Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

BP plc (ADR) (BP) & More: Gevo, Inc. (GEVO) Begins Countdown to Ethanol’s End

There have been two pops of at least 20% for industrial biotech in the last week — both on the heels of expected news, nonetheless. Last week Codexis, Inc. (NASDAQ:CDXS) announced that it successfully completed a demonstration facility in Italy for its CodeXol detergent alcohols with partner Chemtex. It is a step in the right direction, but more sustainable share movements will come with courting commercial partners. The two still have plenty of work to collect production metric data and move into commercial scale with a bigger partner. It also doesn’t help that CEO John Nichols sold about 8% of his shares recently.

The real news came this morning, when Gevo, Inc. (NASDAQ:GEVO) announced that it had resumed commercial production of isobutanol at its Luverne biorefinery. The company had outlined its plans in prior conference calls, and its guidance earlier this year. But, given contamination obstacles at Luverne last summer, I suppose investors have reserved the right to remain cautious. Now that commercial production of isobutanol is finally happening, what exactly does this mean for investors?

The good news

This is tremendous news for Gevo, Inc. (NASDAQ:GEVO) in terms of further sticking it to its closest competitor, Butamax, a joint venture between E I Du Pont De Nemours And Co (NYSE:DD) and BP plc (ADR) (NYSE:BP). Both have enjoyed big wins in court in 2013, but Gevo was the obvious winner. The U.S. Patent and Trademark Office also handed Gevo intellectual property surrounding the commercial-scale production of isobutanol, meaning Butamax will likely have to license at least that sliver of technology from Gevo, Inc. (NASDAQ:GEVO). Today’s news further cements the lead for Gevo, which was already two to three years ahead of its well-funded foe.

It doesn’t look like much, but this is Gevo’s flagship facility at Luverne. Photo courtesy of Gevo.

Additionally, this is actually the first time that Gevo, Inc. (NASDAQ:GEVO) has run its GIFT separation system at full-scale (due to alleged infringement by Butamax). Separation is a huge part of any industrial biotech platform. The more efficiently a company can separate its desired product from byproducts the more economical its total process. Separation technology doesn’t get as much attention as reaching commercial scale, but without it margins can be dramatically affected.

The don’t-hold-your-breath news

Gevo, Inc. (NASDAQ:GEVO) will continue to ramp up its production throughout 2013 and into 2014. That means that the company will gradually increase the liquid volumes of its bioreactors until Luverne produces nameplate capacity, or 18 million gallons per year. This process usually takes 12-18 months, but Luverne is currently only using one production train. The others will be brought on line before the end of the year. Obviously, full ramp-up cannot start until each train is on line.

Whoa, whoa, whoa. What the heck is a production train? A production train is all of the equipment upstream — media holding tanks, buffer tanks, microbial seed trains — and downstream — separation unit, product holding tank, sanitizer holding tanks — that supports the operation of a bioreactor. Efficient facilities are built to share some production equipment across bioreactors, although the scheduling has to be perfect.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.