Seattle-based Blue Marble Energy, the developer of renewable energy and specialty chemicals from biomass, said it has received a $2 million state grant through a partnership with the Odessa Public Development Authority. The company plans to use the grant, from the Washington Community Economic Revitalization Board, to build a refinery in Lincoln County that will turn organic biomass from around Eastern Washington into as much as 858 metric tons of biochemicals and 700 metric tons of green ammonia per year, says CEO Kelly Ogilvie, in an e-mail. The facility is expected to create 30 to 50 full-time jobs in its first year, he says.

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After Carlsbad, CA-based Verdezyne disclosed last month that it plans to raise more than $15 million in venture funding, I arranged to sit down with Damien Perriman, the company’s vice president of business development.

As it turns out, the startup that was founded in 2005 as CODA Genomics has essentially re-engineered itself over the past 18 months. The company overhauled its core business strategy, recruited a new CEO, E. William Radany, along with a new management team, changed its name, and moved its headquarters from Orange County to Carlsbad, CA, about 28 miles north of San Diego. In changing its name to Verdezyne, the company created an identity that is better aligned with its revised focus on the “green design” of biofuels and industrial chemicals.

The company initially was focused on technology spun out from UC Irvine that used specialized computer algorithms to design synthetic DNA. The company offered its services in Computationally Optimized DNA Assembly, or CODA, to help drug discovery teams at pharmaceutical customers like Eli Lilly and Genentech design synthetic genes that could be used to maximize the production of certain proteins for their biotech drug manufacturing processes.

Perriman, who joined Verdezyne in February, tells me, “Our investors made a decision in 2008 that we could make a lot more money by doing the production ourselves.”

With its extensive experience in computational biology and bioinformatics, Verdezyne saw the value in creating high-diversity libraries of genes, so that various genes could be inserted into fast-dividing yeast cells (and other micro-organisms), essentially programming the microbes to produce enzymes it would not otherwise produce. Verdezyne landed a federal grant last month to help build out its genomic library.

“We prefer to work with yeast,” Perriman says, “but we can work with any fungi or bacterial organism.”

The company, which now has 26 employees, has identified three primary markets for its technology.

The first and most obvious target is an …Next Page »

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As startups developing next-generation biofuels emerge in San Diego, Boston, and elsewhere, a business model for rapidly expanding to commercial-scale operations already can be found in the biotech industry, experts said yesterday. The premise of presentations organized by Biocom, San Diego’s life sciences industry group, is that collaborations being formed between biofuel startups and big energy are comparable to the partnerships formed between biotech startups and big pharmaceutical companies.

Biofuels development partnerships will be crucial to meeting renewable fuel standards that the federal government set in the Energy Independence and Security Act of 2007. Wain Fishburn, a founding partner of the Cooley Godward law firm’s San Diego office, said the standards require the U.S. biofuels industry to increase its production fourfold—from 9 billion gallons in 2008 to 36 billion gallons in 2022. Fishburn, who introduced the speakers at the Biocom event, said the ability to meet the federal goal depends on a variety of factors, including the ability to lower the cost of biofuels to be competitive with petroleum-based crude, and the scalability of feedstock, production facilities, distribution, and related infrastructure.

But what it really comes down to, as Verenium (NASDAQ: VRNM) executive William Baum told the audience, is capital.

Baum, who became Cambridge, MA-based Verenium’s executive vice president of business development in 2007 (following the 2006 merger of San Diego’s Diversa and Cambridge’s Celunol) said the need for capital was the theme he heard “over and over again” during a recent meeting that focused on the biofuels industry. “We’ve got hundreds of biofuel companies that are trying to get to the next stage. If you don’t have a big brother with deep pockets, like a BP, Exxon, Shell, or a Chevron, it’s going to be very difficult.”

A number of partnerships already have been established between biofuels startups and major energy conglomerates, Fishburn noted. He listed the following collaborations:

—BP, the London-based global energy conglomerate, has formed two strategic partnerships with Verenium, which has been developing technology to produce cellulosic ethanol using proprietary microbes to accelerate the breakdown of non-edible, high-cellulose plant material into ethanol. Baum described the first collaboration, announced in August 2008, as a technology joint venture for IP. (BP agreed to put up $90 million to develop “low-cost, environmentally sound cellulosic ethanol production facilities in the United States.”) Through a second deal announced nine months ago, BP agreed to provide an additional $45 million and to form a …Next Page »

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Redmond, WA-based Bionavitas, the developer of light technology to grow more efficient algae, said today it has formed a partnership with Seattle-based Blue Marble Energy to make “high margin biochemicals” from algae. The companies didn’t say what they plan to make under this alliance, but it’s not biofuels. Bionavitas CEO Michael Weaver explained the company’s business strategy in depth to Xconomy back in May, when he said the company was more focused on using algae to make food additives, and for toxic cleanup, than for biofuels.

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Lebanon, NH-based Mascoma announced today that it has entered into a two-year biofuels processing and supply deal with Chevron Technology Ventures. Under the agreement, the terms of which were not disclosed, CTV will supply feedstock that Mascoma will convert to cellulosic ethanol. A byproduct of that conversion is energy-rich lignin, which Mascoma will then provide to CTV, a division of energy giant Chevron USA, to evaluate whether it can be turned into transportation fuel.

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[[Correction 10:40 am Pacific: Targeted Growth's camelina program currently uses traditional breeding, not genetic engineering techniques like those for its algae biofuel program.]]

Targeted Growth’s business depends today in large part on its ability to breed new camelina seeds as a source for biofuel. But the Seattle-based biotech/cleantech company also has its eyes on a more distant goal. It hopes to translate some of its genetic engineering skill into a far more efficient vehicle for making renewable biofuels—algae.

Even in a recession, the algae biofuel business sounds bubbly, as dozens of companies are competing for investors’ attention. Targeted Growth is no exception, having declared in a press release last month that it achieved a “breakthrough” in genetic modification of algae that would help make algae-based biofuels compete, once and for all, with petroleum on price. I wanted to dig beneath the headline, so I called up the general manager of Targeted Growth’s bio-based materials group, Margaret McCormick.

Algae has long captivated the imagination of scientists looking for a cheap source of renewable fuel. These fast-dividing microorganisms, known more glibly as “pond scum,” can churn out big quantities of biomass in a hurry. And algae doesn’t depend on a growing season like corn or soybeans, so it can pump out far higher yields of biofuel per acre. It can be grown even more efficiently inside closed bioreactors with artificial light, so it may not have to compete for land with food crops. Many big-name investors have flocked to this corner of the biofuel industry, including Bill Gates and Arch Venture Partners, with their favorite candidate, San Diego-based Sapphire Energy.

So algae gets people excited, and generates headlines, but McCormick really wasn’t trying to pull the wool over my eyes about where things stand with Targeted Growth’s algae biofuel work. “This is just a start for us,” she says.

Targeted Growth, regular readers will recall, has its roots in basic research into how genes play a role in making tumor cells flip into fast-growing, rapidly-dividing mode—work that has its origins at the Fred Hutchinson Cancer Research Center. This knowledge can be harnessed in a different way if you actually want to accelerate growth, like with almost any biological organism—including algae.

So what did Targeted Growth actually accomplish that was so groundbreaking? It used genetic engineering techniques to create a modified strain …Next Page »

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Plankton Power, a Wellfleet, MA-based company developing ways to turn algae into renewable biofuel, announced in a press release today that it will plans on opening a manufacturing plant to produce biofuel from algae on the Massachusetts Military Reservation (MMR) in Bourne, MA. To build the factory, Plankton Power, along with the Regional Technology Development Corporation of Cape Cod, the Massachusetts National Guard, Woods Hole Oceanographic Institution (WHOI), the Marine Biological Laboratory (MBL), and the Cape Cod Commission have formed the Cape Cod Algae Biorefinery Consortium. Plankton Power said it expects pilot-scale production to begin next year.

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Joule Biotechnologies is officially launching today to reveal technology that is designed to mimic photosynthesis to produce liquid fuels and chemicals. The startup says it can produce ethanol at prices competitive with fossil fuels while avoiding some of the pitfalls of making ethanol with corn, switch grass, or other plant materials.

The firm says its method taps key ingredients of photosynthesis—namely sunlight and carbon dioxide—to make ethanol. The Cambridge, MA-based company plans to prove that the method, which has been demonstrated in the lab, can work on a commercial scale in 2010, Joule Biotechnologies CEO Bill Sims tells Xconomy. Though partners at Flagship Ventures in Cambridge formed the startup in 2007, Sims says that Joule has waited to reveal itself until it had a proven process and technology.

If it proves commercially viable, Joule’s process could clear some of the expense and technical hurdles associated with traditional ethanol and other alternative fuel production. Biofuels, for one, are typically made from crops like corn and soybeans that require lots of water and agricultural land to grow. And while cellulosic biofuels made from wood or grass and algae-based methods reduce water and land needs, they are currently more expensive than fossil fuels or have yet to become commercially viable. Joule is among a new generation of clean energy developers that aim to overcome hurdles of producing alternative fuels by tapping the power of the sun and other cheap and abundant resources. Lots of people are hoping that these efforts lead to breakthroughs that cut down on pollution from fossil fuels and, at least in the U.S., reduce dependence on foreign oil.

“We have a vision of finally bringing reality to the idea of energy independence,” Sims says, “and in order to do that we have to have a source of renewable fuel that has unlimited supply.”

Joule points out that its system doesn’t require fresh water and agricultural land like traditional biofuel production. Sims described the function of the firm’s main device, called the SolarConverter, that facilitates the production process. The converter contains a mixture of brackish water, nutrients, and genetically engineered organisms. Carbon dioxide gas is fed into the mixture, and the device is designed to expose the organisms in the mixture to the sun, Sims explains. The organisms are photosynthetic, meaning that they absorb light energy and carbon dioxide to form compounds. Joule has engineered its organisms to secrete ethanol and hydrocarbons and chemicals.

Sims declined to say which specific photosynthetic organisms his firm engineers for its process, but he did reveal that the organisms are not algae, which many companies are …Next Page »

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The biggest news by far last week was ExxonMobil’s decision to invest $600 million in biofuels, with half of that going to San Diego’s Synthetic Genomics. A number of companies also launched new technology iniatives. To find out what’s happening, just keep reading.

—ExxonMobil, the world’s largest oil company, said last week it plans to invest $600 million to develop algae-based biofuels, with least $300 million going to fund fundamental work at Synthetic Genomics, the startup co-founded by J. Craig Venter, the human genome pioneer. Venter said Synthetic Genomics plans to begin construction soon on a research and test facility in San Diego. Venter’s wife, Synthetic Genomics spokeswoman Heather Kowalski, told me the ExxonMobil deal won’t affect the startup’s joint venture with BP, where the initial focus has been on coal. Kowalski also said that BP is an equity investor in Synthetic Genomics, but ExxonMobil is not.

—Covario, the San Diego-based software analytics startup, said it has developed a new software-as-a-service program that automates the process of analyzing Web traffic on a customer’s corporate website. Covario says its “D3″ product for search engine optimization replaces the time-consuming work often performed by Web marketing agencies.

—San Diego wireless giant Qualcomm (NASDAQ: QCOM) said it is “reviewing its options” for LifeComm, its virtual mobile network focused on healthcare services. Qualcomm said LifeComm has been unable to raise enough capital from third parties to fully develop its initial launch product. Mobihealthnews, a Boston website focused on the wireless healthcare industry, said Qualcom has decided to pull the plug on LifeComm.

—Aculon, a San Diego startup specializing in nanocoatings for use in a variety of industries, said its proprietary technology replaces hexavalent chromium in paint primers applied to stainless steel, titanium, aluminum, and other metal surfaces. Hexavalent chromium is a toxic, cancer-causing heavy metal used to make anti-corrosion coatings. Aculon CEO Ed Hughes told me Aculon’s technology forms a coating that is just one molecule thick, or 2 to 4 nanometers.

—San Diego’s TelCentris said it is upgrading its VoxOx universal communicator service to include an automated “personal assistant” that can answer your phone calls and route them according to your preferences. A VoxOx user can combine his or her existing phone number with their e-mail service provider, instant messaging service, and social networking sites like Facebook, MySpace, and Twitter.

—Simon Thompson, ESRI’s director of commercial marketing, mapped out some of the innovative trends in Geographic Information Systems, or GIS, when we met amid the hubbub of the 2009 ESRI International User Conference in downtown San Diego. Thompson said one trend stems from creating GIS mapping “masks,” or layers of mapped information, so you can change the underlying data set on your iPhone app from a map of gas stations to a map of restaurants or schools. Another key trend he discussed involves the convergence of GIS mapping technologies with software analytics.

—Quasar Geophysical Technologies of San Diego has developed a new type of electromagnetic sensor that is sensitive enough to detect tiny electrical currents flowing through subsea rock—and variations in the conductivity among different types of geological formations. The company says its technology is sensitive enough to help the oil and gas exploration industry increase its chances of discovering offshore oil and gas deposits. Quasar has designed its sensors to be deployed on the ocean bottom, as deep as 2.5 miles below the surface, for weeks at a time.

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It may be one of the great untold success stories of the Seattle technology scene. For the past decade, R.W. Beck, an engineering and business consulting firm, has been quietly making a name for itself in key technical areas like energy and water management.

Now the Seattle-based firm with 550 employees is becoming part of the closely guarded empire of SAIC (NYSE: SAI), the government contractor also known as Science Applications International Corporation. The companies did not disclose financial terms under the agreement they announced two weeks ago. But Xconomy has learned from a source familiar with the deal that the price was $155 million.

That amounts to 1.5 percent of SAIC’s $10.1 billion in annual revenue, and it seems unlikely SAIC will interpret R.W. Beck’s price tag as a “material event” requiring disclosure. Still, at $155 million, the deal represents one of the biggest acquisitions—if not the biggest—of a Seattle-area firm since Bellevue, WA-based SnapIn Software was bought by Nuance for $180 million last summer.

Even though SAIC’s core business is contract research and engineering, R.W. Beck’s focus on energy and water infrastructure represents a somewhat unusual foray into civil engineering for the San Diego conglomerate, which generates most of its revenue from defense and intelligence contracts. (A more characteristic deal for SAIC was last week’s acquisition of Atlan, a cybersecurity product testing firm based in McLean, VA, that specializes in validating cryptographic modules, including software and hardware components, to meet federal standards.)

If nothing else, though, SAIC has been extraordinarily adept at catching the big waves in government contracting—and right now, energy is huge. One of the biggest clues to SAIC’s plans for R.W. Beck was a contract that my colleague Bruce Bigelow noted in February, which basically pre-qualifies SAIC to compete for energy conservation contracts throughout the federal government.

Another noteworthy energy-related deal that SAIC landed was a $14.9 million contract to develop economical methods for making JP-8 grade jet fuel from algae. It turns out the Pentagon is interested in developing alternative sources for all that jet fuel that U.S. military aircraft use.

When I reached R.W. Beck president and CEO Russ Stepp last week, he said the deal with SAIC is expected to close on August 1. He had no comment on its size, but did speak freely about what the deal means to both sides.

First of all, the acquisition does not mean R.W. Beck employees will be relocating en masse to San Diego, nor will there be downsizing of the firm’s business operations, Stepp says. Most employees …Next Page »

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Raising money and making deals were the trends of our life sciences stories this past week. And sometimes more than just business executives benefit.

—Greg reported that University of Washington spinoff company Bio Architecture Labs raised $3.4 million in equity funding this week. The company, which works to create synthetic biofuels and renewable chemicals, apparently has put the $1.5 million it raised last year to good use.

—Spun out of the same UW research lab (biochemist David Baker’s), Seattle-based Arzeda also had a good week. The company announced it is teaming up with chemical conglomerate Du Pont to make more productive crops. Arzeda develops artificial enzymes that both companies hope will improve the yield of agricultural plants.

—Greg also wrote about San Francisco-based Limerick BioPharma scoring $15 million in a Series C investment led by OVP Venture Partners, based in Kirkland, WA. Limerick is developing methods of cutting down on drug side effects for better outcomes. OVP expects that human trials will validate the investment.

—Water can be cleaned for drinking easily and cheaply, as featured in my story about Seattle-based PATH and Cascade Designs. The two organizations are working together to develop water purifiers for small, poor communities around the world. A Kenyan community with limited access to clean water is testing the latest prototype.

—The Washington Biotechnology & Biomedical Association wants to step up the success of local companies. WBBA president Chris Rivera is working hard to increase venture capital contributions in the area, and has been bringing in major VC players like SR One to show off the talent and try to entice funding for Washington companies, as Luke reported.

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Seattle-based Bio Architecture Lab, a stealthy spinout from the University of Washington, has raised $3.4 million in equity funding out of a $6 million offering, according to a regulatory filing. Michael Borrus of Menlo Park, CA-based X/Seed Capital is listed on the form as a director, which suggests that X/Seed participated in the funding round. But the form says there are two investors, and the other is unnamed. Reached for comment this morning, Bio Architecture Lab CEO Nikesh Parekh said the company is not talking to the media yet.

Bio Architecture Lab raised $1.5 million from X/Seed last year. (X/Seed is loosely related to Mohr Davidow Ventures.) The company has said it applies computational enzyme design and synthetic biology to produce biofuels and renewable chemicals from novel, sustainable biomass sources—the advantage being that these products cost much less than fuels and chemicals made from traditional sources like corn or sugarcane. The technology was originally spun out of the lab of prominent UW biochemist David Baker, whom Luke profiled here.

The latest funding seems to at least partially validate the efforts of the UW TechTransfer program in connecting venture capitalists with commercially promising technologies from university labs. More specifically, it is a significant step forward for commercial applications of Baker’s research, which has also spawned another Seattle startup working with enzymes, Arzeda.

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When renowned genome scientist J. Craig Venter spoke at San Diego’s Connect’s Innovation Summit two months ago, he focused mostly on creating genetically engineered microbes that consume coal to produce natural gas. But a review of Venter’s recent presentations and other information suggests that Synthetic Genomics, the San Diego startup he co-founded, also has a major biofuels initiative underway, as well as other revolutionary projects.

So when Venter said in April, “we’re not too far away from making an announcement to scale this up,” it’s possible he was just speaking generally about an industrial-scale project based on a synthetic organism, and not about the coal project in particular.

Either way, such an announcement could represent the first time a synthetic organism created from transplanted genes moves from the research laboratory to an industrial-scale operation. “Over the next 20 years, synthetic genomics is going to become the standard for making anything,” Venter said in a 2007 article in NewScientist magazine. He says it will become possible to add different characteristics, to or take them away, from almost everything. In the future, Venter says one DNA-based species (human) will be able to sit down at a computer to create another.

As a result, the first commercialization project that Synthetic Genomics undertakes with a major corporate partner may well involve algae that have been genetically engineered to produce biofuels. Synthetic Genomics’ team already has genetically optimized an algae species so that almost half of the organism’s mass consists of lipids, a broad group of naturally occurring molecules that include fats, waxes, sterols and other energy storage compounds. Now the team is enhancing the organism further to make even more lipids. Such algae would serve as a biofuel feedstock.

Venter has described “the new algae” as a kind of biochemical factory. In his Joint Genome Institute keynote speech in March, Venter said “the new algae” is something that “secretes whatever lipid size we want to engineer. This changes algae from what everybody’s been looking at as a farming problem into a manufacturing problem. So we are trying to get algae to go into a continuous production mode, pumping up these lipids, that come out in a pure form.”

Two years ago, Synthetic Genomics struck a long-term research and development deal with BP, the global energy conglomerate previously known as British Petroleum to develop cleaner energy production.  BP has also been a strategic investor in Synthetic Genomics—even though Venter has stated that he wants the company to replace the petrochemical industry in ten years.

Many aspects of Venter’s algae project seem fanciful. He has described a future where people produce their own biofuel in their backyards, a self-sufficiency scenario he sees as a major source of future fuel production. He envisions possibly millions of “algae micro refineries,” in neighborhoods throughout the United States and beyond. Genetically engineered algae needs sunlight and carbon dioxide, and then secretes a liquid that “can basically be used right away as biodiesel,” according to Venter. The only hardware needed would be stuff like sinks, filters, barrels and pipes.

In a Popular Mechanics magazine interview last year, Venter said the goal at Synthetic Genomics is to have “multiple things on the market within five years.” In a TED speech in February 2008 he estimated that the team would have “the first fourth-generation fuel out in about eighteen months.”

Privately-held Synthetic Genomics was founded in 2005 by Venter, who serves as chairman and CEO, Nobel Laureate Hamilton Smith, who serves as scientific director, and former General Counsel David Kiernan. Its board includes Biotechonomy CEO Juan Enriquez, Draper Fisher Jurvetson managing director Steve Jurvetson, Pulsar CEO Alfonso Romo, and Raydiance CEO Barry Schuler. In 2005 Draper Fisher Jurvetson provided $30 million in Series A round of venture funding. Last year it was reported they were in the process of raising another round, in the range of $100 million to $200 million.

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Greenfuel Technologies, the Cambridge, MA, biofuels startup that closed its doors last month after running out of venture cash, is trying to scrape together some money for its creditors and investors through a sale of intellectual property and other assets.

In a post on its website today, the company said it’s entertaining offers for its basic algae production technology—big tanks designed to be installed next to facilities such as cement plants that emit lots of carbon dioxide, which can be captured and converted into plant matter through photosynthesis.

The company also said it’s selling intellectual property related to “downstream processing” of the algae, thin film technology, algae selection and optimization techniques, and “Generation 1 and 2 bioreactors (tubular).” The company is planning a sealed bid auction for the assets, and says a detailed description and bid sheet is available to interested parties.

According to an e-mail tip received from “Anon GreenFueler”—presumably, a former employee of the startup—there are “several interested parties currently vying to bid for the trade secrets, know-how, and equipment held by GreenFuel.”

Greenfuel struggled for eight years to commercialize its algae production system, which was intended to produce material that could be converted into either protein-rich feedstock or ethanol for cars and trucks. But the company was unable to raise the Series C funding it needed to build its first planned industrial-scale production facility in Spain. The company laid off about half of its staff in January and shut down entirely on May 13.

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Seattle’s biotech companies must be trying to get a lot done before Memorial Day weekend, because we had reports on deals, layoffs, and big strategic moves.

—Dendreon (NASDAQ: DNDN) has spent years trying to prove that its immune-boosting therapy for prostate cancer really works, and now it has to show it can make enough of it to meet coming demand. The company has just one commercial manufacturing facility, and it is rapidly trying to scale it up over the next 14 months so it can pump out a maximum of $500 million to $1 billion worth of Provenge each year, says CEO Mitchell Gold.

—Archus Orthopedics, the Redmond, WA-based developer of spinal implants that help people remain mobile after back surgery, has laid off most of its employees and significantly scaled back operations to conserve its remaining cash.

—Accelerator, the Seattle-based investment vehicle for biotech startups, bankrolled its 10th company, called Xori. The company raised $2.1 million out of a $4.5 million round, toward a goal of developing technology that will make antibody drugs much more quickly, and with better properties, than existing methods.

—Cancer drugs represent one of the most intense fields of interest in biotechnology, so it shouldn’t be a surprise that a lot of Seattle biotech companies have news coming out at this year’s meeting of the American Society of Clinical Oncology from May 29 to June 2. ASCO posted brief online summaries of a lot of clinical trial data to be presented, and I combed through the most interesting abstracts from companies in the Northwest.

—Bionavitas, a Redmond, WA-based developer of light technology to help algae grow much more efficiently, explained its strategy in this feature story. It sees more promising markets in using algae to make food additives and for toxic cleanup—at least in the early days—than for biofuels.

—I heard about an intriguing new startup called Presage Therapeutics, a spinoff from the Fred Hutchinson …Next Page »

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