Novozymes to Boost R&D in Bioagriculture, Biofuel Race, CEO Says

Novozymes A/S (NZYMB), the world’s largest industrial enzymes maker, will increase research and development spending on products aimed at boosting sales to the agriculture and biofuel industries, the company’s next chief said.

Novozymes now has 10 percent of the $1 billion global bioagriculture market, selling microorganisms that improve crop yields or act like pesticides, according to Peder Holk Nielsen, who on April 1 takes the job of chief executive officer from retiring Steen Riisgaard.

“The way to get more is to understand how microorganisms interact with plants and signal to each other,” Holk Nielsen said yesterday in an interview at the company’s headquarters in Bagsvaerd, Denmark. “The company that understands that first stands to really develop and innovate new products that will do better. And that’s all about research and development.”

Novozymes spent 1.53 billion kroner ($270 million) on R&D last year, or 14 percent of its revenue. It holds 47 percent of the global market for industrial enzymes, with DuPont Co. its closest competitor at 21 percent, according to Holk Nielsen. Wilmington, Delaware-based DuPont spent $2.1 billion on R&D in 2012, or 5.9 percent of its revenue, according to its full-year report.

Novozymes in November bought Natural Industries Inc., a U.S. company selling microorganisms that fight diseases in fruits and vegetables. While not ruling out buying more competitors, the 56 year-old executive said the company will bet on research advancements.

Wood Chips

“There’s been so much M&A in this field recently and prices are pretty steep, so it’s more likely that we’ll give it a blast in trying to understand these things and organically develop the proper opportunities,” he said.

Research advancements are also needed to reduce the cost of making cellulosic ethanol, a fuel derived from waste, wood chips and inedible crops and which is more expensive than conventional ethanol made from corn.

“When you look at cellulosic fuel and biomass conversion, that world can go really big,” Holk Nielsen said. “It can really transform the industrial enzyme business.”

The first plant to produce cellulosic ethanol on a commercial scale at a price competitive with corn ethanol and gasoline will be Beta Renewables SpA’s factory in Crescentino, Italy, this year, he said. Novozymes owns 10 percent of Beta Renewables.

‘More Generations’

“There’s at least a couple more generations of enzymes that we know will improve it further,” Holk Nielsen said. “We have the best enzymes technology and we can build production capacity as quickly as the industry can build plants.”

Novozymes expects to supply advanced enzymes to 20 to 25 cellulosic ethanol plants in the period 2015-2017, he said.

As for conventional corn ethanol, the company sees no growth in the U.S. market this year, followed by “a bit of growth” in the next two years, Holk Nielsen said. Novozymes has 60 percent of the market for ethanol enzymes, he said.

“The majority of the growth in our business is going to come by offering better enzymes solutions that can get more ethanol per bushel of corn,” he said.

To contact the reporter on this story: Gelu Sulugiuc in Copenhagen at gsulugiuc@bloomberg.net

To contact the editor responsible for this story: James Ludden at jludden@bloomberg.net

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