Metabolix (NASDAQ:MBLX) is a biotechnology company that produces corn-based, biodegradable plastics from plants. In 2008, Metabolix began building a 50,000 ton per year manufacturing plant near Clinton, which will allow for large-scale commercial manufacturing of their Natural Plastics. These rubbers and plastic consumables (e.g. plastic cups) will be sold under the brand name Mirel. The company has not begun large-scale production yet, but in 2007, the company earned $1.68 million in revenue while sustaining a $27.8 million loss.
While the plastics industry has several well-established players (e.g. Dow Chemical and General Electric), Metabolix will be one of the first firms in the industry to create plastics using corn rather than petroleum.
Because the company uses corn as the base for its plastics, the company's profitability is heavily dependent on corn prices. Thanks to increasing demand for ethanol, the price for a bushel of corn rose by approximately 50% in 2007 alone.
Increased costs and losses can be attributed to increased spending on research, acquisition of patents, and product development. Metabolix is accruing fixed, one-time costs in order to build a manufacturing plant and begin commercial-scale production. Before production, the company's main sources of revenue are government grants, research and development payments, license fees, and royalty payments. The U.S. Department of Energy, the firm's largest funder, has given $12.2M to date. The firm expects to recognize revenue when they begin commercial sale of their Natural Plastics.
|Total Operating Expenses||$7,053||$8,896||$8,678||$9,805||$22,114|
|Loss from Operations||$5,064||$6,513||$5,000||$7,024||$17,524|
Plastics, up until this decade, have been only petroleum-based. As the cost of oil increases, oil-based products increase in price too. The advent of bio-plastics strips away the need for oil in favor of renewable feedstock sources. This benefits Metabolix because it raises demand for their products. Conversely, if oil prices were to fall, so would demand for bioplastics. Crude oil prices have risen from $25 to $72 a barrel from 2002 to 2007  resulting in comparable upward shift in plastic prices.
Raw materials and feedstock constitute the majority of bioplastic production costs. As corn prices increase, producing bioplastics becomes more costly. From 2004 to 2007, corn prices have risen from $2.50 to $3.50 per bushel; this trend has reduced Metabolix' profitability.
In February 2008, Princeton economist Timothy Searchinger released a report demonstrating biofuels' increase in greenhouse gas emissions. Forests and grasslands are cut down and replaced by agricultural land.  The U.S. government support for alternative fuels may overshadow long-term consequences of biofuel production to lower fuel costs in the short-term. In 2007, President Bush set a goal to produce 35 billion gallons of renewable and alternative fuels by 2017; this statement of intent to develop biofuels would favor Metabolix and the growing biofuels market.
Lawmakers are considering creating emission markets which will set limits on the amount of emissions that can be produced in a state. Integral to enforcing such a system is carbon auditing. Carbon auditing, or the process of measuring a company's carbon footprint, has become a powerful means of attracting buyers and investors. As of now, U.S. Energy Regulations and the Kyoto Protocol are two examples of this push toward greener business practices. Companies that are awarded a "green" certification for their business practice can attract investment from those who share their environmental concerns. Therefore, if carbon auditing becomes mandated by law and emissions regulations tighten, such changes will benefit companies that are already based on a products with low carbon footprints. Finally, carbon trading (e.g. a cap-and-trade system) lets companies with good environmental standing to sell "credits" of pollution in an emissions market to other firms to generate revenue. The Regional Greenhouse Gas Initiative and the Global Warming Solutions Act of 2006 (AB 32) are examples of this system's emergence in the U.S.
Plastics, fuels, and chemicals produced by Metabolix will compete with other technologically innovative products as well as conventional petroleum-based plastics, fuels, and chemicals. Firms producing bioplastics compete to offer materials with similar applications and strengths as conventional, petroleum-based plastics.
Cargill and Novamont are clear leaders in the biodegradable plastics market with nearly 40 percent of market share, while Metabolix remains competitive with 9 percent of market share, equal to that of Toyota Motors: