Best stock to invest in – Solazyme’s Not-So-Puzzling Rebranding | Alternative Energy Stocks

Best stock to invest in

Jim Lane

Solazyme undergoes Focus Reassignment Surgery and re-emerges as
TerraVia. Industrials to spin off, nutrition the focus now.

The what, the why, and the “why now?”

In California, Solazyme (SZYM)
said that it is now focusing exclusively on food, nutrition and
specialty ingredients, renaming the company TerraVia. Having
elevated CEO and co-founder Jonathan Wolfson to the Executive
Chairman post, the company says it is on the hunt for a
food-business CEO, and has raised $28M from a group of foodie
investors including Glenhill Capital, VMG Partners, PowerPlant
Ventures, ARTIS Ventures, Simon Equities and several influential
food industry CEOs.

Leaving many observers feeling like Caitlyn Jenner’s golf buddies
at Sherwood Country Club. Supportive but perhaps a little

The products, technology and market opportunities in industrial
markets including fuels, industrial oils, and the oilfield/Encapso
business will be spun-off. The company stated: “Moving forward,
these initiatives will be grouped together as “Solazyme
Industrials” and will not be part of TerraVia’s refined focus.
Solazyme believes these businesses have tremendous opportunity to
develop into large and profitable entities, while improving the
lives of people and the planet. The Company will be pursuing
strategic alternatives over the next 12-18 months to unlock the
value created. Solazyme’s objective is to identify partners who
have the operational capabilities needed to realize the potential
of those businesses.”

The TerraVia Business going forward

TerraVia’s portfolio of ingredients and products include:
Specialty Food Ingredients, including the AlgaVia Whole Algae
ingredients (lipid rich powder and protein) and AlgaWise Algae
Oils (cooking and high stability oils). Consumer Food Products,
including Thrive Culinary Algae Oil, Animal Nutrition Ingredients,
a new area for the Company, and Specialty Personal Care
Ingredients, including AlgaPur Oils.

There are two ways to tell the tale. We’ll visit the dark side
first, and then focus on the path forward for the newly-minted

The Dark Side of the Story

Let’s face facts. We have a CEO search rather than a new CEO,
plus a re-branding of the company without the kind of signature
deal that usually propels companies to venture into the risky area
of re-branding. And, we have a jettisoning of two of the four legs
of the corporate stool.

The circumstances are screaming that the Monday afternoon’s Q4
earnings announcement will make it plain that Solazyme’s growth
and growth prospects in certain sectors have stalled short of cash
positive — just as the nutritional prospects have materially
brightened. Clearly fuels are in that basket. We’ll have to see
what the fate of Algenist is, and how the company will handle the
pressing topic of securing orders for its commercial-scale plant
in Brazil.

On the industrials side, it would come as no surprise that
there’s the exhaustion powered by $30-$40 oil and crashing rig
counts that doomed Encapso and made Solazyme’s fuels unaffordable
except in boutique quantities. On the nutrition side, a name-brand
group of White Knights have come along, and have targeted the
company to get a hold of its powerful technology and applications
in the foodie space. For sure, the investors are buying in at
considerable premium to the stock’s moving average. Very

Back to the sunny uplands of algae’s promise and Solazyme’s
powerful technology

If you’ve been on Neptune for the past decade or so, let me state
for your benefit that the world could use help on nutrition, with
a population set to increase some 4 billion this century. That’s
3.8 quadrillion calories per year, more than we consume right now.
Assuming that the developing world, by the way, doesn’t increase
its caloric intake.

Think of that as 2 billion tons of the edible parts of a salmon,
per year, additional. And that’s excluding any pets you might
bring along. And excluding the food you plan to feed to the
salmon. And the waste part of the fish, and the food that gets
wasted through spoilage and so on.

Did I mention that the global fish catch last year was 90 million
tons, the whole she-bang? And, that we’re currently alarmed over
fish depletion rates. And, that we’d like our calories to be
healthier, please. Which means making the healthy calories better
tasting, and you’ll appreciate the challenge thereof if you’ve
ever tried to sell the idea of broccoli to a five-year old with an
ice cream in her hand.

For some time, Silicon Valley has been spewing our tech endeavors
aimed at the nutrition problem — from ingredients (such as flavors
and flavorings) all the way to food substitutes — and yield
enhancing crop technologies and crop protection systems. Companies
like Modern Meadow, Beyond Meat and Impossible Foods. Given the
large valuations and epic venture rounds they’ve been racking up —
it’s not surprising that some industrial biotech companies are
either being acquired or changing their stripes as fats as they
can, to join the rush.

Evolva, for example, acquired Allylix, but not for its
transformative jet fuel capabilities but for its yeast
fermentation patent portfolio, more or less. Sapphire Energy
re-aimed itself at the omega-3 and protein markets not long ago.
Amyris maintains a fuel and industrials unit of considerable
promise, but has been making its most headway in the health &
beauty and flavorings world, of late.

So, there are epic reasons for Solazyme, under the TerraVia
brand, to go forward in the world of developing applications in
food oils, and whole algal flour, and the like. And to those
who’ve been around the food ingredient business — the winds of
change are blowing and Solazyme’s technology is powerful enough to
make it a major player.

But the competitive advantage will not be limited to its
algae-based technology. There’s a considerable customer list now
built up in nutrition — some of which are newly disclosed this
week, including Hormel, Utz, Enjoy Life, So Delicious, Soylent and
Follow Your Heart. And over in speciality personal care
ingredients, there are “major customers” not yet disclosed,
alongside the multi-year relationship with Unilever.

And, TerraVia has gone through many of the hardships of scale-up
in its commercial-scale facility in Brazil. The company has
substantially de-risked itself. And achieved a “sector focus” with
these announcements that many in the financial community have been
calling for. The major task going forward is to demonstrate that
these customer relationships will translate into large, multi-year
commercial orders at profitable margins — that we have yet to see
and analysts will be scouring the quarterly report issued Monday
for the signals that orders are scaling commensurate with the

Reaction from Fortress TerraVia

Bullish they are.

“By unlocking the power of algae, the mother of all plants and
earth’s original superfood, we are bringing much-needed innovation
in food and nutrition,” said outgoing CEO Jonathan Wolfson. “Our
new generation of breakthrough ingredients and foods delivers on
nutrition, flavor and texture all with an unparalleled
sustainability profile, and these products are already beginning
to penetrate a market that is demanding healthier alternatives.
Over more than 13 years we have invested in developing a unique
understanding and expertise around algae. Today the pieces are in
place for the Company to fulfill its mission and create
substantial value for customers and shareholders.”

“There are opportunities for our algae-based ingredients across
every aisle of the grocery store, driven by consumer demand for
clean labels and an increasing focus on plant-based foods with
great taste,” said SVP and chief foodie Mark Brooks. “We are
enhancing a new generation of foods that deliver better flavor and
nutrition, including healthier fats and enhanced protein, fiber
and micronutrients. In addition to products incorporating our
ingredients on store shelves today, we are currently in active
development projects with major CPG companies for new products
such as salad dressings and gluten-free bakery products that are
healthier and offer the taste and texture that consumers demand.”

“We are moving forward with a strong business foundation and
clear vision,” said CFO Tyler Painter, Chief Financial and
Operating Officer. “We have invested significant time and capital
in the development of our innovation platform and large-scale
manufacturing capability. We enjoy long-standing commitments from
partners, led by Bunge and Unilever, who have helped bring our
vision to life. Importantly, we have also learned significant
lessons in scale-up and commercialization, helping to de-risk the
inherent challenges in bringing disruptive products to market.
These strengths combined with our refined focus, a proven suite of
products and the expanded market knowledge we gain with our new
investors and board member, position us well to execute on our
opportunities in food, nutrition and specialty ingredients.”

The Bottom Line

The need to focus resources, we get it. The need to raise
capital, we get it. The need to focus on what has momentum, we get
that too.

Technology takes us in strange directions, as any foodie might
know. Percy Spencer invented the microwave in 1945 by complete
accident, after noticing that the chocolate in his pants melted
when he passed by a magnetron. Took 20 years to perfect it, but
look at the microwave now.

Despite the messy pants.

Jim Lane is editor and
publisher  of 
Biofuels Digest where this


was originally published.
Biofuels Digest is the most widely read  Biofuels daily
read by 14,000+ organizations.

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