Sapphire Energy Anticipates “Significant” Revenue Stream From Monsanto Alliance

3/9/11Follow @bvbigelow

San Diego biofuels startup Sapphire Energy added to its pedigreed credentials yesterday, revealing an undisclosed investment by St. Louis, MO-based Monsanto (NYSE: MON), a premiere agricultural biotech giant, as part of an extended collaborative agreement.

Sapphire established its exalted lineage a couple of years ago when it raised $100 million in Series B venture funding from Bill Gates’s investment arm, Cascades Investments; the venture capital firm founded by the Rockefeller family, Venrock; the Wellcome Trust (established in the U.K. to manage the fortune of the pharmaceutical magnate Sir Henry Wellcome); and Arch Venture Partners. The company also has secured more than $104 million in federal loans and grants to build a demonstration biorefinery near Las Cruces, NM.

Sapphire CEO Jason Pyle declined to comment on the amount of Monsanto’s minority investment, which is reportedly part of a larger Series C round that he also declined to discuss.

Jason Pyle

But Pyle was willing to discussing Sapphire’s collaboration with Monsanto, which he says has actually been underway for the past year—and is expected to generate “significant revenue” for Sapphire at a time when it is spending heavily to scale up its development of algae-based biofuels.

“What Monsanto really is to us is an opportunity to monetize Sapphire’s technology in a field that we’re not actually in,” Pyle told me. “It’s not just a strategic technical partnership, but also a kind of market partnership, where they are going to be able to monetize Sapphire’s products in [agricultural] markets we would not otherwise be able to access.

“We are in the business ourselves of identifying valuable traits for the use of algae in commercial agriculture, including crop protection, yield enhancement, stress tolerance, harvestability—all the things that allow you to produce and grow a crop like algae at low cost and enormous scale,” the Sapphire CEO said. “They are very interested in things like yield enhancement and higher stress tolerance for their primary products. What we are providing to them is a pipeline of trait genetics from our algal research that they are going to explore” in corn, rice, soybeans, and other high-value food crops.

In fact, Pyle said Sapphire has identified a number of algal traits, including genes for yield enhancement and stress tolerance, which it is making available to Monsanto. Sapphire has been using high throughput screening tools to identify hundreds of thousands of traits in various algal strains. The San Diego startup says it has not deployed an genetically modified organism into open ponds at its test and development site, but Sapphire has done extensive genetic engineering of algae in the laboratory.

“We face a common goal in looking for ways to improve upon an organism’s ability to achieve greater productivity under optimal and sub-optimal environmental conditions,” Robb Fraley, Monsanto’s chief technology officer, says in a prepared statement.

Monsanto is a leading producer of genetically engineered seed (critics like Greenpeace contend that the company provides the technology in 90 percent of the world’s genetically engineered seeds). In comparison to algae, which are single-cell organisms, corn and other crop plants have a huge number of genes.

“What they share in common that’s very exciting is all of the core metabolic machinery—photosynthesis, carbon fixation, nitrogen fixation, amino acid synthesis, sugar synthesis, oil synthesis, all of those things,” Pyle said.

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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