Scouting San Diego, Battelle Chemist Seeks Catalyzing Role as Industrial Biotech Arises Here

11/2/11Follow @bvbigelow

Like a lot of big companies that offer contract R&D and specialized services, Columbus, OH-based Battelle has kept an office in San Diego for decades, mostly to manage technical programs and help clients like the U.S. Navy and Marine Corps on special projects.

That started to change, though, just over a year ago when Bhima Vijayendran arrived in San Diego from Malaysia. Vijayendran spent his previous three years leading research at a renewable energy laboratory in Kuala Lampur operated jointly by Battelle and Japan’s Mitsubishi Corp for PETRONAS, Malaysia’s government-owned oil and gas company.

“Until recently, this used to be more of a service office in San Diego,” says Vijayendran, a materials expert recognized for his work in polymers and surface chemistry. “Because of my background and my interests, I’m trying to bring a little bit more of a technology flavor” to Battelle’s San Diego operations.

Among other things, Vijayendran says he’s on the lookout for new business opportunities with local companies, as both an R&D partner and as a potential investor. Aside from managing seven federal research laboratories, Battelle has focused its business in three areas—national security, health and life sciences, and energy and cleantech. These focus areas coincide with some of San Diego’s most-prominent innovation clusters, so it would seem like a business match made in heaven.

Battelle is no ordinary business, however. It is the largest private nonprofit R&D organization in the world, known officially as the Battelle Memorial Institute, doing $6.5 billion in contract research with a global workforce of more than 22,000 employees. When Battelle licenses its technology, sells its stake in a startup, or acquires a new laboratory management contract, Vijayendran says the company donates 25 percent of the proceeds to charitable causes. Past inventions include xerography copier technology (which Battelle sold to Xerox), the scannable universal product code, the compact disc, and fiber optics technologies now owned by JDS Uniphase.

“We strongly believe that we’ve got to do creative work,” Vijayendran says. “We’ve got to make discoveries and inventions, but more importantly, these things have got to create value in the marketplace.”

San Diego’s innovation community also has grown excited at the possibility that the $220-million venture fund that Battelle created in 2003 will likewise step up its investment activity here, says Camille Saltman, president and chief operating officer of Connect, a nonprofit group supporting entrepreneurs in San Diego.

Battelle Ventures, based in Princeton, NJ, has invested about 75 percent of its capital in 27 startups throughout the country, according to Tracy Warren, a general partner. The portfolio includes BioNano Genomics, a company developing genetic mapping technology that moved to San Diego from Philadelphia earlier this year.

But people shouldn’t infer too much from the move, says BioNano CEO Erik Holmlin. While the decision to move to San Diego was a board-level decision (and Warren is chairman), Holmlin said it had little to do with Battelle’s plans here. Rather, Holmlin says BioNano moved to take advantage of San Diego’s “critical mass of expertise” in genomic sequencing—and because he prefers to live here.

Warren also downplayed the notion that Battelle Ventures would increase its investments in San Diego, saying the fund operates independently from Battelle, and would continue to be “geographically agnostic.” Nevertheless, Warren says early stage technology deals are often referred to the fund by Battelle’s global network of scientists and engineers. “They do pass those onto us, so there is a sort of proprietary lead generation for us,” she says.

Still, Vijayendran says his move to San Diego reflects a relatively new corporate strategy.

“The kind of business we have with the DoD [Department of Defense] in general tends to be more service-oriented, and the margins are not as high,” Vijayendran says. “So the thinking at the senior leadership level is that we should start offering patent or IP-based solutions to capture higher value for our R&D.”

Aside from the Navy and Marine Corps, which make up most of Battelle’s contract work in San Diego, Vijayendran says Battelle also has many life sciences clients here that are working in diagnostics, drug delivery, or early stage drug discovery.

Vijayendran arrival bears particular significance for San Diego’s nascent cleantech community. With his expertise in materials science and recent experience overseeing Battelle’s renewable energy program in Malaysia, Vijayendran is particularly interested in producing high-value specialty chemicals from bio-renewable raw materials, such as soy-based plasticizers. He says bio-based polyols alone represent a $12 billion global market.

In scouting for local business opportunities, Vijayendran says he’s met with all of the San Diego-based companies working to develop algae-based biofuels and biotech-based renewable chemicals—from companies like General Atomics and Sapphire Energy, which are developing algae-based biofuels, to Malama Composites, a startup making soy-based foam and composite materials.

Advanced materials go into “almost everything,” Vijayendran explains, “whether you want to make a better chemical, better solar panel, or a better solar battery. There are many companies here that kind of look at that as an engine that drives subsequent innovation. We thought this could be a hook to get a bigger presence here.”

So far, that hasn’t resulted in an influx of new Battelle employees. Vijayendran says the company has no plans to expand its operations or to build a laboratory in San Diego.

“The goal may not necessarily be to get more people to San Diego,” which now has about 40 employees, says Jim Bird, who manages Battelle’s regional office here after retiring as a Navy captain in 2007. “Part of the business model is to get more work and to allow small companies to access Battelle research capabilities back in Columbus.”

Looking ahead, Vijayendran says cleantech startups face a significant challenge in moving their technology from the laboratory to industrial-scale production. In the renewable bio-chemical industry, building a production plant typically requires a dollar for each pound of production—so a plant that produces 200 million pounds of bio-based material annually would cost about $200 million to build.

As a result, Vijayendran says the Silicon Valley VCs who jumped into cleantech deals a few years ago have been discovering that industrial biotechnology is far more capital-intensive than they expected. “We believe that for this area to grow, and to have renewable resource-based products and chemicals, that it’s going to be important to work with established players, like a DuPont, DSM, or BASF, because they know this business,” he says.

“The model we’ve been using is to take on early stage technology, filing for patents, and getting companies to work with us to further develop and commercialize [their advances],” Vijayendran says. As Battelle helps startups validate their technologies and create value in the market, he anticipates they will need to quickly find industrial partners—and that’s something Battelle can help with as well.

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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