Solazyme, Inc. and Amyris, Inc. Will Make Sluggish Economic Growth a Distant Memory

The stock market holds its breath with every monthly economic report, but it seems to be ignoring a section of the economy that accounted for 7% of all GDP growth in 2011 and 2012. What is it, and how are Solazyme and Amyris driving it higher?

Feb 14, 2014 at 3:00PM

Solazyme (NASDAQ:SZYM) and Amyris (NASDAQ:AMRS) are disrupting the world's approach to manufacturing commodity chemicals, specialty chemicals, and fuels. Their industrial biotech platforms create drop-in renewable products from engineered industrial organisms that can directly replace, complement, and enhance existing products created from petrochemical or agricultural sources. Better yet, their platforms can produce products for multiple, unrelated industries -- industrial lubricants, cosmetics, food ingredients, flavors and fragrances, and more -- from one production cycle to the next. That disruptive potential means companies such as Solazyme and Amyris will be major cogs in the future global economy, err, bioeconomy.

Capitalize on the growing American (and global) bioeconomy
What the heck is the bioeconomy? It's all of the revenue generated by genetically modified systems from three major industry groups: biotech seeds (agriculture), biopharmaceuticals (health care), and industrial biotech (large-scale fermentation of chemicals and production of biomaterials). You may have never heard of the term "bioeconomy," but it is perhaps the single most important cog of our post-industrial economy in the 21st century. As author and entrepreneur Dr. Rob Carlson notes:

Domestic revenues from genetically modified systems are growing at approximately 15% annually, much faster than the economy as a whole. As I announced during a Congressional Briefing in November, the total 2012 U.S. revenues from genetically modified systems, hereafter the Genetically Modified Domestic Product (GMDP), reached at least $350 billion, the equivalent of approximately 2.5% of GDP, up from $300 billion in 2010. For comparison, according to IHS iSuppli, the 2012 global revenues for the semiconductor industry amounted to $322 billion. Remarkably, assuming a 2011-12 GDP annual growth rate of 2.5%, the two year, $50 billion increase in GMDP accounted for almost 7% of total U.S. GDP growth.

Imagine that: Nearly 7% of the economy's growth in 2011 and 2012 stemmed from biological products and systems. Here's how the estimate breaks down.


Solazyme and Amyris fall into that giant green slice, although they can only target about 87% of the total (initially). Nonetheless, the two companies could combine to make very significant contributions to the American bioeconomy in the next 10 years. Assuming conservative average selling prices, every 400,000 metric tons of oil capacity could bring in $1 billion for Solazyme, while every 250 million liters of capacity could fetch the same amount for Amyris. That represents some pretty profitable capacity.

While both companies are wisely chasing the cheap and easily accessible sugars of Brazil, each will inevitably build a commercial manufacturing base in the United States. Solazyme has already begun ramping commercial operations at a 20,000 MT facility that utilizes corn starch in Iowa, which will be expanded to 40,000 MT and 100,000 MT in two subsequent upgrades. The company will soon begin ramping a 100,000 MT facility in Brazil. Meanwhile, Amyris is ramping operations at a roughly 33,000 MT facility and has partially completed a second facility twice that size, also in Brazil.

Why is an American manufacturing base inevitable? One major reason: It simply isn't realistic for the United States to pursue its lofty ethanol blending goals set forth in the Renewable Fuel Standard, which will squeeze ethanol margins and force some producers to look to higher-value products. Solazyme and Amyris will probably never retrofit an ethanol facility, but their technology platforms offer an attractive alternative to ethanol for companies controlling the feedstock supply. The industrial biotech industry will gradually produce less and less ethanol and more and more high-value biobased chemicals.

Foolish bottom line
There are a handful of promising industrial biotech companies emerging today that have learned from the early mistakes of Solazyme and Amyris and will one day build commercial-scale facilities in the United States to produce vast quantities of biobased fuels and chemicals, both commodity and specialty. However, pioneers such as Solazyme and Amyris offer an attractive long-term investment that can help your portfolio capitalize on the growing bioeconomy, especially with a combined market cap of just more than $1 billion. It seems like a no-brainer to me, but it's just one reason to own the companies. We'll explore more in the next several weeks. 

Bioeconomy not for you?
Perhaps you already own Solazyme and Amyris, or maybe you just don't see the opportunity of the bioeconomy. Good news: you can still become wealthy through investing. As every savvy investor knows, Warren Buffett didn't make billions by betting on half-baked stocks. He isolated his best few ideas, bet big, and rode them to riches, hardly ever selling. You deserve the same. That's why our CEO, legendary investor Tom Gardner, has permitted us to reveal "The Motley Fool's 3 Stocks to Own Forever." These picks are free today! Just click here now to uncover the three companies we love. 

Maxx Chatsko has no position in any stocks mentioned. Check out his personal portfolio, his CAPS pagehis previous writing for The Motley Fool, or his work with SynBioBeta. to keep up with developments in the synthetic biology industry.

The Motley Fool owns shares of Solazyme. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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