Indianapolis-based bioengineering firm Xylogenics Inc. has licensed its proprietary yeast strain to a Milwaukee firm that is a supplier to the fuel-ethanol industry. It is the first such licensing agreement for Xylogenics.

Lallemand Ethanol Technology will use Xylogenics’ yeast strain, which is notable in its potential to produce ethanol from cheap, abundant plant matter, such as grasses and the leftover portion of a corn stalk. Most ethanol is made from corn kernels, a food crop whose price has risen with the demand for ethanol.

Xylogenics claims its yeast strain, developed at the Indiana University School of Medicine, can increase yields and lower costs of producing corn ethanol.

Terms of the deal were not disclosed.

“We are confident that our combined strengths will allow us to move quickly to commercialization and make a positive impact on the fuel-ethanol industry economics,” said Mike Neibler, CEO of Xlyogenics.

The ethanol industry is trying to slash production costs to make E85—a mix of 85 percent ethanol and 15 percent gasoline—more competitive with gasoline. The industry is also lobbying federal agencies to permit the blending of a higher percentage of ethanol into ordinary gasoline. Most gasoline is blended with no more than 10 percent ethanol.

The eight-employee Xlyogenics is based at the Indiana University Emerging Technology Center along the Central Canal. It was funded by $150,000 from IU faculty and from the Lugar Center for Renewable Energy. Earlier this year, it lassoed $225,000 from angel investors affiliated with the University of Notre Dame.