IUPUI startup eyes yeast as fuel for ethanol

January 5, 2009
A firm hatched out of the Indiana University School of Medicine has raised $150,000 toward bringing to market yeasts that could be a cure for one of the biggest bioengineering challenges of the day.

IU molecular biologist Mark Goebl and his assistants started down the path toward modifying yeasts to study cell division and its implications for curing diseases. But they took a different road after realizing a strain of yeast they created could yield the alternative fuel ethanol.

Not just any ethanol, mind you—cellulosic ethanol. To some it's the holy grail of producing ethanol cheaply by using grasses and other common plants rather than the food staple corn.

Corn is rich in yeast's favorite sugar, glucose, making it the main ingredient for the Midwest's ethanol refining industry. Trouble is, demand for corn to make ethanol has pumped up food prices. The higher demand also has made ethanol more expensive to produce, making it that much less competitive with gasoline.

Unfortunately, fermenting ethanol on the cheap from basic plant matter has been as elusive as cracking the sound barrier in an old-fashioned airplane. Grasses and other more humble plant matter contain glucose, as does the corn kernel. But these plants harbor other complex sugars in their cell walls that yeasts won't readily ferment, such as xylose.

Yeast's favorite sugar is glucose. As long as there's even a trace amount of it present, yeast will wrinkle its nose at xylose.

"The big home-run is that we're breaking down the xylose," said Mike Neibler, CEO of Xylogenics.

The Indianapolis-based start-up expects the IU Research and Technology Corp. will file the final U.S. patent documents on its genetically altered yeast strain within weeks. Xylogenics and IU also must negotiate a royalty agreement so the firm can license the technology to ethanol producers and their suppliers.

"We really don't want to be in the yeast manufacturing businesses," said Neibler.

He's hoping to present the vision for Xylogenics at the Jan. 8 meeting of the Indiana Venture Club in hopes of raising more money for the effort.

Neibler said the firm will need about $2 million initially, much of that for the cost of producing small batches of ethanol and verifying yields from the company's yeasts

Goebl, an IU professor of biochemistry and molecular biology, is chief science officer of Xylogenics. He also works on behalf of the Richard G. Lugar Center for Renewable Energy at IUPUI.

Xylogenics estimates that its genetically altered yeast could, conservatively, increase U.S. ethanol production by at least 30 percent. If so, its yeasts could produce big revenue.

Considering royalties and the number of gallons of ethanol likely to be used nationwide, Xylogenics believes it could collect more than $65 million in 2011. The estimated use of ethanol is based on a 2007 Congressional mandate. By 2022, the mandated level is 36 billion gallons, which company founders estimate could fetch the company more than $500 million.

The company says its "Xylanol" yeast also can help improve corn fermentation, improving its production yield by about 3 percent.

To the extent Xylogenics' yeast could make ethanol a more viable alternative to imported oil it could fuel further construction of ethanol distilleries. Indiana has nine operating and about as many others planned or under construction. "This would be good for the state of Indiana," said Cary Woods, chairman of Xylogenics.

State's ethanol expertise

Whether Xylogenics is on to something or not commercially, at this stage, is hard to say. So-called breakthroughs in cellulosic ethanol have been heralded in recent years yet ultra-low-cost production remains elusive.

At the least, Xylogenics stands to further Indiana's reputation in cellulosic ethanol research.

Some in the industry say the best advance yet in yeast fermentation technology remains the work of Purdue University researchers led by molecular biologist Nancy W. Ho. They added three additional genes to yeast to make it able to simultaneously convert glucose and xylose to ethanol, at least according to initial Purdue claims. Purdue licensed the technology to Canadian biotech company Iogen Corp., which makes cellulosic ethanol from wheat straw.

Purdue said the ability to ferment xylose increased the yield of ethanol from straw by 40 percent. Exactly how cost-efficient Iogen's production is relative to other ethanol distilleries isn't clear.

"Her [Ho's] organism is still one of the most competitive ones out there," said Bruce E. Dale, a professor of chemical engineering at Michigan State University and expert in alternative fuels.

Clearly, Xylogenics went down a different path. "The genetic engineering carried out by other labs is quite elegant but it seems as though they had overlooked a critical component that we have now addressed, said Josh Heyen, a member of Goebl's research team.

In recent years they've been altering yeasts as part of research into the cell division cycle and its implications for new medicines, said Ross Cocklin, a team member.

"Ethanol production wasn't our focus at the time," said Goebl.

Mainstream application

Xylogenics CEO Neibler figures the yeast fermentation process has the most potential.

For one, it's not new technology and already is widely used at existing ethanol refineries. "It's the least disruptive technology in the market today."

Fermentation isn't the only way to make ethanol—there also are thermochemical technologies picking up speed in the cellulosic realm. One close-to-home application is being built in a dump in Lake County, using a so-called gravity pressure vessel. Indiana Ethanol Power, whose lead investor is Indianapolis engineering firm RW Armstrong, will inject a slurry of ground-up landfill waste under pressure into a tube that goes 2,000 feet into the ground. The material heats and begins to form sugars.

Other emerging technologies use a gasification process.

Ultimately it's likely that a number of technologies will be used as the ethanol industry matures, said Michigan State's Dale. Grasses, for example, may be best converted biologically, using yeasts, while more woody materials could be better suited for combustion-type technologies.

"I wish there were, but I don't think there's any silver bullet out there" at this point, added Dale.
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