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How We Invest-Venture Capital Opportunities for
Biotech Sector
Biomass and Green Technology Financing Opportunities
Kuala Lumpur
20th April 2011
• $162 million Venture Capital Fund focused on investments across the Life Sciences
• 50-50 partnership between Burrill & Company and Malaysian Technology Development Corporation.
• Labuan based fund with office in KL
Background on MLSCF
3
Burrill Malaysia MTDC Labuan
MLSCF
MLSCFMC
100% 100%
50% 50%
100% Management Shares
Investors
100% Participating Shares
Direct Investment70%
Investment inBLSCF III
30%
MLSCF Structure
4
MLSCF Portfolio
CompanyCompanyCompanyCompany Role:Role:Role:Role:Board Board Board Board
Seat:Seat:Seat:Seat:Investment Partners:Investment Partners:Investment Partners:Investment Partners:
FoundedFoundedFoundedFounded
LeadLeadLeadLead
LeadLeadLeadLead
CoCoCoCo----InvestorInvestorInvestorInvestor
CoCoCoCo----LeadLeadLeadLead
CoCoCoCo----InvestorInvestorInvestorInvestor
5
MLSCF Portfolio
CompanyCompanyCompanyCompany Role:Role:Role:Role:Board Board Board Board
Seat:Seat:Seat:Seat:Investment Partners:Investment Partners:Investment Partners:Investment Partners:
LeadLeadLeadLead
CoCoCoCo----InvestorInvestorInvestorInvestor
CoCoCoCo----InvestorInvestorInvestorInvestor Observer
CoCoCoCo----InvestorInvestorInvestorInvestor Observer
LeadLeadLeadLead
LeadLeadLeadLead
Energy industry evolved from bio to fossil fuels since 1875
Alternative Energy?
7
Rationale for BioGreentech
• Time is right for biogreentech i.e. biotechnology applied to sustainability concerns of energy security, climate change and food & water security
• Instrument to deliver on Malaysia’s aspirations– Accelerate transformation to a high value, innovation
driven economy
– Support green economy strategy
– Support biotechnology policy and greentech policy
• Window to innovative companies and understanding of best practice biogreentechinvesting
8
Built On Long-Term Megatrends
ENERGY SECURITYAll nations desire greater energy independence
US imports >60% of liquid transportation fuels
Oil prices will rise as demand outstrips supply
GLOBAL CLIMATE CHANGEStrong societal and environmental pressure to reduce carbon footprint
Stringent regional and state GHG regulations being enacted
Low-carbon energy and renewables in demand
FOOD AND WATER SECURITYGrowing global population with coincident loss of prime farm land
Great need to increase productivity per unit of land with reduced inputs particularly water and fertilizer
Social unrest will increase pressure for increased production
Need for new technologies for water sources and supply
SUSTAINABILITYIncreased social, political pressure to lower the environmental impact of energy generation, food production and chemicals
Major consumer brands focusing on “sustainable and green” practices, i.e., Wal-Mart, Unilever, Staples, P&G etc
The chemical industry seeking biorenewable feedstocks as an alternative to highly volatile fossil carbon sources
Worldwide Mandates and Subsidies-Biofuel
Revenue Potential by 2020
$ Billions across the value chain from Ag inputs to end products
WEF Report 2010
Venture Capital Relative to Other Forms of Finance
VC is a Relatively Small Piece of Global Cleantech Investment
Venture Investment in Biofuels is a Modest Piece of Cleantech Venture Investment
BioGreentech Private Financings > $20M
1Q’10 2Q’10 3Q’10 4Q’10 1Q’11*
$100M
$50M
Quarter Totals: $144M $357M $270M $217M $162M
* As of Feb 2011
Emerging Eco System
Large Corporates
Private
Investment
DEAL OPPORTUNITY
Govt. Support & Mandate
VC and PE Investment in Cleantech on the rise.
Stimulus, DOE, RFS2, future CO2
Shell, Total, Samsung Exxon, Wal-Mart… to name a few
Venture Capital is NOT Project Finance or Private Equity
• Challenges to Venture Investment in Biofuels
– VC’s must target 5-10X returns for their early money in
– Targeted return requires investment in game changing technology, IP
– Typical $ timeline for a VC-backed biofuels project
– Bench scale demonstration of technology, ~$5M
– Pilot facility scale-up ~$10M
– Refinement of pilot operations/ contingency ~$5M
– Small scale commercial facility ~$20-50M
– Large scale commercial facility ~$100-200M
– Project finance is not available until the 1st facility is up and running at the appropriate scale
Who will fill the funding gap??
VC“Comfort Zone”
MSCF BioGreentech Portfolio
• Gevo – C4 platform (isobutanol); potential extensions
• Cobalt – C4 Platform (n-butanol); cellulosic focused
• Codexis – Broad bioprocessing platform
• Akermin – CO2 capture; Gas separations
• Abunda – Food and wellness ingredients
• Chromatin – Designer Chromosomes, feedstock
• Glori Oil – BEOR
• Segetis – Ketal Chemistry for next gen monomers/oligo/polymers
• Mascoma – Consolidated Cellulosic processing
17
MLSCF in BioGreentech rankings
MLSCF investments ranked among the top 30 companies in bioenergy
– Mascoma (2008, #8; 2009, #10 )
– Cobalt Biofuels (2008, #17; 2009, #30)
– Gevo (2008, #27; 2009, #13)
– Codexis (2009, #35)
MLSCF investments were listed in the largest 15 biofuelstransactions in 2008
– Mascoma ($61M)
– Cobalt Biofuels ($25M)
– Gevo ($17M)
MLSCF investments successful in highly competitive award of US DOE grants
– Cobalt Biofuels ($30M)
Large Corporate Partners Step-Up
Date Transaction
PartiesTechnology / Application
Scale / Location
Time to
Market
Est. Value1
(M)
Deal Structure
Comments
June 2010
Biorefinery technology / high-value performance chemicals, advanced biofuels, oleochemicals
180-360 kMT output / Indonesia
< 1 year
na Joint ventureBiorefinery utilizes renewable oil feedstocks
June 2010
Engineered yeast strains / sugarcane fermentation to farnesene-based specialty chemicals for industrial and automotive applications
na / Brazil
na $80-100 Joint ventureDefinitive agreement to be signed in 2010; initial markets in US, Europe, Brazil
June 2010
Synthetic biology platform / discovery of novel compounds and pathways for renewable fuels and chemicals
na na $180+
R&D collaboration, JV at commercialization stage
Total acquired 17% equity stake, contributed $50M in R&D costs, 50/50 cost sharing going forward
April 2010
Engineered yeast strain / sugarcane fermentation to farnesene-based specialty chemicals
> 2 mMT input / Brazil
1-2 years
$80-100
Joint venture (50/50 ownership), shared capex, Amyris to commercialize
Follows 12/09 acquisition of 40% stake in sugar cane mill for $80M
March 2008
BioForming catalyst technology / conversion of plant sugars to gasoline and gasoline blend components
na na na
R&D collaboration on technology improvement and scale-up
First demonstration biogasoline plant in 03/10, 38,000 L/yr capacity
April 2007
Polyhydroxyalkonoate (PHA) production from renewable feedstock / biodegradable plastics for injection molding, paper coating, cast film and sheet, etc.
50 kMT output / Clinton, IA
< 1 year
$300+
Joint venture (50/50 ownership), milestones, royalties, profit sharing
Continuation of 2004 technology alliance; Metabolixto receive reimbursement for R&D and other services plus royalties
Source: company websites, regulatory filings
1 Capex value for the JV deals and total value of payments and equity investment for the R&D collaboration
Opportunity for Biomass Rich CountriesInnovation Travels to the Feedstock
• Wilmar investment in Elevance
• Biorefinery to be established in Indonesia
• Production of olefin waxes, lubricants, other
• Feedstock: Palm Oil
• GlycosBio partners with Bio-XCell, Malaysia
• GlycosBio & Bio-XCell will construct a commercial scale facility and R&D center in Malaysia
• Production of ethanol from glycerol
• Production of isoprene
Global Sales of Chemicals
Global Crude oil Sales = $2,500 Billion Global Biofuel Sales = $52 Billion2% total fuel sales
1.5%
4.8%5.4%
19.2%
Biofuels a Piece of the Growing White Biotech PieWhite biotech sales expected to grow significantly and increase share
over the next 5 years…
10
90
White biotech
Sales chemical industry*
Market growth; process conversion; new bio-based ingredients
Growth with customer markets; new applications
Assumptions
* Current chemical industry sales excluding B2C sales in pharma and personal care** Top-down estimate based on industry interviews
Source: SRI, FO Licht, Frost and Sullivan, Press clippings, McKinsey
EUR billions
100% = EUR 1,300 billion
Increase share of oleo vs. synthetic surfactants but decreasing prices
Moderate growth in new products/services
Continuation of current very strong growth in biofuels
Moderate growth in hydrocolloids, strong growth in botanicals
Increasing use of biocatalysis and higher share of biologics
Moderate penetration of new bio-polymers and bio-based bulk chemicals
Bio-dependent sales 2010Segment
2005 basis
2005 - 10 growth
Biofuels
Pharmaceutical ingredients
Bulk/polymers
Food/ feed
ingredients
Oleochemicals
Enzymes
Others
Total Bio
Plant extracts
42
23
20
15
11
8
4
2
125
Biofuel Focused Startups Must be Opportunistic
Most biofuel companies are entering the chemical market place first with “gateway” chemicals like butanol, succinic acid, etc.
• Versatile, novel and robust platforms will be the big winners.
Partnerships-especially JV’s will be essential for accessing innovation.
• Partnerships are forming well before commercial scale-up and therefore early access is key.
The “End-Game” for VCs: The EXITBiofuel IPOs: Market Performance
$0
$5
$10
$15
$20
$25
$30
$35
$40
Apr-10 Jul-10 Oct-10 Jan-11
CDXS
AMRS
GEVO
Sh
are
Pri
ce
$1.4B
MarketCap
$0.5B
$0.4B
24
Era of BioGreentech Solutions & Markets
Massive institutional support
• US DOE facilitating by investing heavily in enabling technologies, encouraging private sector investment, reducing tech risk and time to market
• Greentech a significant part of countries’ stimulus packages
Well developed global markets for biogreentech products
• Major corporations seek sustainable technologies, processes and products
• Industries asking for alternatives to petro-based processes as well as new bio-based value-added products
• Food vs fuel debate now in perspective
Progressive govt policy in US & Europe
• Renewable Fuels Standard sets aggressive targets, complete with incentives and penalties
• Project funding will leverage private sector investments
Valuations on the side of investors
• Buyers’ market due to global financial crisis
• Rational risk-adjusted valuations are occurring
25
The Biomass Feed Stock is Key
Investment Opportunities
– Increased productivity technologies
–Conversion technologies
–Fermentation Products
–Carbon sequestration
Malaysia has biomass but needs technology and partnerships to build a bio-based renewablesindustry
Food
Feed
RenewableFeedstocks
EnhancedYields
Lower Inputs
EnergyCrops
Conversion
2626
Where To Invest ?
Feedstocks
Energy CropsCrop technologiesTrait technologySyngas technologiesBiomass to sugarsLignin conversionBiosolar systemsBiomass intelligence& logistics
Processing
Synthetic BiologyBiocatalysisGreen chemistryAdvanced catalysisAlgal/CyanobacterialtechnologiesFermentationBiorefineriesProcess intensification
Products
Biofuels/powerElectrofuelsBiopolymersBiochemicalsPackaging materialsBioconstructionmaterialsPulp, fiber & paper
Environment
Water & SoilGreen House GasesCarbon Capture &SequestrationNutrient recyclingFertiliser technologiesBioremediations
27
Malaysia’s Landscape & Strengths Provide Unique Opportunity
LandscapeLandscape
Government Commitment• Launching of National
Biotechnology Policy and National Green Tech Policy
• Establishment of Ministry of Green Tech
• Commitment to reduce Malaysia’s carbon intensity of GDP by 40% of 2005 levels
Local sustainability concerns• Oil palm sustainability
(upstream)• Downstream oil palm products
acceptance• Maturing/depleting oil&gas
reserves• Fast-growing GHG emissions• Food security
StrengthsStrengths
The Equatorial Advantage• Abundant sunlight and plentiful
rainfall lends to high carbon capture by crops/plants
• Strong in commodities• Proximity to major markets e.g.
China and India
Strong Economic History• Close ties to Middle
East/Islamic markets• Long-standing manufacturing
and design base, both MNC and highly-skilled local SMEs
• One of the strongest corporate cultures in Southeast Asia with global reach and value chain integration
Summary
• Diverse factors are shaping national and business policies regarding use of natural resources and energy – “The beginning of the end”
• On the supply side - Access, Security, Competitiveness, Cost
• On the demand side – Economic prosperity in emerging economies, convenience, luxury
• On the regulatory side – Climate Change, Life Cycle, Foot Print
• Substantial head space for innovation led businesses in renewables
• Significant investments coupled with optimum policies needed for the businesses to develop
Thank You