Solazyme (SZYM) is an interesting company on the brink of commercializing its innovative product platform. What does it do?

Solazyme, Inc. produces and sells renewable oil for chemicals and fuels, nutrition, and skin and personal care markets. Its proprietary technology transforms a range of plant-based sugars into oils, as well as allows producing and selling specialty bioproducts from the protein, fiber, and other compounds produced by microalgae. Its renewable products could replace or enhance oils derived from petroleum, plants, and animal fats. [Yahoo]

Seeking Alpha contributor Kevin Quon argued after interviewing management again:

Solazyme (SZYM) has now reached the point of commercializing a proprietary technology platform that has spent a decade in development. The company is capable of significantly altering the supply chains of established industries by introducing oils with unique properties.

However, Quan laments that the company isn't seen in the proper light, that is, it's capabilities to produce customized oils is not appreciated:

Even now, media publications continue to errantly tag Solazyme as a mere biofuel play or solar stock in stark contrast to its position as a growing industrial biotechnology leader specializing in customized oil design.

Well, with a market cap of $850M+ it certainly is recognized for something as its revenue was just $44M last year whilst only producing fairly substantial losses so far. But revenues are about to be revved up as the technology scales from lab to plant and two commercial plants will come online

The stock seems to be caught between $8 and $13:

There are good reasons for this company to be interesting

1. They have unique capabilities, designing and manufacturing renewable oils on the basis of a microalgae based platform
2. The platform scales and is fairly robust and can (according to Kevin Quon) ["cost-effectively replace expensive processing steps now utilized throughout the industry."] One should consult the whole linked article for details.
3. So their platform not only is cheaper, but enables the production of more oils: ["Economically speaking, there are only a small number of oils in this world, which can be efficiently produced and made in large enough supply to become reasonably priced for most products. There is an overall lack of characteristic diversity amongst this pool of well-known oils."]

But then again, there are things to consider. The market cap is over $800M, almost three times the 2015 projected revenues and analyst expect the company to still produce a loss in 2015 (20 cents a share), even though their two factories (one is already producing and the other will start somewhere in the first half of this year) supposedly run at full capacity. However, Quan argues that:

It is important to consider that even upon reaching nameplate capacity, Solazyme's full potential remains far from tapped. As portrayed in what was written above, Solazyme has only begun to introduce products that represent the base level of their value-added creativity. For now, the company is comfortable in increasing the yields of well-known molecules within established markets.

So this is only the beginning of the game. The aim is to move to 'designer oils,' that add value and produce higher margins.

http://www.nytimes.com/2011/03/24/fashion/24SKIN.html?_r=2&;

Did a little homework and came across this article that is 3 years old on the anti aging product line they sell called Algenist.  Their entry into the luxury cosmetics market is interesting.

They have done an impressive job of building the world wide buzz on the product line:  http://www.algenist.com/news/buzz

Then I went to Sephora.com to read the product reviews by customers starting with the lowest ratings.  Quite a few complaints that it did nothing OR actually harmed their skin OR plateaued on improving the skin and then started regressing.  On the other end lots of people thought it was great.  One thing for certain is everyone agrees it is very expensive and goes quickly in the small sizes.

You have to wonder if there is some product QA/consistency issues that are giving these strongly negative results.  In any case when  people pay a lot for something that has elevated claims and it doesn't work or worse, hurts the skin, then  to me that news starts to spread like wildfire and can kill off the product quickly.

They may eventually develop some bullet proof skin products, but this one has a plenty of holes shot in it if you can believe these reviews.  If Sephora is selling the stuff and posting the bad reviews, I have to believe they are legit.

On the biofuels side this is all heavily subsidized by governments and thus is easly hit when e.g., defense spending plummets as Obama is now doing.  So that doesn't draw me in.

I couldn't come across much independenlty verifiable scientific evidence that their products actually deliver benefits; only claim of 3rd party labs which I assume they hired.  Maybe I missed it.

I'm not feeling it so far.  The PPS seems to reflect the same sentiments.  Would take a lot more homework for me to get a clearer picture.  Thanks for the post.

Trolling the Oceans to Combat Aging

By CATHERINE SAINT LOUIS

Published: March 23, 2011

Related

• 
  Beauty Spots (March 24, 2011)

  
  

Enlarge This Image

Heidi Schumann for The New York Times

Solazyme executives, from left, Jonathan Wolfson, Frederic Stoeckel and Harrison F. Dillon with algae samples.

William P. O'Donnell/The New York Times

Retailing for $65 to $95, Algenist moisturizers, serum and eye balm are already available at Sephora.com and will go on sale in the company’s stores this week. “When we saw it, we thought it was so unique, such innovation, something our clients could really understand,” Mrs. Slater said of the line. “The whole story about this being an unexpected discovery.”

Mrs. Slater added that it made sense to her that alguronic acid (a compound that protects microalgae cells, according to Algenist’s maker, Solazyme) could also protect middle-aged faces from environmental assault. “Think about how algae can live anywhere, live in the coldest of places, or the harshest of places, and think about translating that to skin care,” she said.

Dermatologists might not wholeheartedly share Sephora’s enthusiasm. But a surprising story about a product’s genesis can be just as important for generating sales as the product’s demonstrable efficacy. Consider Crème de la Mer, which, like Algenist, contains sea matter, and also involves an enterprising scientist: an aerospace physicist trying to heal scars he suffered in a lab accident.

“It’s a slightly different story,” said Nica Lewis, the head consultant of beauty innovation at Mintel, a market research firm. “But it’s still ‘brainy scientist comes up with cosmetic product.’ ”

According to Jonathan Wolfson, the chief executive of Solazyme, the alternative-energy company that makes Algenist, the product came about after a fortuitous suggestion roughly six years ago by Arthur Grossman, a microalgae expert who’s now an adviser to the brand. At first, Solazyme executives had a good chuckle about the idea of getting into skin care, Mr. Wolfson said. “I really never thought I’d be standing in a store like this,” he told a gathering of reporters during a preview at Sephora Fifth Avenue, amid shiny display cases of primer and volumizing mascara.

It may seem novel for a nonbeauty company to get into skin care, but these days, it really isn’t, Mrs. Lewis said. “There are ingredient suppliers that provide ingredients to health care, food and drink industries, and cosmetic companies,” she said. In Japan, “food and health care companies have found cosmetic applications for their ingredients, so they are creating skin care brands.”

For example, Frutarom, a flavor-ingredient house based in Israel, makes Alguard, a purified polysaccharide shield from a red microalgae that it says protects skin from daily assaults and reduces roughness as well as the look of fine lines.

There are more than 100 algae-derived ingredients used in cosmetics worldwide, Mrs. Lewis said. The patent-pending alguronic acid in Algenist is a “single, purified, highly bioactive compound,” said Tony Day, the vice president for research and development at Solazyme, and therefore delivers “much higher activity to the skin” than products using only a microalgae extract.

Studies conducted by an independent lab and commissioned by Algenist, none of which have been published in a peer-reviewed journal, showed alguronic acid increased cell regeneration and the synthesis of elastin (which gives skin that snap-back youthful quality). This testing also demonstrated that alguronic acid provided protection against cell damage induced by ultraviolet rays, and inhibited the enzymes that break down elastin.

After reviewing press materials and Solazyme’s 84-page patent application, Dr. David McDaniel, a dermatologist and the director of the Institute of Anti-Aging Research in Virginia Beach, Va., said he was impressed by the in-vitro testing of alguronic acid. “In the petri dish, their data seems to show some substantial benefits to their active ingredient,” he said. But he cautioned that in-vitro testing does not demonstrate how a final formulation works off the shelf.

Dr. Dana Sachs, an associate professor of dermatology at the University of Michigan, Ann Arbor, wrote in an e-mail after looking at Algenist’s dossier that “the claims on cell regeneration and elastin synthesis are based on in vitro models, which is hard to extrapolate to in vivo, and again no statistical significance is presented, so this is a weak claim.”

Dr. Day, who has a doctorate in biochemistry, said that statistical significance was found but not included in press materials. And, according to the company, a study of 30 women showed that after 10 days of using the Algenist serum, they had a 25 percent decrease in wrinkles as shown by silicone replicas of their faces.

Dr. Ellen Marmur, the chief of the division of dermatologic and cosmetic surgery at Mount Sinai Medical Center in Manhattan, did say Algenist could fairly claim that alguronic acid offers protection against ultraviolet damage to cells, and that she might use the product as “a nice sun protection on top of S.P.F. protection.”

Algenist literature touts alguronic acid’s superiority to hyaluronic acid, retinol and vitamin C, among other anti-aging ingredients, in encouraging elastin synthesis and cell regeneration. But Dr. McDaniel, who does research into using plant-derived products to lengthen the life of cells, says he thinks the comparative data must be viewed with caution because the studies that yielded it are “challenging to do accurately, hard to interpret and not necessarily predictive of final products.”

Soon, consumers will judge whether Algenist products are a breakthrough. In an unusual move, Sephora is introducing the line in 800 locations in 8 countries all at once, in a rollout coordinated with QVC. “It was a brand nobody has ever heard of,” said Allen Burke, the senior adviser for beauty strategy and development at QVC. “We want to give it a lot of visibility all at the same time.” But Mr. Burke knows that marketing has its limits. “It can be the most interesting story in the world,” he said. “But if it doesn’t deliver, it’s not a business that we can do.”

Goldman Sachs doesn't see much immediate upside and cut its rating to neutral. Funny enough, it's up 6% at pixel time..

• Solazyme (SZYM -1.1%) is downgraded to Neutral from Buy with a $13.50 price target at Goldman Sachs, which sees limited upside for the stock in the near-term although the long-term growth story is intact.
• The firm believes SZYM has executed well vs. peers, with its first two commercial-scale facilities now within months of coming online and delivering volume, but this catalyst appears to be reflected in the stock’s ~30% move since the end of January.
• The firm adds that it is more guarded on the near-term path for catalysts given financial performance is likely to remain muted.

Teething problems over, we can recover in the stock:

 

Solazyme, Inc.3 hours ago

10 handelsdagen achter elkaar omhoog en een overgekochte RSI, we staan voor de opening op $12.22, tijd voor enige afkoeling?

Ooops, I'm talking in my native language here. It happens.. Translation:

10 days of higher prices, all good things must come to an end (and indeed they did today..)

Well, with regard to the graph in the previous post, we did expect things to cool off, but not by this much we have to admit..

A new SA article is interesting:

• Solazyme recently gained its first customer for AlgaVia's Whole Algal Flour Product.
• The company offers natural product ingredients and is also able to improve the health profiles of food.
• Solazyme's technology platform could be a disruptive innovation when it comes to oil profile variety.

Solazyme: Taking Advantage Of Healthy Food Trends And The Need For Innovation - Solazyme Inc | Seeking Alpha