Royal DSM's Partnerships, Market Penetration & Progress

Royal DSM is making significant inroads in the biorefining sector, and it shows no signs of slowing down
By Bryan Sims | August 22, 2011

The bold undertakings conducted today by Netherlands-based Royal DSM N.V. in the field of industrial biotechnology are in far contrast to its humble beginnings as a modest, state-owned coal mining company in 1902. The firm eventually transformed into a petrochemical company in the 1990s. In the past six years, however, DSM has evolved into an international life sciences and materials powerhouse that’s working feverishly to speed the transition to a biobased economy, a global approach to manufacturing and living based on resources derived from biotechnology rather than relying on fossil sources.

Since 2005, DSM has relied upon industrial biotechnology platforms such as fermentation or biocatalytic techniques as springboards to bring its diverse products to market. DSM’s activity in industrial biotechnology is not only being applied to biofuel and biochemicals, but it also applies to all four of its focus markets, or “clusters:” nutrition, pharmaceuticals, performance materials and polymer intermediates. As a result, DSM’s established presence in Europe has spilled into the U.S. and China.

It wasn’t until the mid-1990s, however, during its wave of acquisitions of several biotechnology firms that DSM would realize the importance of catalysis as the basis for experiencing growth in the area of industrial biotechnology. In September 2003, DSM acquired Roche Fine Chemicals and Vitamins Division and subsequently renamed the unit DSM Nutritional Products, a decision that would position DSM as a leading industrial biotechnology and chemical company, according to Volkert Claassen, vice president of strategy and key partnerships for DSM’s biobased products and services division.

“From that moment on, we’ve steadily built processes and products based on biotechnology,” Claassen says.

Claassen, who left Genencor International in 2006 to lead DSM’s industrial biotechnology effort in his role as vice president of White Biotechnology, recognized the monumental challenges that lay before him. During his four years in that capacity, Claassen helped shape DSM’s emerging business area of industrial biotechnology—widely referred to as “white” biotechnology in Europe—into a launching platform for products and services in the areas of biofuels and biochemicals. Building on that success, Claassen is poised to take DSM’s enlarged industrial biotechnology segment to the next level.
“We have a different mentality now, we see that industrial biotechnology can really work,” Claassen says. “It’s all about execution right now.”

When Claassen says DSM is executing, he means it. This is evidenced by the spate of investment, acquisition and joint development activities DSM has in several big-name biorefining companies; moves that are poised to accelerate the biorefining landscape and broaden the availability of biobased chemicals and consumer products.

Power of Partnering

Alliances or partnerships with large, reputable and resourceful global brands like DSM are considered by many small to mid-level biorefining firms a necessary business decision rather than an option for bringing their novel biobased products to market. While DSM’s list of partnerships and collaborations might be lengthy, each has  different elements that carry distinctly different objectives, Claassen says.

Currently, DSM’s involvement in the biorefining sector includes a strategic investment in Carlsbad, Calif.-based Verdezyne Inc. to advance the development of ethanol and biobased adipic acid, a precursor used in the manufacture of nylon 6,6, polyeurethanes and engineered plastics; a strategic investment in Golden Valley, Minn.-based Segetis Inc. for the development of selective ketalization for identifying levulinic acid esters that can be used in cleaning solvents and other household products; a collaboration with France-based Roquette Freres to jointly commercialize biobased succinic acid; a collaboration with Elevance Renewable Sciences Inc. to explore unique monomers for the production of specialty biobased thermoplastic materials using Elevance’s novel metathesis technology; an enzyme supply agreement with Codexis Inc.; acquisition of the Dutch C5 Yeast Co. for advanced biofuel development and production; acquisition of Microbia Inc. for its ongoing development of natural carotenoids for use in nutrition, chemicals and specialty materials; acquisition of algae developer Martek Biosciences, which added a growth platform for its health and natural food ingredients area, including sugar-based biodiesel development as part of a collaboration Martek had with BP prior to being acquired by DSM.

“All of these are examples of companies that are doing interesting things where we can add additional applications, leverage their technology by helping them to scale up and also broaden their geographical reach, because we have market connections all over the world to make these things happen,” Claassen explains. 

Like the benefits of DSM’s current investments, industry participants such as Colorado-based biobased acrylic acid developer OPX Biotechnologies Inc. (OPXBio) understand how fruitful partnerships with big name, reputable, global firms such as DSM can be, and it shows through its joint development agreement with chemical giant Dow Chemical Co.

“For OPXBio, and I think for the industry in general, it’s very important that these strategic partnerships get formed and they are productive and accelerate the progress to commercialization,” says Charles (Chas) Eggert, president and CEO of OPXBio. “There’s no question that our affiliation in our partnership with Dow Chemical adds credibility to OPXBio while increasing chances for additional partnerships, additional funding and for attracting talent that can help propel our strategy forward.”

For industry organizations that advocate industrial biotechnology’s rapid movement in the biobased economy, such as the Biotechnology Industry Organization, DSM’s early and active involvement is an indication of how the industry might be reaching a point of maturity, according to BIO Executive Vice President Brent Erickson.

“That’s being demonstrated by a couple of things,” he says. “The first one is the merger and acquisition activity. The second thing that I think is indicative of that maturity is the IPOs we’ve seen on Wall Street. I think we’re moving from laboratory or concept stage of technology development to actual commercialization, and I think DSM is at the forefront of that.”

Mark Bunger, research director at Lux Research based in the firm’s San Francisco office, agrees with Erickson’s theory. “I think it’s fair to say that DSM has been the most innovative, creative and probably even the most aggressive with their approach to industrial biotechnology, and their acquisition activity tends to reflect that,” Bunger says. “It’s become a part of the definition of who they are.”

Not only are biorefining firms benefitting from the myriad of services and skills DSM might offer, but the Dutch firm believes the feeling is mutual as it is learning aspects within the entire industrial biotechnology supply chain as well, such as the business of aggregating starch and cellulosic feedstocks for various biofuel or biochemical developments, according to Claassen.

“There was one important thing that DSM immediately realized when it considered its move into larger scale application of biotechnology,” he adds, “and that was it needed partners that had knowledge in agriculture, processing, crops and so forth because everything we did before in chemistry revolved around oil.”

Market Prioritization

According to McKinsey & Co., the total global market for biofuels is estimated to be approximately $40 billion and for biochemicals, it is estimated to be approximately $70 billion. The biochemical and biopolymers market, including oleochemicals, is estimated to be around $55 billion in 2010-‘11. As the world population increases, those numbers should increase, which is expected to present a lucrative proposition for DSM.

The most attractive biorefining markets in which DSM expects rapid long-term growth, according to Claassen, include second-generation biofuel development, such as cellulosic ethanol. DSM is well-equipped and positioned to capitalize on the advanced biofuel market with its robust enzyme and yeast portfolio for pretreating and converting cellulosic sugars, Claassen says. The firm is actively working to make it happen, but commercial success largely depends on  federal incentives, political influence and feedstock sourcing and supply considerations in different countries around the world.

“We have enzymes that do amazing things,” Claassen says. “I think the enzyme/yeast system as we have it are more than capable to pretreat cellulosic feedstock and produce highly efficient ethanol, but it will be a few years away yet until DSM deepens its involvement in advanced biofuel development.”

In the short-term, Claassen says DSM aims to contribute its expertise and resources on its partnerships and investments engaged in biochemical development. Claassen points out that biobased succinic acid is of immediate interest for the company through its joint collaboration with Roquette Freres. Both companies intend to build a 10,000-metric-ton-per-year facility near a Roquette starch manufacturing plant in Cassano Spinola, Italy. The proposed facility, scheduled to come online by second quarter 2012, would be Europe’s largest biobased succinic acid production facility.

While Claassen wouldn’t disclose if the company is actively seeking potential acquisition or partnership targets outside of its current portfolio of activity, he admits that DSM has an uncanny ability for monitoring “new kids on the block” in the event that such an opportunity rises.

“When I joined DSM, I felt that was really the strength of the company,” he says. “We follow a number of companies closely. There are always potential candidates for a potential target for a partnership, acquisition or investment, but we see clearly that we want to focus more on where we’re good at and we have to accelerate execution right now.” He adds, “That means we’ll explore different ways to cooperate externally to engage innovators and make sure we do that in a balanced approach in win-win scenarios. I think you’ll likely see these kinds of connections being made in the coming years.”
Author: Bryan Sims
Associate Editor, Biorefining Magazine
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