Synthetic Biology: Transforming the Industrial Chemicals Space

TL;DR

• The chemicals industry has a large carbon footprint and many of its processes result in toxic byproducts. Thus the time is ripe to find greener and cleaner chemical manufacturing processes.
• Synthetic biology, or synbio, leverages genetic engineering, systems biology and precision fermentation to manufacture products using engineered micro-organisms and enzymes.
• In the past two decades, these technologies have begun to be used to manufacture chemicals, ranging from commodity chemicals like fuels and plant-based nylon to specialty chemicals like fragrances and food additives.
• The first generation of chemicals companies to use synbio came forth in the late 90s and sought to be full-stack players. They, however, struggled with meeting market demands.
• The second generation of synbio chemicals companies adopted a different approach which has been enabled by a more mature market as well as more advanced technologies. Their solutions have begun to be demonstrated and deployed at scale.
• These companies have received significant quanta of investment, particularly in the last five years. However, they still need to demonstrate scale-up and cost competitiveness with their fossil-fuel counterparts.
• Regulations around the world are slowly keeping pace with advances in synthetic biology.

Introduction

Chemicals are a key part of the global economy, powering many aspects of our technological society. Whether it is commodity chemicals like biofuels or specialty dyes like indigo, the chemicals industry is pivotally important to our lives, producing a whole gamut of products, including resins, surfactants, biofuels, rubber and films. We rely on industrially produced chemicals for a wide range of activities, including agriculture, transportation, fashion and packaging.

However, the chemicals industry is also responsible for over 5% of annual global greenhouse gas (GHG) emissions. This is due to the resource-intensive nature of the processes involved as well as the use of petrochemicals as input feedstock. Further, large chemical plants have other deleterious effects on the environment around them, such as groundwater contamination, reduction of local biodiversity, and decrease in local soil fertility. Many byproducts of the chemical industry are known or probable carcinogens too.

It is thus of utmost importance to transform the chemicals industry into a safer, more sustainable and environmentally-friendly version of its current self. Not only that, but there is also scope for technological improvements to make current processes more efficient and cost-effective. For chemical plants, this can be done in multiple ways:

• Replace feedstocks with renewable, or plant-based ones,
• Replace legacy chemical- and energy-intensive processes with biological processes,
• Perform carbon (and other pollutant) capture at the point of emission, and
• Make existing processes cleaner, with respect to particulate emissions and effluent discharge.

For many years now, the chemicals industry has already begun to incorporate bio-based input materials and processes. This has resulted in lower emissions, cleaner processes, and a reduced reliance on fossil- and chemical-based inputs. For certain applications, such as manufacturing ethanol fuel from corn, the bio-based approach has scaled up to make it a mainstream product. In fact, the bio-conversion of corn to ethanol began in the 1970s. Bio-based processes have struggled, though, for the most part, to attain cost competitiveness with their chemical process counterparts, primarily due to variability in the input organic feedstock and low conversion efficiencies. Legacy bioprocess technology could not make bio-based chemicals ubiquitous due to both scientific and technological barriers.

To overcome the first level of scientific barriers, the chemicals industry began to incorporate a new partner: synthetic biology, due to a combination of two tailwinds: the maturation and cost-competitiveness of synthetic biology as an industrial technology, as well as global push to divest from fossil fuel dependence.

Synthetic biology takes the vanilla bio-based approach a step further by engineering, at a genetic level, the micro-organisms or enzymes that facilitate bio-based chemicals manufacturing. As the processes have matured both in terms of technological scale-up as well as market readiness, many players have incorporated synthetic biology into their chemical manufacturing processes. As these technologies have been developed, optimized, and deployed at scale, products manufactured using them are finally attaining cost-competitiveness with their fossil fuel counterparts.

What is the synthetic biology approach?

Synthetic biology is the engineering of natural biological systems to equip them with desired useful properties. It is an interdisciplinary field, combining techniques from biotechnology, systems biology, genomics and data science. In the context of real-world applications, and in particular the chemicals industry, synthetic biology is used to create proprietary strains of microbes and enzymes that can perform completely novel tasks, or perform currently useful tasks at a higher rate or higher efficiency. These engineered processes are a marked improvement over the previous generation of bioprocesses as they are more robust, more tolerant when it comes to operating conditions, and more efficient in converting input feedstock to the desired chemical output. The use of synthetic biology also reduces dependence on specific input feedstocks, enables energy and raw material security, and pushes towards a circular economy.

The fundamentals of synthetic biology have been known for many decades now. The know-how and expertise to deploy these at scale, though, has come more recently. Some of these factors are advances in computational power and availability of genomic data. Further, from a market and demand perspective, climate change has added a sense of urgency in looking for sustainable alternatives to our most carbon-intensive activities.

Generally speaking, the use of synthetic biology in industrial chemicals takes on two forms: using either engineered microbes or engineered enzymes for the production of the desired chemical. The two approaches need not be mutually exclusive. The engineering of microbes and the creation of enzymes offer two related, yet distinct, approaches to manufacture industrial chemicals while harnessing the power of biological systems. The microbial approach involves creating custom-engineered “cell factories”, which serve as production platforms tailor-made for each product. This approach taps into the engineered metabolic activity of the microbe in question. The microbes may be heterotrophic, where carbon is provided as input to the microbe (usually in the form of a sugar), or photosynthetic, which generates desired outputs from just CO2 and sunlight. The enzymatic approach involves using custom-engineered enzymes to perform the conversion of input chemicals to desired outputs. The enzymatic approaches generally take place in the absence of living cells, and can thus have advantages when it comes to flexibility and robustness.

How is the market developing?

The first cohort of synbio companies

Starting from the late 1990s, companies began to incorporate synthetic biology techniques into industrial chemicals manufacturing. Companies that began operations by manufacturing specialty chemicals operated in higher-value products which however had a relatively small market size. Such an approach provided companies with a suitable platform to test and deploy their synthetic biology-based approach at a medium scale. Manufacturing commodity chemicals, on the other hand, was and remains a different game as the margins are smaller and the finished products are very much fungible. While this poses challenges in terms of scale-up and cost-competitiveness, the commodity chemicals market also offers the opportunity for players to grow into very large companies.

The first cohort of synbio companies, sometimes called the synbio 1.0 companies, generally focused on being full-stack players, i.e, they focused on a single application with a large market and sought to vertically integrate all the processes in manufacturing an end product. This was partially due to the fact that the industry was a new one, and without a supporting ecosystem, companies had to develop all the processes right from raw material to end product. A sizable fraction of them focused on manufacturing fuels.

However, the market was lukewarm to many of these first-cohort synbio companies, with the result that only a few of them are continuing to operate today. One of the primary reasons for this was that even though the technology was approaching maturity, it was still a difficult proposition to scale these up to the market’s demand and to attain price parity with their fossil fuel-based counterparts. Further, some of the negative externalities surrounding conventional chemicals manufacturing (deleterious environmental effects, unsafe processes, greenhouse gas emissions, to name a few) were not factored in and kept their costs artificially low.

However, some of the 1.0 companies continue to operate to this day. The common denominator across these companies is that they have maintained a strong core technology that they’ve been able to leverage across a gamut of products. This has enabled them to apply their expertise to different parts of the chemicals industry and adapt to market feedback over the years.

For example, Genomatica was founded in 1998, and after a decade-long exploration of various products, finally developed a genetically engineered strain of E.coli to produce 1,4-butanediol (BDO), an important component in the production of spandex. This bio-BDO is now core to Genomatica’s business strategy. Once this platform was built, the company developed other products, such as plant-based nylon launched in 2019 and a palm oil alternative in 2021. The company most recently raised a $118M Series C round in 2021.

Another of the 1.0 companies, LanzaTech, was founded in 2005 with the aim of producing sustainable biofuels. It developed and has continued to optimize a process in which it can upcycle “waste” carbon from industries and convert it to ethanol. The company, though, opened its first commercial scale facility only in 2018 and in the meantime operated pilots and research partnerships to improve its tech. The company’s technology has now matured to the point where it can upcycle CO2 itself into fuel, representing a step change in its effectiveness.  With demonstrable technology and a demand for sustainable fuels, LanzaTech raised over $500 million last year.

Amyris, another US-based player, was founded in 2003 with its initial mandate being to create a molecule to treat malaria. Only after going public in 2010 did the company begin to operate commercial scale plants to manufacture squalene, biofuels and multiple flavour compounds. It has since developed a platform to genetically and metabolically engineer strains of bakers yeast to produce Acetyl-Co-A, which can then be used to produce different terpene compounds. These compounds include both specialty chemicals such as biodegradable solvents and fragrances as well as commodity chemicals like isoprene to be used in vehicle tyres and fuels such as renewable diesel.

Now that some of these products are getting established commercially, they are beginning to attain cost-competitiveness to varying extents. For example, Genomatica’s bio-based BDO attains price parity with its fossil fuel counterpart when crude oil is priced at $45 or higher per barrel. Given recent crude prices, this clearly signifies a cost advantage that bio-BDO has on top of its advantageous climate footprint. However, not all synbio-based products are cost-competitive at the same price of crude. For example, Amyris and LanzaTech (via its subsidiary LanzaJet) both manufacture sustainable aviation fuel (SAF). Amyris’ SAF is expected to be cost-competitive at a crude oil price of $80/barrel. In 2021, LanzaJet’s SAF was priced at $3/gallon whereas fossil-based SAF was available at $1.6/gallon.

Synbio 2.0 companies: the second cohort

Even though there have been some success stories in the synbio-1.0 companies, they represent the exception rather than the rule. The second cohort of companies, learning from the journeys of the first generation of companies, have broadly taken a different approach, where they focus less on being a full-stack company with few products and more on becoming a platform player, with a product range spanning both commodity and specialty chemicals.

One of the best-known synbio companies in this cohort is Solugen. Solugen focuses on creating enzymes via genetically engineered microbial strains and using them to process the primary input material, corn syrup, into a variety of chemicals, such as hydrogen peroxide and gluconic acid. From the outset, Solugen has set out to be a platform player with a diverse portfolio of products, and further, they seek to become input material-agnostic. Solugen raised over $200 million last year in its Series D round and secured a valuation north of $1 billion.

Swedish company EnginZyme was founded in 2014, and their technology is very similar to Solugen’s: they engineer and immobilize enzymes to enable more efficient chemical production. They raised a Series C round of €22 million last year which is enabling them to scale up their existing pilots and begin to manufacture high-performance cosmetics, food applications, alternative sweeteners, and flavors and fragrances.

Some companies, such as Codexis, Arzeda and CinderBio, have approached the market in a different manner: instead of doing end-to-end bio-manufacturing of commodity or specialty chemicals, they have focused entirely on creating enzymes that enable or improve biomanufacturing. Codexis, which went public in 2010, develops enzymes for pharmaceutical, biofuel and chemical production. Most recently, they launched the CodeXyme® 4 and CodeXyme® 4X cellulase enzyme packages. Arzeda, another USA-based company, builds novel enzymes and discovers pathways for manufacturing commodity and specialty chemicals. Arzeda raised $33 million in 2022 in their Series B round.  

Another heavily polluting field that’s being disrupted by synthetic biology innovation is fashion, both in the production and dyeing of textiles. Bolt Threads and MycoWorks, for example, have engineered particular strains of mushroom species to manufacture specialty textiles. Bolt Threads notably raised over $250 million in 2021 in its Series E and is able to manufacture small quantities of its products which are currently used in premium footwear and textiles. MycoWorks raised $125 million in 2022 and entered into a strategic partnership with General Motors to begin deploying their Fine Mycelium™ materials across automotive design. While mycelium-based products are very exciting, they are yet to attain price parity with their conventional counterparts and thus have seen their application limited to luxury products.

Bioplastics, another commodity chemical class, has seen synthetic biology innovations be made lately. RWDC, a Singapore-based company which was started in 2015 is currently scaling up its manufacturing processes to produce polyhydroxy-alkanoate plastics via precision fermentation and raised a $95 million round of funding in 2021 for the scale-up.

In the past five years, larger players in the chemical space have also begun to manufacture some chemicals using synthetic biology. For example, Dow recently launched PRIMAL, which is a bio-based acrylic emulsion used to then formulate paints. DSM, along with SABIC and UPM Biofuels, created a bio-based version of Dyneema, a high-performance fibre product with a multitude of applications. UPM has also invested heavily into biorefineries to manufacture glycols and fillers from wood, instead of the traditional feedstocks like naptha and coal, and is currently constructing these primarily in Germany.

Bio-based chemicals in India

In India, synthetic biology is yet to find a mainstream role to play in the manufacture of industrial chemicals. The bio-based chemicals industry, however, does exist, with both large global players and domestic companies in the business of using organic feedstocks to manufacture chemicals at an industrial scale. For example, Godavari Biorefineries and Vizag Chemicals use feedstock like sugarcane to manufacture products like ethanol, ethanol-based biochemicals, bioplastics, and surfactants, to name a few. Cargill, too, invested $15 million in 2020 to set up a new bioindustrial plant in Maharashtra to manufacture bypass fat and waxes. In 2021, India-based Spray Engineering Devices entered into a partnership with LanzaTech to set up a first-of-its-kind bagasse-to-ethanol project using LanzaTech’s synthetic biology process. Alfa Laval services industries looking to set up new bio-based manufacturing plants.

Research efforts to incorporate synthetic biology into the manufacture of chemicals are ongoing in a number of institutions, such as the Institute of Chemical Technology and the National Centre for Biological Sciences. These potential applications include designing microbes, enzymes and algae for biofuel synthesis, bioremediation, home and personal care products, as well as high-value chemicals such as dyes. This presents a big opportunity for players of all sizes, ranging from startups to multinationals.

The bio-industrial sector in India contributes to roughly 13% of the overall bioeconomy size and is worth $10.3 billion. The bio-industrial sector in India is almost entirely encompassed by biofuels and enzyme manufacturing. However, synthetic biology is yet to find a foothold in this sector. However, India’s bioeconomy has grown eight-fold from 2014 to 2022 and is currently worth $80 billion, and is set to achieve a value of $150 billion by 2025. This further rise will no doubt involve innovations involving the use of synthetic biology techniques in the bio-industrial sector.

Opportunities

Given both the growing demand for more climate-friendly chemicals as well as our increasing technological proficiency with synthetic biology, there are many opportunities to manufacture the chemicals we need in safer and more efficient ways. The use of synthetic biology in industrial chemicals is still in the nascent stage, opening up opportunities both in terms of technological advances as well as capturing increasingly larger shares of the existing chemicals industry.

In particular, a large opportunity presents itself in the form of reducing the demand for “first-generation” organic feedstocks, such as corn, corn syrup or sugarcane. Recent progress, both from academia and companies such as LanzaTech, has involved discovering and engineering microbes that can convert single-carbon molecules (such as CO2) to higher-carbon and higher-value products. This has a host of advantages, with a few being that it negates the land-use concern of using organic feedstocks and unlocks carbon capture in parallel. For example, LanzaTech has developed the capability of converting CO2 to ethanol which can be used either as a fuel or an input material for further processing.

Using organic feedstocks also opens up the opportunity for these new-age chemical companies to become carbon-neutral or even carbon-negative, as Solugen is attempting to do. This can potentially enable these companies to monetize this aspect by plugging into carbon markets around the world.

Not only is synthetic biology making the chemicals industry more sustainable, but it is also reducing the cost of a number of chemicals available worldwide. Roadblocks that existed in the past for bio-based processes may fall by the wayside with the adoption of synthetic biology. For example, enzymatic processes in general are expensive due to the cost of raw materials. However, the use of synthetic biology to engineer enzymes with desired properties is quickly becoming common, with the result that enzymatic processes are no longer prohibitive by cost. As costs of establishing bio-based and bio-enabled plants fall, the adoption of synthetic biology as a mainstream process will continue to grow.

Of course, there is a major push from governments around the world for sustainable alternatives to industrial products across the board, which also includes chemicals. Increasing support from policymakers in the form of regulation, subsidies and investment will make bio-based chemicals increasingly attractive in comparison to their fossil fuel-based counterparts.

Graphics courtesy DALL.E 2 and various Flaticon users