Cargill acquires OPX Biotechnologies

The Moguls of Minneapolis pick up an advantaged route to key renewable chemicals.

News has filtered out from Cargill that the agricultural giant has acquired OPX Biotechnologies’ proprietary fermentation-based processes and systems. Bottom line, excepting the building, they bought essentially the entire company in an asset purchase.

As is the usual practice at Fortress Cargill, terms were not disclosed, and probably won’t be until shortly after planetary extinction some 5 billion years from now. The transaction closed on April 28th. The companies are now in a 6-9 month transition period, after which OPX will wind down.

It’s a “good news” story. Not everyone is a believer that every biobased technology has a place in the market, or will find a home with a major partner who can take the technology forward to commercial-scale. But here’s one that did.

“This sale of OPXBIO’s technology to Cargill demonstrates the great progress OPXBIO has made towards product commercialization,” said Mike Rosenberg, CEO of OPXBIO. “Cargill has all the right capabilities and experience to deliver products produced from OPXBIO’s technology to customers.”

It’s no surprise to many that OPX Bio has been out on the hustings raising capital, and that following the conclusion of a partnership with Dow last September based on commercializing bio-based acrylic acid, those proceedings took on  a new urgency. Last October, Mike Rosenberg was appointed as CEO. His charge from the board? Refine the strategy, find strategic partners or new venture capital, and quickly.

The company quickly pivoted from a strategy of commercializing bio-acrylic via joint venture with development partners to a licensing strategy; meanwhile, pursuing an accelerated development of its fatty acids technology. Based on the speed-to-market which was always the OPX “secret sauce” owing to its EDGE technology (Efficiency Directed Genome Engineering, which is up to 5,000 times faster than conventional bioengineering methods for redesigning the genetic code of microbes), the company thought it could get to samples in 2015 and selling completed product by 2017.

Meanwhile, the shift to a licensing strategy in acrylic meant seeing upfront licensing revenue as soon as 2016, instead of in 2019 under the build, own and operate model.

The OPX Bio Process – click for a full-size view

The new strategy proved popular, with prospective strategic partners, in the roadshow that OPX undertook. And an undisclosed “major EPC” was interested in an arrangement where they would build plants and OPX would license the know-how, and build a plant every two years. Ultimately some licensing and joint development prospects began to ask about acquiring the company as a whole.

Fearing the challenges of picking between myriad opportunities coming in on wholly different timelines, OPXinitiated a formal process in December, retaining DecisionPoint Advisors, setting up a data room. They had an LOI in place with Cargill by February after a process that attracted interest from multiple parties. Since then, the companies have been engaged in due diligence, and now the deal has closed.

Why OPX?

The company had been focused over the past few years in developing applications to produce 3-HP (3-hydroxypropionic acid) via fermentation, which is then converted in one step to bio-based acrylic acid.

But the company had pathways to a multi-billion dollar market, via a collection of target molecules, including: butanol, BDO, 3-HP, acetyl-CoA, malonyl-CoA, malonate semialdehyde, 3-HP, acrylic acid, PDO, malonic acid, ethyl 3-HP, propiolactone, acrylonitrile, acrylamide, methyl acrylate, a polymer including super absorbent polymers and polyacrylic acid.  OPX Bio has developed what is generally believed to be a world-class capability in strain and metabolic engineering towards that end.

Why Cargill?

Complementing OPX’s development expertise, comes the commercial nous of Cargill. A company which is not only an ag-sector giant, but has all the bumps and bruises that comes from deep experience in scaling up and commercializing fermentation-based technologies. The company has a deep bench of talent — famously, they’ve been known to bring more of their people in to study a potential relationship than the entire head count of some of the little technology companies they partnered with or acquired.

And, they’d been down the road in bio-acrylic, too. Back in 2008, Cargill and Novozymes announced a joint agreement to develop technology enabling the production of acrylic acid via 3-hydroxypropionic acid (3HP) from renewable raw materials. The project was supported by a $1.5 million matching cooperative agreement from the U.S. Department of Energy. The collaboration aimed at enabling fermentation of sugar into 3HP using a bioengineered microorganism.

“Our customers that make products in any of these categories will benefit from this technology acquisition because it will enable us to produce more and better solutions for them than they can get from any other company,” said Cargill Corn Milling vice president, Brian Silvey. “It will also make bio-based products with extensive functionality more readily available than ingredients produced using petroleum-based or tropical oils.”

So, OPX, why not continue to go it alone?

“It just gets hard,” OPX CEO Mike Rosenberg told The Digest, “to justify the stand-alone approach when you match up the opportunities like the one here, compared to the real challenges of raising a Series D venture round for the company at the same time as raising $35 million or so to fund our JV obligations in building a first commercial plant. And then the next plant would possibly be costing something like $100 million, and there’s no guarantee of a second partner out there who’s as good to work with as Dow and with whom you can develop and build a second plant. What if one was the only one? We had to look at that.”

Regarding the valuation, Rosenberg told The Digest, “we really don’t want to get in to the details, but we did have a thorough process with multiple parties, it wasn’t like a ‘one company we’re talking with’ process, and we got a fair market price for the technology from a company that is a great fit.

And, a timing fit. Clearly OPX did not savor a protracted transaction process due to “burn rate” considerations , and Cargill’s ability to close and fund a transaction quickly was a factor, in addition to price.

Who stays?

Well, skiing enthusiasts will understand that not every single employee will be making the move from Boulder, CO to Minneapolis, but a number would be expected to join Cargill and some others will stay affiliated as consultants.

The Bottom Line

We may never know the price, and the extent to which early-stage investors realized a windfall or got out “OK”, that’s for another day. In terms of the success of the technology, that’s clear — it developed in a venture enviroment, but now finds a home in the biggest private ag-sector company in the world.

Cargill has gobbled another one, possibly at a good price, and certainly we expect to hear more about fatty acids and biobased acrylics from their Corn Wet Milling operations.