Solazyme Inc. (SZYM:US), the maker of algae-based biofuel and nutritional products, fell the most in 21 months after terminating a food-product joint venture citing “divergent” views with French partner Roquette Freres SA.
Solazyme slumped 13 percent to $10.94 at the close in New York, the most since Sept. 22, 2011.
The Solazyme Roquette Nutritionals LLC venture, established in November 2010, will be dissolved in the coming weeks, according to a statement today from South San Francisco, California-based Solazyme.
Solazyme contributed its algae technology to the venture and the French agriculture company was providing capital to build manufacturing facilities. Dissolving the partnership means Solazyme loses a potential source of revenue from selling nutritional products, said Weston Twigg, an analyst at Pacific Crest Securities LLC in Portland, Oregon.
“That’s the one thing that the Roquette venture takes away: they would have gotten paid out of the profit from the JV,” Twigg said today in an interview. “Now we don’t have that.”
The joint venture began work last year on a plant with annual output of 5,000 tons, and the companies had planned to eventually build a larger facility with 10 times the capacity, according to a May 8 filing.
“Solazyme probably wanted to go a bit faster,” Twigg said. “The companies are fundamentally different.”
The venture was developing microalgae-based ingredients and oils to boost the nutritional content of food products, according to its website.
“The decision to terminate the joint venture was driven by divergent views on an acceptable commercial strategy and timeline for the manufacturing and marketing of joint venture products,” Solazyme said in the statement.
Exiting the venture will accelerate the commercialization of the technology and is in the “best interest” of shareholders, Solazyme Chief Executive Officer Jonathan Wolfson said today in a conference call. He doesn’t expect the decision to affect revenue this year.
“The decision isn’t related to technology readiness or robustness, product quality, the product value proposition, or market demand,” Wolfson said. “We believe revenue and profit from these products will benefit Solazyme sooner than would have been likely under the joint venture.”
Exiting the venture frees Solazyme to pursue other relationships, Twigg said.
“If there’s a little positive bias to this it’s that this opens up more of the food and other nutritionals market a little earlier,” Twigg said. “That would help with the profitability of the model and help with their expansion.”
Solazyme feeds sugars to its bioengineered algae to produce oils that may be used in fuel, chemicals, nutrition and and personal-care products. The company in December reached commercial-scale production of the renewable oil at an Archer-Daniels-Midland Co. (ADM:US) plant in Iowa.
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