Issue Date: April 30, 2012
New Market For Contract Firms
Many industrial biotechnology executives see traditional chemical producers as dinosaurs they will soon put out of business with their environmentally friendlier products. In the meantime, though, these executives are depending on the same dinosaurs to manufacture their products while they get their own facilities up and running.
They are turning to contract manufacturers, a class of chemical company almost as old as the industry itself. Contract manufacturers ply their trade on the outskirts of the chemical industry, producing things their customers, often small or new companies, don’t have the manpower, technical know-how, or financial wherewithal to make themselves.
As a flurry of recent announcements shows, today’s contract chemical manufacturers are experiencing a boom in business with industrial biotechnology companies. Developmental quantities of chemicals derived from renewable raw materials such as sugar or vegetable oil are now being made by contract manufacturers across the U.S.
One such firm is DTI, formerly known as DanChem Technologies. Last month, Rivertop Renewables announced that DTI has started manufacturing the biobased chemical glucaric acid at DTI’s plant in Danville, Va. Production runs are about 850 lb per batch.
Based in Montana, Rivertop was launched in 2008 on the strength of carbohydrate oxidation technology developed by Donald E. Kiely, a University of Montana emeritus chemistry professor. The firm sees potential for glucaric acid as a replacement for phosphates in laundry detergents and as an environmentally friendly corrosion inhibitor.
Rivertop is in the midst of a $3.5 million expansion of its Missoula headquarters, notes Steven Donen, the firm’s vice president of process development and engineering. The build-out includes space for a pilot facility where the company expects to perfect a continuous process for producing glucaric acid. But for now, Rivertop is limited to making laboratory-scale quantities.
Donen first encountered DTI when he worked for Segetis, a biobased chemical company in Minnesota. Segetis’ choice for a contractor to manufacture its products—solvents and plasticizers based on levulinic ketals—was a company in the Midwest. But when Donen was hired by Rivertop to scale up manufacturing, he put DTI on his short list of potential partners.
The two firms have been working together for about 10 months, according to Moe Elum, an account manager at DTI who works with biobased chemical companies. On the basis of the success of the runs already completed, the two firms anticipate increasing production at the Danville plant to a rate of up to 10 million lb annually by the fourth quarter of this year.
Although Rivertop’s raw material is a sugar rather than a synthetic molecule, it’s all chemistry to DTI. “To us it’s just a starting point,” Elum says. Like many contractors, DTI has amassed multiple reactors and capabilities to meet the needs of a broad range of customers. DTI prides itself on skill with multistep operations, horizontal reactors, and high-viscosity materials.
But for customers, the financial flexibility offered by contract manufacturers can be as important as the technical skills they bring. “We can definitely soften the capital intensity of their projects, because we already have all the pots and pans,” Elum says. “I stress, ‘Don’t go buying equipment until you come here and see what we’ve got.’ ”
At Michigan Biotechnology Institute, a contract manufacturer of fermentation-derived materials, “derisking” is the term preferred by Chief Executive Officer Bobby Bringi for the benefits of contract manufacturing. He defines derisking as “a systematic approach to demonstrate commercial viability at a meaningful pilot scale.”
That’s what MBI did for OPX Biotechnologies, a Colorado-based company that is developing a renewable alternative to petroleum-derived acrylic acid. Last month, the firms announced that MBI successfully fermented OPX’s key acrylic acid intermediate, 3-hydroxypropionic acid, in a 3,000-L reactor at MBI’s Lansing, Mich., facility.
A 30-year-old nonprofit owned by Michigan State University Foundation, MBI has seen a pickup in collaboration with biobased chemical companies in the past three years, Bringi says. In 2010, for example, MBI produced Genomatica’s biobased version of 1,4-butanediol using sugar as feedstock. Previously, MBI helped develop biobased products for Cargill and DuPont.
For such companies, Bringi says, scale-up at MBI’s facility can answer the basic question: Does this process work? “Pilot-scale success is usually a really good milestone for our partners,” he says. In addition, fermentation at the 3,000-L scale can generate hundreds of kilograms of product for testing by prospective customers well before the chemical would be available from an in-house facility.
Getting products to customers in a timely fashion is one of the main reasons that Elevance Renewable Sciences has worked with a number of U.S. contract manufacturers, according to Andy Shafer, the firm’s executive vice president for sales and market development.
Elevance was publicly launched in 2008 by Cargill, the private equity firm TPG, and Materia, which owns olefin metathesis technology developed by California Institute of Technology chemistry professor Robert H. Grubbs. Elevance uses metathesis to convert vegetable oils into substitutes for traditional petrochemicals. With a partner, the company is building a 185,000-metric-ton-per-year plant in Indonesia to manufacture its products. It also purchased a biodiesel plant in Mississippi that it plans to convert into a second facility.
But in the meantime, Shafer says, Elevance is supplying customers with the help of contract manufacturers. One of those firms, which Shafer won’t identify, produced 500 metric tons of specialty chemicals last spring, including α-olefins and novel esters for applications such as surfactants, personal care products, and lubricants.
Shafer, a former Cargill employee, says he and other Cargill executives started hunting for contract manufacturers even before Elevance was formed. “Working with contract manufacturers from the start was intended to help us get products to the market, and it has done that,” he says. Today Elevance uses them for capabilities including metathesis, transesterification, hydrogenation, distillation, and fractionation.
After Elevance opens the Indonesian facility later this year, its reliance on contract manufacturers will diminish, although the company intends to continue using them.
Contract manufacturer Albemarle proposes that customers take a different approach. It wants to keep making their products even after they have achieved commercial success. “We’re very up-front about that,” says Kurt Hoeprich, business manager for custom services at Albemarle’s fine chemistry division. “Our business model is to be the long-term commercial manufacturer.”
Judging from public announcements, Albemarle is one of the more successful contract manufacturers pursuing renewable chemical customers. In 2010, Novomer chose Albemarle to produce polyols and other polymers that use carbon dioxide as a raw material. Novvi, a joint venture between Amyris and Cosan, picked Albemarle last year to manufacture lubricant base oils out of farnesene, a novel chemical that Amyris generates via fermentation.
And last month, the Naval Air Warfare Center Weapons Division announced that Albemarle will make pilot-scale quantities of jet fuel out of biobased 1-butanol provided by Cobalt Technologies. By the end of the second quarter, Hoeprich says, Albemarle will have used Navy-developed technology to convert 1-butanol first to 1-butene and then to jet fuel via oligomerization.
Along with hydrogenation and distillation, oligomerization is one of three core capabilities for which many biobased chemical companies seek out Albemarle, Hoeprich says. The firm offers these services at its main contract manufacturing site in Baton Rouge, La., and at its larger facility in Pasadena, Texas.
Albemarle considers itself particularly skilled in scaling up from batch manufacturing, which is used in the early stages of product development, to the continuous processes desired for commercial manufacturing. To lure customers, Hoeprich says, Albemarle has added pilot-scale reactors in the 100-gal range and expanded equipment for initial continuous-process work.
Hoeprich’s proposal to Albemarle’s batch customers is that they work with his team on a continuous process and then let Albemarle make their products for the long term at a site such as its Pasadena plant. “We make commercial products there today in hundreds to thousands of metric tons per year,” he says.
One potential candidate for such a move is the Navy, which has said it plans to follow initial manufacturing of the jet fuel with larger runs for flight testing. “Given the excellent technology and asset fit, we fully intend to partner for larger production runs,” Hoeprich says. Where those runs take place and whether or not they are based on a continuous process will depend on the Navy’s goals for timing and quantity, he adds.
Three years after Albemarle began pursuing biobased chemical manufacturing in earnest, the business is becoming a significant one, Hoeprich says. Novomer, Amyris, and the Navy are three of many customers, he points out. Albemarle’s biobased chemical customers have doubled in number over the past year, and he sees the potential for more growth in coming years.
Allen Julian, a chemical industry veteran who recently joined MBI as chief business officer, also sees opportunity ahead. “There’s an enormous need for the kinds of things we can do to help these nascent technologies move from the laboratory to commercial scale,” Julian says. “No matter how good your technology is, there is still a learning curve. There’s no substitute for having done it before.”
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