Taste-Maker Allylix Prepares to Make “Nootkatone” a Household Word, as San Diego Gains Momentum in Industrial Biotechnology

8/18/10Follow @bvbigelow

In the six years since Allylix was founded, the San Diego startup has been developing ways of getting yeast to produce complex hydrocarbon molecules called terpenes for use initially as flavor and fragrance enhancers. In April, Allylix raised $9 million in a C Series round of venture capital to fund its commercialization plans, which call for launching the first eight of its terpene products through 2012.

The company already has launched its first product, a terpene with a keen grapefruit taste and smell called nootkatone, which was previously extracted from grapefruit peels through a costly process. In fact, Allylix says the market for nootkatone has been limited due to its high price. Now the startup intends to put the squeeze on the existing nootkatone market, and use its proprietary yeast-based fermentation technology to open new markets in food and beverage industries by making the grapefruit-scented molecule in bulk quantities at low cost.

Grapefruit iStock imageAllylix is an example of a new kind of startup in San Diego that is using the tools of biotechnology to make hydrocarbon-based molecules as “renewable chemicals.” The company’s strategy, in a nutshell, is to repeat what it’s doing with nookatone with related terpene compounds—next in the lineup is a juicy orange flavor and fragrance called valentene— focusing initially on the $1.9 billion “aroma chemical” segment of the flavor and fragrance market.  Allylix is targeting perfumers with other terpenes.

It turns out plants produce terpenes in minute quantities for a variety of functions, and when I talked recently with Allylix CEO Carolyn Fritz, I got a 30-minute lessen in plant biology that was just a taste of what the company is up to.

One of the cool things she told me is that plants typically evoke terpenes in response to an environmental condition of some kind. So when insects attack a plant—a pine tree, for example—the tree responds to the attack by exuding a flypaper-sticky terpene resin. (This resin can be distilled to make turpentine.) Other types of terpenes are highly valued for other characteristics. Fritz says a geranium flower evokes a terpene that is actually a rose scent, to attract insects that will pollinate it. Terpenes also can be anti-viral and anti-fungal. Steroids are terpenes. Carotenoids are terpenes. Other terpenes are cytotoxins, which make them valuable in treating cancer.

Pine Tree resin

Pine Tree resin

Altogether, Fritz said terpenes comprise a huge class of molecules that include hundreds of thousands of compounds. As a result, terpenes have significant commercial value to the industries focused on pharmaceuticals, insect repellants, and flavors and fragrances.

“From a commercial perspective, they are very interesting,” Fritz says. “They are also chemically very complex, and very hard to make.”

As an example, Fritz says trying to chemically synthesize a specific terpene would typically yield equal amounts of four seemingly identical “twin” compounds with fundamentally different characteristics. Each version has the same number and type of atoms, and each would have the same wavelength under spectral analysis. But the 3-D structure of each one is different—and has a different interaction with receptors for taste and smell.

“One compound may have absolutely no fragrance at all,” Fritz said. “Another could have a mild fragrance. One could smell bad, and one could smell really good and be very strong—and we just want that one.”

For a company developing commercial fragrances or flavors, the problem can be bewildering. Before Allylix came along, terpenes were expensive to extract commercially, and no one knew how to use conventional chemistry to make them—and that’s where the biology came in. “The beauty of biology is that biological systems are designed to create just one version,” Fritz said, “whereas chemical synthesis creates a mixture.”

The technology Allylix uses was developed by Joseph Chappell, a plant biologist at the University of Kentucky, and Joseph Noel, a structural biologist and biochemist at the Salk Institute in San Diego. In late 2004, Allylix acquired the rights to this technology and began working on ways to genetically engineer yeast to manufacture the desired terpene.

To get this far, Fritz says Allylix has raised a total of $15 million in funding (including the $9M round in April) from seven investor groups: Tate and Lyle Ventures in the U.K., Midpoint Food and Ag in Indiana, Avrio Ventures of Canada, the Tech Coast Angels, Pasadena Angels, and Blue Grass Angels. “The companies that invest in industrial biotech are not the same companies that invest in pharma,” Fritz said. “The nice thing for us is that they really understand our markets, and they really understand what we do.”

Allylix is among several industrial biotech startups that are making San Diego something of a nub—if not quite a hub—for an emerging sector of sustainable technologies that use biotechnology to engineer algae, yeast, and microbes to manufacture chemicals without petroleum-based feedstocks. Without including the algae-based biofuels companies like Sapphire Energy and Synthetic Genomics, at least five other companies in this area besides Allylix are focused on industrial biotechnology to produce renewable chemicals: Carlsbad, CA-based Verdezyne, and San Diego’s CP Kelco, Genomatica; Senomyx (NASDAQ: [[ticker:SNMX); and the San Diego-based business units that Cambridge, MA-based Verenium recently sold to BP. (So far, it’s still unclear what BP plans to do with the business units, which are mostly the leftover operations of San Diego-based Diversa that were developing enzymes and cellulosic ethanol fuel.)

The field has been growing fast enough that two California nonprofit life sciences groups, San Diego’s Biocom and San Francisco’s BayBio, have organized the “California Industrial Biotech Conference,” a two-day event in downtown San Diego next month.

Fritz told me that industrial biotechnology was just beginning to germinate in San Diego when she arrived here more than a decade ago to oversee the first of two startup businesses for Dow Chemical. “When I came here in 2000, there was a little,” she said. “But it has grown quite significantly.”

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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