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In Depth August 14, 2008, 5:00PM EST

I Have Just One Word for You: Bioplastics

The scourge of indestructible garbage and sky-high oil are fueling interest in plastics from plants. Is it time for tiny biotech Metabolix to get more respect on Wall Street?

By Mara Der Hovanesian

Jason Grow

Peoples hopes to grow his plastic in plants such as switchgrass and oilseed Jason Grow

For half of his life and all of his 25-year career as a bioengineer, Oliver P. Peoples has wanted to prove two things: that he could reengineer plants to grow biodegradable plastic in their cells and that he could make a lot of money doing it.

On the first goal, Peoples has had astonishing success. His Cambridge (Mass.) company, Metabolix (MBLX), has harnessed the complex genetics of plant-cell metabolism and collected hundreds of patents on a process for manufacturing "bioplastics" in large vats of microbes. A $200million factory is under construction and could start producing Metabolix's bioplastic, called Mirel, early next year. But Peoples' second mission, amassing wealth for himself and his investors, is glaringly incomplete. Mauled in the bear market and pounded by manufacturing delays, Metabolix's shares have spiraled down from a peak of 28 last November to around 11 in recent weeks.

The company is now in a crucible every struggling biotech encounters. As it awaits commercial production, it is burning through cash. And it must carefully pick the right customers to showcase Mirel's wide range of applications, from gift cards and cosmetics cases to plastic bags and computer parts.

Despite the intense pressure, the tall, Scottish-born biologist barely registers concern. Moving with calm determination among cell cultures and seedlings in the company's 13,000-square-foot lab and greenhouse, Peoples, 50, explains why he and his backers are unperturbed by the low share price. As oil prices spike up, so does the cost of plastic materials, virtually all of which are petroleum-based. In addition, consumer groups and environmentalists around the world are in an uproar over the billions of tons of plastic waste that get dumped at sea or buried in landfills and over the health effects of related toxins. Almost 30million tons a year of plastic solid waste is dumped into the U.S., and about 5% is recycled. These trends fuel demand for novel bioplastics that aren't linked to pricey fossil fuels and don't harm the environment. Peoples says the stock market hasn't recognized these forces; it's simply running away from risk. "When you're a small-cap company, the risk profile is higher, so you get a disproportionate share of the downturn," he says, a faint accent evident in his measured diction.

Peoples may find it easy to stick to his guns because the world's top suppliers of plastics and their customers have all recognized the larger trends. DuPont (DD) fired up its first biomaterials plant in 2006, selling more than a $100million worth of products in the past year, including its bioplastic called Sorona. Starting in 2009, Cargill's NatureWorks unit hopes to ship 140,000metric tons a year of a bioplastic called Ingeo, for use in fresh food containers and textiles, among other things. Brazilian petrochemical giant Braskem (BAK) is spending $300million on a factory for sugarcane-based bioplastics, while Toray Industries of Japan is making plastics from fermented plant starches and sugars. There's also a host of U.S. startups with names such as Novomer and Cereplast (CERP.OB) that make plastics from wheat, tapioca, potatoes, soy, and more. "We've gone from being mad scientists to being visionaries," says Frederic Scheer, CEO of Cereplast, based in Hawthorne, Calif.

GORGING ON GLUCOSE

All these materials are green in the sense that they reduce dependence on fossil fuels. But while rival bioplastics must be incinerated or composted at high temperatures, Mirel will decompose if it is simply tossed in a home compost heap or dumped at sea. "Mirel is the one that works in all environments," says Joseph P.

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