3 Opportunities for Solazyme Investors
Investors looking to get into industrial biotechnology should keep a watchful eye on renewable oils manufacturer Solazyme . The developmental stage company has some pretty big ambitions and, should its goals be realized, is in for some eye-popping growth. Looking for some more specific reasons to keep Solazyme on your watchlist? Here are three opportunities for investors taking the long-term approach to the company.
1. Diverse target markets
Today the word "oil" is associated with crude oil, petrochemicals, and fuels. However, oils reach into a broader range of everyday life. When you hear the word "oil" you should think not just about fuels, but about foods, lubricants, fragrances, and body lotions, too (just to name a few). Investors of Solazyme will get to enjoy next-generation alternative fuels -- including blendstocks and drop-ins -- as well as specialty chemicals, personal care products, and nutritional products.
The diverse range of chemicals that can be manufactured on the company's platform will one day help to distribute risk across various unrelated customers, partnerships, markets, and continents. There are far too many spooky examples of over-dependence in the history of investing to name just one, but know that Solazyme is aiming for diversity and stabilization. Volatility in any one market or with any one partner will not necessarily spell disaster for the company or shareholders.
2. Financially strong
In what could be considered a rarity in the industrial biotechnology industry, Solazyme is actually leaps and bounds ahead of peers when it comes to its balance sheet. It had $239 million in cash and short-term investments at the end of March, which will go a long way toward commercializing products and biorefineries in the next two years. The company expects operating expenses to fall between $115 million and $120 million in 2013, so that war chest will disappear pretty quickly.
Solazyme will continue to be compared with industry pioneer Amyris , as both push into uncharted waters for commercial scale bio-based chemicals production. From a product standpoint the comparison is not very far off. The two companies are commercializing multiple products in similarly diverse markets: Amyris with building block molecules, Solazyme with tailored oils. However, the latter has managed a much healthier balance sheet and burn rate to date.
It will be a costly and unprofitable next several years for the company, but it will not have to dilute investors at nearly the same rate as other bio-based chemical producers. You would be hard pressed to find similar financial health in other companies in the developmental stage, especially in this capital-intensive industry.
3. Can you say "growth"?
Solazyme will jump from 1,820 metric tons of renewable oil capacity (from its demonstration facility in Peoria) now to over 125,000 metric tons before mid-2014.
Peoria (product development)
1,820 metric tons
Solazyme Roquette Nutritionals
5,000 metric tons
100,000 metric tons
20,000 metric tons
Fast-forward to the end of 2016 and the company is planning on having 550,000 metric tons of operating capacity installed with partners, while 300,000-350,000 metric tons will belong to Solazyme. That will require a good amount of new capital and partner commitments, but it is pretty tremendous growth that is impossible to ignore. Management isn't shy about its ambitions either. They believe the company can grow revenues from $44 million in 2012 to over $1 billion with their final production capacity in place.
Foolish bottom line
Solazyme offers some interesting opportunities for investors looking to get into the growth that lies ahead in the industrial biotechnology industry. It is developing a diverse product portfolio with international partners, has had no trouble raising money with shareholders in mind, and is growing out of its shoes. The story will take years to play out and there could very well be obstacles ahead, but this is as good as it gets in the industry right now. Will you be buying this disruptive innovator? Let me know in the comments section below.
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The article 3 Opportunities for Solazyme Investors originally appeared on Fool.com.Fool contributor Maxx Chatsko has no position in any stocks mentioned. Check out his personal portfolio, his CAPS page, or follow him on Twitter @BlacknGoldFool to keep up with his writing on energy, bioprocessing, and emerging technologies.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.
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