Inching toward IPO, Genomatica hunts for cash

HOUSTON Mon Jun 13, 2011 3:59pm EDT

Genomatica Chief Executive Officer Christophe Schilling answers questions as he participates in the Reuters Energy Summit in Houston June 13, 2011. REUTERS/Richard Carson

Genomatica Chief Executive Officer Christophe Schilling answers questions as he participates in the Reuters Energy Summit in Houston June 13, 2011.

Credit: Reuters/Richard Carson

HOUSTON (Reuters) - Genomatica plans to raise up to $150 million, possibly through a stock offering, to capitalize on Wall Street's fascination with the lucrative renewable chemicals sector, its chief executive said.

As shoppers have been willing to pay more for cosmetics or specialty clothing rather than gasoline, Genomatica and its peers have realized that the real green gold mine is not alternative fuels, but alternative chemicals.

So far, Wall Street has gone along for the ride.

"We're pretty actively looking at the situation in both public and private markets," Genomatica Chief Executive Christophe Schilling said at the Reuters Global Energy and Climate Summit on Monday.

"For us to get to a point where we would see profitability, we're talking about raising anywhere on the order of $100 million to $150 million."

The funding would be in addition to $84 million Genomatica has received so far from Mitsubishi (8058.T), TPG, Draper Fisher Jurvetson, Alloy Ventures, Waste Management (WM.N) and other investors.

Genomatica makes chemicals from corn, biomass or landfill gas that are identical to those produced from crude oil or natural gas, and often at a cheaper price.

"When someone comes in and says, 'We make the same chemical, just instead of making it from crude oil we made it from sugar,' you can imagine there's much more ability to get rapid adoption," Schilling said.

Schilling demurred when asked directly about the timing of any possible initial public offering for the company he founded 10 years ago.

Still, he's aware that the best time to strike is often when the iron is hot. Shares of rival Amyris Inc (AMRS.O), for instance, have jumped 74 percent since going public last September.

"There is obviously interest not only here domestically in the traditional financial markets but also overseas," Schilling said at the Reuters Summit, held at the Reuters office in Houston. "A lot of sovereign wealth funds are highly interested in this area as well."

Programing E. COLI

The bulk of Genomatica's technology comes from Schilling's graduate research at the University of California, San Diego, where he discovered E. coli bacteria can be programed to produce several chemicals using a range of feedstocks, not just corn.

The company has begun began making small batches of butanediol, a chemical used to make spandex, as part of a licensing partnership with Tate & Lyle (TATE.L).

It hopes to commercially launch the product next year.

Genomatica is able to produce butanediol at lower temperatures than traditional crude processes and with less carbon dioxide emissions, Schilling said.

Rivals, including BASF (BASFn.DE) and LyondellBasell (LYB.N), annually produce roughly 4 billion pounds of the chemical from fossil fuels, at 24 plants.

Genomatica is able to produce the chemical for as cheap as 50 cents per pound, cheaper than traditional rivals. That cheaper price hints of the potential windfall if Genomatica's technology takes off.

"The biggest challenge that the green movement has always had is its higher costs," Schilling said. "The best-success stories are when sustainability improves the bottom line."

The San Diego-based company is also hoping to produce propylene and other chemicals in the future.

"What we're trying to develop for the chemical industry is feedstock flexibility," Schilling, 37, said.

Genomatica has no interest in running large chemical plants; it much prefers to license out its technology to customers that want to make their own chemical, Schilling said.

When asked if he would ever use his technology to make gasoline, Schilling smiled, but stood firm on his business model.

"I have no interest in making fuels," Schilling said. "I can make a lot more in chemicals."

(Reporting by Ernest Scheyder, Nichola Groom, Matt Daily, Braden Reddall, Michael Erman, Bruce Nichols and Anna Driver; Editing by Gary Hill)