Bridging the Divide between Demand and Bio-Based Materials

Kalib Kersh 4th Annual Next Generation Bio-Based Chemicals

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About Lux Research

Helps clients find new business opportunities from emerging technologies in physical and life sciences

Offers ongoing technology and market intelligence, as well as market data and consulting services

Over 250 clients on six continents – multinational corporations, investors, governments, and SMEs

Global reach, with over 80 employees in Boston, New York, Amsterdam, Singapore, Shanghai, Seoul, and Tokyo

Combines deep technical expertise with business analysis to support strategic decisions

Technology coverage Solar Components

Solar Systems

Grid Storage

Electric Vehicles

Alternative Fuels Bio-based Materials & Chemicals Formulation and Delivery

China BioPharma

Water Exploration and Production Advanced Materials Printed, Flexible, and Organic Electronics Energy Electronics Sustainable Building Materials Efficient Building Systems

China Innovation

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Which came first? The molecule or the market?

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History is littered with eureka moments that never amount to much value for end-users

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Bio-based chemical industry innovation cycle: Got sample quantities? It’s time for applications

Feedstock development

Conversion evolution

Material availability

Applications development

Consumer demand

Capacity expansion

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Overview

Applications are useful in structuring bio-based chemicals opportunities

Leaders partner profusely to access markets and applications expertise

Bio-based materials value proposition is ringing more clearly than ever

Lessons from history may accelerate bio-chemical commercialization

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Performed: Semi-quantitative assessment of largest polymer demands and how bio-based polymers fit

End-users are hungry for polymers – where are they?

Rough order-of-magnitude market sizing

Simple match and rank approach to seeing which polymers meet which application demands

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End-users are out there … breathing today and being born tomorrow

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Rise of the middle class is inevitable –and is bringing environmental and technical challenges with it

Prevailing sources of resources likely not to continue to be economically accessible – in short order

Source: Lux Research The Race to Replace Reserves, October 2012

And this most recent Lux report pegs the end of (economically recoverable) oil at 2030 to 2034 … unless significant investment is committed

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Application Markets in the Billions of $’s

Small

$<1B

Low Mid-range

$5B-$10B

High Mid-range

$1-$10B

Large

$10-$100B

Massive

>$100B • Disposable

liners • Disposable

flatware

• Medical containers

• Specialty coatings

• Industrial coatings

• Tubing • Laminates • Disposable

bags • Container

closures • Advanced

composites • Gears and

mechanical parts

• Industrial enclosures

• Medical packaging

• Industrial containers

• Beverage containers

• Food containers

• Pharma packaging

• Architectural coatings

• Medical biomaterials

• Shipping packaging

• Industrial films • Piping • Insulation

• Adhesives

• Chemicals • Plastics • Textiles and

fabrics • Industrial

packaging

Source: Lux Research Bridging the Divide

between Demands and Bio-Based Materials, September, 2012

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Ranking criteria were used to match applications to polymers that fit the application’s requirements

Source: Lux Research Bridging the Divide between Demands and Bio-Based Materials, September, 2012

Applications were rated on criteria of: Materials were rated on dimensions of:

Differentiated performance required by application

Performance as differentiator

Need for material to be durable Durability

Need for material to be recyclable Recyclable

Need for an environmentally preferred solution

Environmentally preferred

Need for economic availability and scale Economic availability

Threat of substitution (Substitution potential)

Threat of substitution (Substitution potential)

Other factors Other factors

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Technical Parameters / Materials Properties

Source: Lux Research Bridging the Divide between Demands and Bio-Based Materials, September, 2012

Specia l ty / Performance as Di fferentiator Durabi l i ty

Rheology as Performance

Attribute RecyclableEnvironmenta l

Preference

Carbon Footprint /

Energy Efficiency

Avai lable Economica l ly

Biodegrad-abi l i ty and Compost-

abi l i ty Sca le

Polyvinyl chloride (PVC)Polypropylene (PP)Polystyrene (PS and HIPS)PolycarbonateBiopolymer-containing blends and alloysPolyethylene (LDPE)Polyethylene (HDPE)Polyethylene terephthalate (PET)Polyester (PET, PC, PBAT)Nylon 6, nylon 11Eco-polyesterEthylene vinyl acetate (EVA)Polytrimethyl terephtalate (PTT)Polylactic acid (PLA)Polyhydroxybutyrate (PHB)Acrylonitrile butadiene styrene (ABS)Polyhydroxyalkanoates (PHA)Polybutylene succinate (PBS)Poly-3-hydroxybutyrate-co-valerate (PHBV)Polyurethane (PUR or PU)Polyetheretherketone (PEEK)

Key: 1 2 3 4 5

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Top Material-Application Matches, on Basis of Technical and Market Parameters

Source: Lux Research Bridging the Divide between Demands and Bio-Based Materials, September, 2012

Containers, packaging, films

Industrial components

Coatings

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Bio-based materials participate in these applications with performance meeting or exceeding incumbents

Source: Lux Research Bridging the Divide between Demands and Bio-Based Materials, September, 2012

Application Materials Opportunity Coatings Bio-based feedstocks including

soybean oil, tung oil, polyols including glycerin and bio-based

Increased bio-based content; low VOCs (satisfies CARB and other regulations)

Industrial components

PTT for foams

PE, EVA, and ABS for tubing

ABS for advanced composites,

PC for laminates,

PP insulation

Adding value through advanced manufacturing

Using large-volume materials in unprecedented, underutilized, or difficult ways

Containers, packaging, films

HDPE, LDPE, PET, and PVC;

PLA for disposables can’t be beat

PLA’s low carbon intensity, potential for recycling and biodegradability make it best-in-class for disposable items

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A host of developers continue work to make an increasing slate of bio-based “drop-ins” available

Chemical End products Key companies

Butanol Solvents, paints, butyl rubber, PET, fuels

Gevo, Butamax (isobut); Cathay, MetEx, Cobalt (n-but)

Adipic acid Nylons, resins, polyurethanes Verdezyne, Rennovia, BioAmber, Inventure, Genomatica

Succinic acid C4 molecules, PBS, PBT, solvents, de-icers

BioAmber, Myriant, DSM/Roquette, BASF/Purac

Butanediol (BDO) C4 molecules, PBS, PBT

Genomatica, LanzaTech (2,3-BD), BioAmber

Butadiene Rubber, ABS Genomatica, Amyris, Global Bioenergies

Isoprene Rubber GlycosBio, AE Biofuels/Zymetis, Amyris, Genencor, Global Bioenergies

Propanediol (PDO) Fibers, polyurethanes, PTT, cosmetics

DuPont, GlycosBio, Inventure, MetEx

Acrylic Acid Coatings, adhesives, plastics OPX Biotechnologies, Itaconix, Novomer

Furans Polyesters, polyurethane, fuels Avantium, Pennakem

Terephthalic acid PET, plasticizers Draths, Avantium, Gevo

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Partnering on applications and accessing markets increases at a frenzied velocity

Substitutes • PLA, starch- based plastics

Drop-in Replacements • PE, PP, PET, solvents, polymers

Improvements • Spider silk, living materials

Products on market today Partner on applications & access to markets

Butanol

Adipic acid Isoprene

Succinic acid

Terephthalic acid Butadiene

BDO

PDO

Acrylic acid

Furans

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Brand owners are reaching down to stimulate development of bioPET and alternatives

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Gevo’s downstream partners create products in a range of fuels and chemicals applications

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Bio-based rubber gaining steam through a range of key alliances and joint development work

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Partnerships to commercialize relatively novel bio-based specialty chemicals are even more important

PBS

Some still may be asking, “Is bio better?”

Or worse: they assume/believe bio has nothing to offer them

Others are making investments and thinking about strategic opportunities to be met by bio-enabled materials and processes • Large companies which desire

to maintain an edge should be mindful of extensive commitments in bio by the plalyers like …

Some of the bio-based hype has subsided – but there’s still plenty of buzz – and opps for growth

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The Bio-Based Materials value proposition

Biotech does takes time to develop, but has profound ways of meeting market challenges • Hedge against supply chain risk cost savings • Add unprecedented value – bio-based lubricants, new

renewable/biodegradable/high performance

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Main Obstacles in Pursuit of Bio-based Drop-in Replacements of Conventional, High-volume Polymers

Source: Lux Research Bridging the Divide between Demands and Bio-Based Materials, September, 2012

Top Drop-ins to Commercialize

Main Obstacle Driver

PS/HIPS Strain development for bio-based styrene

Lower toxicity process (no benzene)

PET Development, economic production

Brand-owner competition

PVC Economic production Lower carbon footprint PP Economic production

route Bio-based content for personal care

Eco-polyester Clearer communication of value proposition; supply chain certification

More affordable alternative to virgin polyester

EVA (Ethylene vinyl acetate)

Viable routes from bio-based feedstocks

Increased bio-based content; efficiency

PE Cost parity with incumbent PE

Increased bio-based content; efficiency

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Successful commercialization requires supply and demand coordination – and, it use to be, luck

Reliably forecasted demand item

When nylon leggings were released, demand planning failed – leading to supplies falling short for years

Experience with consumer products provided extensive opportunity to refine performance

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Allow processors and end-users to become familiar with a material – start with low-risk applications

Increasing risk More demanding specifications Larger addressable markets

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1954 – HDPE released into the market - Initial sales grossly disappointing; stocks piled up - Turn-around came from surprising source: hula hoops

• By 1957, commercialization of PE extensive

Aim for low-risk, but high-visibility application

to build growth

Expanding horizons – learning from historical commercialization efforts: polyethylene

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Bio-based chemical industry innovation cycle

Feedstock development

Conversion evolution

Material availability

Applications development

Consumer demand

Capacity expansion

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Overview

Applications are useful in structuring the bio-based chemicals opportunity

Leaders partner profusely to access markets and applications expertise

Bio-based materials value proposition is ringing more clearly than ever

Lessons from history may accelerate bio-chemical commercialization

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Lux Bio-based Materials and Chemicals Intelligence: Planned State of the Market Reports

Report title Date Description

State of the Bio-Based Materials and

Chemicals Space

Q1 2012

Though many companies are targeting the same bio-based platform chemicals: succinic acid, adipic acid, butanol, terephthalic acid, isobutene, isoprene, BDO etc., these innovators are unique with respect to technology, business development, and maturity. To better understand the dynamics among start ups in this space, and rank each one against its peers, we’ll build Lux Innovation Grids, provide updates on partnerships and investments, and comment on trends and white spaces.

BBMC Capacity Update

(& launch of BBMC Tracker)

Q2 2013

Complete update on the scale and status of bio-based materials intermediates and chemicals. The comprehensive overview will include North America and South America, Europe, Asia, and developments elsewhere. Landscape will include capital invested in plants, capacity in 2011, and projections to 2015, 2010, 2025, and 2035 under three scenarios (reduction in growth, sustained low growth, bio-based boom). Analysis will cover trends by region, feedstock, conversion technology, and relative to existing markets.

Pretreatment of Cellulose to Sugars

(x-tag with AF)

Q3 2013

Systematic evaluation of tech, costs and estimates, and business execution of companies, compared and contrasted. We will pick the winners and losers, as well as highlight challenges and make clear the opportunities.

Leading Bio-Based Materials and

Chemicals Applications

Q4 2013

Focus on applications that are winning the minds and hearts of end-users for having performance attributes above and beyond incumbents, particularly in bio-lubricants, bio-based plasticizers, personal care relevant products, and other bio-based materials and chemicals. Analysis will include an assessment of commercialization success on these applications with lessons to be learned for rolling out applications with other bio-based products.

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Features the leaders that bring science-driven innovation to market, coupled with proprietary analysis from Lux Research's world-renowned analyst team

Keynotes from Nihar Patel (Toyota), John Hillenbrand (Owens Corning), Akira Nakaminato (Mitsui and Co.), and Christopher Roche (Eaton Corp)

Over 40 Speakers (CEO’s, Presidents, & Vice Presidents)

Tracks in:

Energy & Environment Near & Far

Electronics & Connectivity Near & Far

Health & Nutrition Near & Far

Invitation Only: visit www.luxexecutivesummit.com for more details

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Questions?

Kalib Kersh kalib.kersh@luxresearchinc.com

323.788.1037 (mobile)