Even though the sun was finally out in Seattle, dozens of folks from the worlds of cleantech, life sciences and high tech got together to share thoughts and network at Xconomy’s latest event, “Separating Hype from Reality in Alternative Fuels.”

Our panelists and presenters dove into the past and future of biofuels, the need for balanced public policy, the promise and reality of electric vehicles, how the Pacific Northwest can drive innovation in airline fuels, and much more.

For a recap of the major themes touched on by our panelists, you can check out my wrapup of Thursday night’s discussion. We’ve also put together this photo gallery of some sights from the program, captured by Vinh Chung of Total Effects Video.

We also must thank our underwriters, partners and sponsors, without whom our events wouldn’t be possible. The Institute for Systems Biology was the host, the Washington Clean Technology Alliance was our partner, and Mixtur was our design sponsor.

Our valued underwriters were Alexandria Real Estate Equities, Christensen O’Connor Johnson Kindness, Cooley, Davis Wright Tremaine, Fenwick & West, Graham & Dunn, the ISB, Invest Northern Ireland, J. Robert Scott, Kauffman Foundation, Latham & Watkins, the Science and Technology Directorate of the U.S. Department of Homeland Security, Seed IP Law Group, and Swedish Medical Center.

And our venture capital members for this event were ARCH Venture Partners, Vulcan Capital, and WRF Capital.

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We had a great time at our latest Xconomy Seattle event, “Separating Hype from Reality in Alternative Fuels,” held last night at the new Institute for Systems Biology headquarters in Seattle’s South Lake Union neighborhood.

The presenters sketched some meaty ideas about the drive to develop oil alternatives, challenged a bit of conventional thinking, and got the audience to dive in with great follow-up questions. Here are a few of the big themes that emerged as Luke moderated the main discussion with Ned David and Kristina Burow of Arch Venture Partners—two of the co-founders of San Diego-based Sapphire Energy—and Margaret McCormick, the co-founder and CEO of Seattle-based Matrix Genetics. If you want to see some images from the event, check out this Flickr gallery from Vinh Chung of Total Effects Video.

—Biofuels 3.0: David pointed to the U.S.’s last two attempts to develop biofuels—after the 1970s energy crunch and in the mid-2000s, when national policy ramped up the production of ethanol. Neither of those eras, of course, have delivered much in the way of energy independence.

David said the 1970s saw the first big effort to cultivate algae as an alternative fuel source, but that fell short because the technology wasn’t advanced enough to get results. That wrongly led many to believe that algae wouldn’t work, he said.

The ethanol boomlet of the past decade was the 2.0 wave of biofuels for this country, but that hasn’t produced anything like what all those optimistic politicians pledged at the outset. “Forty percent of the U.S. corn crop goes to replacing 8 percent of our transportation fuel,” Burow said. “That is not sustainable.”

At present, David said, we’re in the 3.0 phase of U.S. biofuels. Algae was a big focus of this particular discussion, since all three of our panelists have direct experience with that field. With projects like Sapphire Energy’s drive to put a huge algae-fuel production facility in the Mexican desert, you’re seeing “the first building blocks of world-scale capability” for these fuels.

“I think that microorganisms can solve most of the problems of the world. If you go back, it was alcohol or it was cheese,” McCormick said. “There’s so much potential that can be harnessed out of these microorganisms and the DNA that’s in them, and we can look at them to solve all kinds of problems.”

—High stakes, but no quick fixes: McCormick said the latest phase of alternative fuels work is not purely driven by an economic need to reduce spending on oil, but is also by the need to address climate change and national security issues.

Burow added a fourth factor: “This has got to work. By 2020, we’ll have increased our need for energy by 40 percent as a world. And there’s simply no way to meet that increase without these types of alternative fuels.”

At the same time, Burow said, the cycle for developing such culture-shifting technologies is still much slower than we expect from other areas of innovation. “This isn’t Twitter. This isn’t … Next Page »

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Margaret McCormick has been dreaming of ways to make microorganisms do big things since her grad school days in biology at MIT. Years later, the scientist-turned-venture capitalist is now in a position to act on those dreams as CEO of a Seattle-based startup called Matrix Genetics.

The idea is about as big as startup visions get: engineering single-cell varieties of algae to become the workhorses that crank out commercial quantities of oil.

“I’ve always been fascinated by the power of single-cell organisms,” McCormick says. “There is so much unlocked potential for them to help us solve big problems.”

McCormick, one of the featured speakers at next week’s Xconomy event on alternative fuels, has led this quiet effort for the past three years inside Seattle-based Targeted Growth. While Targeted Growth grabbed headlines with hybrid camelina seeds that it turned into jet fuel for Boeing planes, McCormick and her team of a dozen scientists plowed away behind the scenes at something they believe has much bigger long-term potential.

The work has been focused on modifying one of the relatively simple genetic strains of algae, known as cyanobacteria, to produce more oils. Now that some critical early tests have been passed, McCormick says this effort is spinning off into a company of its own, which she believes can compete with a couple of the big names in the business of modifying algae strains for fuel. That includes Craig Venter’s Synthetic Genomics (which has a partnership with Exxon Mobil) and Cambridge, MA-based Joule Unlimited.

These are still the earliest of days for Matrix as a company. The company is made up of a team of 12 scientists, eight of them with Ph.Ds, housed inside the Institute for Systems Biology. Jim Roberts, a professor at the Fred Hutchinson Cancer Research Center, and Fred Cross, a professor at Rockefeller University in New York, are a couple outside advisors who have played a key role, McCormick says. So far, Matrix has five patent applications filed, with more to come, and it is on the fundraising trail, with a goal of nailing down its first $10 million to $15 million, McCormick says. But even at this very early point in the company’s development, McCormick says she has already had some preliminary talks with oil companies that she hopes could lead to technology licensing deals over the next couple years.

Roberts, who’s close to the project, has some bullish things to say about its progress. “The future of Matrix is very bright,” he says in an e-mail. “Our progress surpasses other companies that are also interested in developing cyanobacteria as an oil-producing organism, such as Synthetic Genomics and Joule.”

Exciting as it may be in the lab, it’s still quite a long way from being applied in the business world. The global energy and transportation market is staggering in size, worth an estimated $7 trillion a year, and Matrix Genetics has no illusions that it will take over a big chunk of it by itself. The business model depends on making important discoveries for turning cyanobacteria into oil factories, and then licensing the technology to big oil companies that have the money and expertise to refine, distribute, market and sell the energy products. Matrix, at this point, is sticking to its basic science, and isn’t banking on raising a huge amount of capital that would be required to build up its own commercial infrastructure.

“We believe the return on investment for us will be in the genetics. Our expertise has always been in the genetics, and we don’t have the team that will be needed to build out the entire value chain,” McCormick says.

The history of how this came about is pretty interesting. Targeted Growth, a company that’s been around more than a decade, has a lot of experience in using knowledge of genetics to boost crop yields. As years went on, and oil prices went up, Targeted Growth got more interested in … Next Page »

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Solazyme, the South San Francisco-based maker of renewable biofuels that was started by a couple of college friends, is going to see just how much interest public investors have in their once “delusional” idea.

Solazyme is out to raise as much as $100 million through an initial public offering, according to a prospectus filed with the Securities & Exchange Commission on Friday. The proposed deal is underwritten by Morgan Stanley, Goldman Sachs, Lazard Capital Markets, and Pacific Crest Securities. The company hopes to eventually trade under the symbol (NASDAQ: SZYM).

The company, which I profiled in July, was founded in 2003 by Jonathan Wolfson and his college friend Harrison Dillon. Their plan, which Wolfson says sounded more than a little far-fetched at the time, was to use fast-dividing, efficient algae to produce renewable fuels. Wolfson and Dillon have turned their once-delusional vision into an organization with 111 full-time employees, and a diverse set of partnerships with big companies like Chevron, Dow, Qantas, Sephora, and Unilever. It also has contracts to supply renewable diesel to the biggest customer on the planet-the U.S. Department of Defense.

The capitalization table for this company looks a lot different than your typical VC-backed venture. The Roda Group in Berkeley, CA has the largest stake in Solazyme with 29.8 percent ownership, followed by Braemar Energy Ventures in New York with 10.7 percent. The founders—Wolfson and Dillon—each still have a 9.7 percent ownership stake, according to the prospectus. Wolfson is the CEO, and Dillon is the president and chief technology officer.

Going public is a critical step for Solazyme if it is going to fulfill its promise of making renewable fuels at scale. Other aspiring biofuel companies—LS9, Sapphire Energy, and Synthetic Genomics among them—will surely be watching this one closely to see whether public investors have worked up an appetite for biofuel plays.

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It’s tough out there for angel investors and venture capitalists—not to mention entrepreneurs scrambling for money so they can build the next big thing. Nothing surprising there, but it’s especially true in cleantech and energy, where the exit market has not yet matured, and the process of building early-stage companies is as thorny as ever.

Enter the Massachusetts Clean Energy Center (MassCEC), a Boston-based state agency that supports and promotes local clean energy companies. Led by executive director Patrick Cloney, MassCEC is trying to develop the cleantech ecosystem in the Bay state by focusing on renewable energy generation and workforce development, and by making investments in early-stage projects and startups. The agency has helped finance dozens of companies big and small, including A123Systems (NASDAQ: AONE), 1366 Technologies, FloDesign, Solartrec, and Next Step Living. It has investments in areas like solar, wind, biofuels, hydro, and energy storage—and an increasing focus on energy efficiency, smart buildings, and smart grid technologies.

Earlier this fall, I spoke with MassCEC’s managing director of investments, Arif Padaria, about the state’s energy landscape and his agency’s role. MassCEC receives $25 million a year from the state’s renewable energy tax, and about $8 million of that is controlled by Padaria, to be used for investments in early-stage technology companies.

Padaria, 42, is a software entrepreneur and computer scientist by training, and a tech investor by recent career. In the early 1990s, he dropped out of a PhD program at Princeton to help start a couple of software companies, both of which were acquired. He then went the business school route, got his MBA at Columbia, and went to work on Wall Street as a tech investment banker with Broadview; later he got into venture investing at TVM Capital and Pilot House Ventures (with a stint in strategic investing at Microsoft in between). Padaria started at MassCEC in January 2010.

A big part of his charge is to help selected Massachusetts cleantech startups traverse the so-called “valley of death” and obtain their first financing round, which is usually in the $1-3 million range. MassCEC participates in these rounds and gains an equity stake in the companies.

“How do we impact that?” Padaria says. “I’m essentially a state angel group. I come with a whole network of investors, especially in software. I’m going out there, beating the bushes, trying to find the right deals. My goal is return on success, not just return on investment. We take a thought leadership role in ecosystem development. We go into a field where nobody else [i.e., an institutional investor] is willing to touch it, so to speak.”

Padaria elaborated on some of these themes in our chat below. Here are some edited highlights:

Xconomy: Where does the MassCEC investment fund fit into the ecosystem of cleantech angels, venture capitalists, and federal government financing (such as grants from the Advanced Research Projects Agency-Energy)?

Arif Padaria: Where we really fit is on the angel side. VCs are pleased that someone is coming in to take the risk to move a company to a level that may work or not work. If it does work, it could … Next Page »

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South San Francisco-based Solazyme, which is developing a technology to use fast-dividing algae to produce biofuels, collected a $52 million Series D round of venture financing in early August. Today the company announced that Bunge Limited (NYSE: BG), one of Brazil’s largest processors of sugarcane, has joined the Series D round, alongside previously announced backers Morgan Stanley, Braemar Energy Ventures, CTTV Investments, Harris and Harris Group, Lightspeed Venture Partners, the Roda Group, San-Ei Gen, VantagePoint Venture Partners, and Zygote Ventures. Solazyme didn’t say how much Bunge contributed to the round.

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Sometimes in this job, the stuff you hear just seems too good to be true. Like when the mayor of San Diego invites members of an audience to suggest a slogan more exciting than the one he came up with: “When you think of pond scum, think of San Diego.”

It’s not often that the mayor of a major city serves up an opportunity to respond to something like that.

Yet that’s pretty much what San Diego Mayor Jerry Sanders did in public remarks last week at an event that Synthetic Genomics organized to mark the first anniversary of its partnership with the oil giant ExxonMobil (NYSE: XOM). The San Diego startup is getting at least half of the $600 million that ExxonMobil is spending to develop algae that could someplace replace crude oil as a refinery raw material for the production of diesel, gasoline, and jet fuel.

There are thousands of different types of algae, so the task of identifying—or genetically engineering—the ideal algal species for making biofuels still represents a huge scientific challenge. Still, if all goes as planned, our next generation of transportation fuels could someday come from ordinary pond scum.

So it was a proud mayor who stepped to the microphone following a few introductory comments by J. Craig Venter, the human genome pioneer who is Synthetic Genomics’ CEO and co-founder.

Mayor Jerry Sanders

“Our region, the San Diego region, has been able to gain stature as a hub for biofuels,” Mayor Sanders said. “We have more than 20 companies right now working on alternative fuels—including fuels made from used cooking oil, plant-based fuels, and then the micro-algae research being done right here. Between our first-rate research universities—UCSD and San Diego State University—and all of the research institutions up here on Torrey Pines Mesa, we believe that San Diego will soon be synonymous with alternative energy and biofuels.”

The mayor then went on to make a little joke—which now must seem like a soft pitch down the middle of the strike zone to wordsmiths everywhere.

“Now we’re still working on our slogan, after our initial efforts failed to generate excitement,” Sanders said. “So if anyone can think of something more exciting than, ‘When you think of pond scum, think of San Diego,’ we’d appreciate some help on that.”

Amid the polite laughter that ensued, an idea was born. Let’s ask the gentle readers of Xconomy to take up the offer that hizzoner so generously extended!

But first a little background.

As a popular convention and tourist destination, San Diego has promoted itself since … Next Page »

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NextCAT, a Detroit-based developer of catalysts for biodiesel production, announced today that it has signed an option agreement to produce technology developed at the National Biofuels Energy Laboratory at Wayne State University. NextCat says its catalyst technology can take biomass not currently in the food stream, such as algae and recycled cooking oil, and convert it into fuel. Charles Salley, NextCAT’s interim CEO, said in a prepared statement that with the option agreement, pilot-scale testing can begin this year. NextCAT is housed at TechTown, a Detroit business incubator, and has received funding from the Michigan Pre-Seed Capital Fund.

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Things were hopping over the past week in San Diego. Get into the rhythm here.

—San Diego’s West Wireless Health Institute named Donald Casey chief executive officer. Casey was formerly worldwide chairman of Johnson & Johnson’s comprehensive care group. The Institute was founded last year with a $45 million gift from telemarketing and communications entrepreneurs Gary and Mary West.

—Tocagen raised nearly $7.8 million in a Series D round that began Feb. 2 and another $3 million from the sale of preferred shares. The San Diego biotech is working on gene therapies for cancer.

—Sapphire Energy scientists were part of research team that demonstrated the feasibility of using algae to produce commercial levels of therapeutic proteins. Sapphire cofounder Stephen Mayfield of UC San Diego believes algae will reduce the cost of producing certain biotech drugs.

—San Diego-based Trius Therapeutics, which is working on an antibiotic for MRSA infections, postponed its plan to go public. The company said it needed time to get clarity on new FDA guidelines that will affect clinical trials for its experimental drug.

—Medical device startup ImThera Medical is testing an implanted electronic device for sleep apnea. The device transmits a steady electric current that causes the tongue muscle to tighten and pull away from the upper airway. Trials are taking place in Europe.

—Isis Pharmaceuticals (NASDAQ: ISIS), a Carlsbad, CA-based biotech earned a $6 million payment from Bristol-Myers Squibb for getting clearance from regulators to begin clinical trials of a new cholesterol-lowering drug.

—Life Technologies (NASDAQ: LIFE) the Carlsbad, CA-based maker of … Next Page »

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Scientists in San Diego and Hayward, CA, have demonstrated the feasibility of using algae to produce commercial levels of human therapeutic proteins that are currently being used to treat emphysema and other diseases, or are in clinical trials for use to boost the immune system.

“The bottom line from the study is that the algae expression platform is ready for prime time,” UC San Diego biologist Stephen Mayfield writes in an e-mail to me over the weekend. “We can express a very high percentage of recombinant genes (at least as good as the best system out there) and they are soluble and bioactive.”

Mayfield says the findings substantiate something he told Denise in December—that algae could dramatically cut the costs of making complex proteins, including interferons, antibodies, and growth factors that already are being used to treat cancer and other diseases. Such complex drugs are currently produced from mammalian or bacterial cells. Algae, though, is much less expensive to work with, and algae cells grow much more quickly—doubling in number ever 12 hours.

“Obviously the scalability and cost of algae make the system attractive, but if you can’t make a high percentage of proteins then costs don’t really matter that much,” says Mayfield, who led the study. The research, published online this week in Plant Biotechnology Journal, included scientists from The Scripps Research Institute (TSRI), San Diego algae biofuels company Sapphire Energy, and Protelica, (previously known as ProtElix) a Hayward, CA-based startup that specializes in protein engineering. Mayfield joined UCSD in November from TSRI, where he had worked since 1987.

Mayfield said a few months ago that a factory that uses algae to produce biotechnology drugs would be significantly cheaper to build than a traditional facility, and drug production costs would be about 75 percent lower. He contends that pharmaceutical companies could use such savings to dramatically cut the costs of some drugs that now cost consumers tens of thousands of dollars a year.

The process the scientists used to genetically modify a … Next Page »

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Washington State University will receive a $2 million federal grant to develop algae-based biofuels in a collaboration with a couple of Seattle-based startup companies. The grant, secured with help of Washington Sen. Patty Murray, will support what’s called the Washington State Algae Alliance, a partnership of WSU, Seattle-based Targeted Growth, and Seattle’s Inventure Chemical.

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The potential of algae as a clean energy source has been generating a lot of entrepreneurial excitement in San Diego. At last count, 10 local companies are busy working on technologies focused on transforming ordinary pond scum into “green crude” one day capable of powering aircraft, trucks, automobiles, and even utility plants—and easing the world’s energy problems. It is a bold vision—but one that may be selling algae short. That thought occurred to me after I had a chat with Stephen Mayfield, a leading expert on the genetics of algae who recently moved his lab from The Scripps Research Institute to UC San Diego.

Mayfield has been studying algae for about a quarter of a century—long before it became hot—and he is a co-founder of San Diego-based Sapphire Energy, the oil-from-algae startup backed by billionaire Bill Gates. He’s a big believer in biofuels, and just a few days before Thanksgiving, he was in Washington with other Sapphire representatives, lobbying the Department of Energy for support. But to Mayfield, algae have far more to offer than a potential energy solution. He sees them as a possible answer to an entirely separate problem: the high cost of biotechnology drugs.

First some background. Many biotechnology drugs are made in living organisms, such as bacteria, yeast, or mammalian cells. The genetic code for a therapeutic protein or antibody is inserted into the organisms, which uses the DNA as a blueprint for producing the designated complex molecule. It is impressive technology, although the organisms require plenty of care and feeding in big, expensive factories that take years to build and bring online. And there’s the rub. Companies must often decide whether to construct a drug factory before they are certain they have a product.

Miscalculations are costly. By the time Idec Pharmaceuticals of San Diego broke ground on a $380-million factory in nearby Oceanside, CA, in 2002, all three drugs it planned to manufacture there had hit setbacks in clinical trials. A search for new drugs to produce in the factory led to Idec’s merger with Biogen of Cambridge, MA, which decided to make the multiple sclerosis drug natalizumab (Tysabri) there.

The biotech community in San Diego is well-acquainted with the rest of the story. Not long after the factory was completed, Biogen Idec briefly withdrew natalizumab from the market because a handful of patients developed rare but life-threatening brain infections. The drug never became the blockbuster the company had hoped for, and the factory was sold to Genentech at a loss.

Failing to invest in manufacturing can be just as costly, as Seattle-based Immunex learned. A shortage of production capacity for its blockbuster rheumatoid arthritis drug is one reason why that company sold itself to Amgen.

Mayfield says algae are ideal vehicles in which to produce biotech drugs because they don’t need all the pampering other organisms require. They pull … 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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Somebody forgot to tell the Northwest biotech community this is the height of vacation season. Our pages this week were packed with stories on financings, clinical trials, exclusive interviews and more.

—Rick Klausner, the former leader of the National Cancer Institute and the global health wing of the Bill & Melinda Gates Foundation, provided some intriguing insights on cutting-edge biology that he’s been following in his new job as a venture capitalist. Deep into this story, Klausner explains why he thinks Seattle-based Dendreon (NASDAQ: DNDN) is just scratching the surface of what immune-stimulating therapies will be able to do in the future.

—Targeted Growth gets its share of publicity for its camelina seeds that are used to make jet fuel, but further in the future, Targeted Growth envisions making a bigger impact with genetically modified algae that can be made to compete on price with petroleum. We got the story from a conversation with Targeted Growth’s Margaret McCormick.

—Seattle-based Cell Therapeutics (NASDAQ: CTIC) raised about $40 million last month, and lo and behold, this week it found yet another lone institutional investor willing to wager another $30 million that this company has brighter days ahead. Cell Therapeutics has asked the FDA to approve its experimental pixantrone therapy for patients with non-Hodgkin’s lymphoma.

—PATH, the Seattle-based nonprofit that works to improve health in poor countries, won the closest thing the humanitarian field has to the Nobel—the Conrad N. Hilton Humanitarian Prize. PATH president Chris Elias envisions using the $1.5 million cash award as seed capital for a five-year, $25 million plan to support innovative new global health technologies, and to support geographic expansion in Africa.

—Amgen scientists in Seattle had something to celebrate a week ago, but just one week later the picture has gotten a little muddier. Earlier, we reported that the first big prospective clinical trial confirmed the company’s hypothesis that panitumumab (Vectibix) can slow the spread of tumors for colorectal cancer patients with normal forms of the KRAS gene (and that the drug doesn’t help those with mutated forms). This week a second clinical trial in a sicker patient population found the same pattern with respect to slowing the spread of tumors, although the treatment didn’t actually help normal KRAS patients live any longer.

—Seattle Genetics put the finishing touches on its big stock offering, which ended up generating a grand total of $136 million. The Bothell, WA-based developer of cancer drugs (NASDAQ: SGEN) said its underwriters exercised all their options to buy an extra 1.65 million shares. JP Morgan and Goldman Sachs were joint book-running managers of the offering. (Apparently Seattle Genetics saw fit to use at least a little money to spiff up its website, too.)

—Seattle-based biotech consultant Stewart Lyman submitted another intriguing editorial for the Xconomist Forum on why Big Pharma companies have many reasons to make biologic drugs. Some of this is about science, but there’s politics and business to consider, too.

—Mukilteo, WA-based CombiMatrix (NASDAQ: CBMX), the maker of genetic analysis tools, is looking to hire an investment bank to consider whether the time is right to sell the company. Back in June, after it got crushed by bigger competitors selling DNA microarray tools, I profiled the company’s attempt to reinvent itself around cancer diagnostics.

— Light Sciences Oncology isn’t just about oncology anymore. The Bellevue, WA-based company said it has started enrolling patients in a clinical trial to see if it can treat benign prostatic hyperplasia, otherwise known as an enlarged prostate. The company’s technology uses light-emitting diodes, threaded into localized tissue, to activate a drug within a certain wavelength.

—Seattle-based Sound Pharmaceuticals, the developer of treatments for hearing loss, said this week it nailed down a $2.1 million contract from the U.S. Navy to continue developing its lead therapy. It’s the third grant the company has gotten from the Navy since 2005, and will enable it to beef up its pipeline of experimental treatments, says CEO Jonathan Kil.

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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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Targeted Growth, the Seattle-based developer of renewable fuels and high-yield agricultural products, said today that its scientists have found a way to boost the amount of lipid content by 400 percent in cyanobacteria, which it says could increase the oil yield from algae enough to make it competitive on price with conventional petroleum. The company and its collaborators have identified and tested every active gene in cyanobacteria, and added some new genes, to create a strain of algae that produces higher oil yields. Targeted Growth, which was profiled last week in Xconomy, says it has filed multiple patent applications on the high-yield strain of algae.

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With the start of real summer weather in the Northwest, we’ve seen some good deal action heating up in Internet software, biotech, and energy in the past week.

—Seattle-based consulting firm R.W. Beck is being acquired by government contractor SAIC (NYSE: SAI) in San Diego for $155 million. It’s one of the Northwest’s bigger tech deals of the past year. R.W. Beck’s 550 employees (125 in Seattle) won’t be relocating, and Beck CEO Russ Stepp says the deal will help his company pursue larger projects in areas like energy and water management, while also helping SAIC take smart grid and modeling technologies into utility markets.

—Bothell, WA-based OncoGenex (NASDAQ: OGXI), a developer of cancer drugs, reached agreements to raise $9.5 million from institutional investors through a registered stock offering, as Luke reported. In May, the company presented data showing its prostate cancer drug, OGX-011, helped men live a median time of about 7 months longer when combined with chemotherapy, as compared to chemo alone.

—Portland, OR-based Internet startup AboutUs closed $1.2 million from Seattle-based Voyager Capital and other investors. This tranche closing rounds out the company’s Series A funding and includes $1 million from Voyager (fulfilling its previous $2.5 million commitment). AboutUs focuses on information discovery and sharing online.

—Seattle-based Blue Marble Energy has raised an undisclosed amount of Series A funding from unnamed investors, as Eric reported. The company is working on ways to convert algae and waste into useful chemicals and renewable fuel. In April, Blue Marble Energy closed approximately $1 million out of a $2 million equity offering, according to a regulatory filing.

—Bio Architecture Lab, a Seattle-based University of Washington spinout, raised $3.4 million in equity funding out of a $6 million offering. The investors were not disclosed. The stealth startup, which raised $1.5 million from X/Seed Capital last year, is using synthetic biology and computational enzyme design to make biofuels and renewable chemicals from relatively cheap, sustainable biomass sources.

—Kirkland, WA-based OVP Venture Partners led a $15 million Series C investment in San Francisco-based Limerick BioPharma. The other investors include Arch Venture Partners, Sevin Rosen Funds, and Altitude Funds. It’s a new portfolio company for OVP, and managing director Chad Waite has joined Limerick’s board.

—Portland, OR-based Blackbox Republic, a niche social network, has raised $1 million in seed funding from angel investors. Blackbox is led by former Jive Software exec Sam Lawrence. The company is targeting the sex positive community, and wants to fill the void between Facebook and Match.com.

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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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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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