Commercial Life Catches up With Solazyme Inc (SZYM)

The good news
There is some good news to go around. The decision to dissolve the joint venture is not related to technological setbacks, but rather timelines that could be made to satisfy both companies. Additionally, Solazyme Inc (NASDAQ:SZYM) still retains the nutritional oil profiles it has developed. Depending on regulatory hurdles in South America and the United States (the FDA recently granted regulatory approval for another nutritional product), the company can manufacture nutritional oils at Clinton and Moema with upgrades to downstream processing equipment. It would require Bunge’s approval in Brazil, but the firm has expressed interest in food oils in the past.

What I find interesting is that the company may actually find it easier to fulfill initial volumes at its larger facilities. Whether or not management has major off-take agreements for specialty chemicals ready to go remains to be seen, but adding nutritional oils to the mix could alleviate some of that pressure by expanding the potential customer base. It also isn’t out of the question that another food partner would be brought in to build a new facility for nutritional oils.

Foolish bottom line
This was surprising news for investors, but it isn’t necessarily all bad news. Solazyme Inc (NASDAQ:SZYM) will now miss out on $75 million-$125 million in future revenue per year from the facility. However, this will allow it to perhaps expedite commercialization of nutritional oils and focus on manufacturing operations in Brazil and the United States. If you can see the company’s amazing long-term potential, then perhaps you will see this as a buying opportunity. I still have concerns about analysts’ projections for the company’s revenue that need to be settled, although I will certainly look to buy shares if shares slip much further.

The article Commercial Life Catches up With Solazyme originally appeared on Fool.com and is written by Maxx Chatsko.

Fool contributor Maxx Chatsko has no position in any stocks mentioned. Check out his personal portfolio, his CAPS page, or follow him on Twitter @BlacknGoldFool to keep up with his writing on energy, bioprocessing, and biotechnology.The Motley Fool owns shares of Solazyme.

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