Mark Emalfarb, CEO of Dyadic International: “Governments need to quit talking about making the transformation from oil to renewable sugars and, like the Nike commercials say, ‘Just Do It’!”

Dyadic International, Inc. is a small biotechnology company with huge potential in the production of cellulosic ethanol and various other biobased products, having a patented C1 fungus; a living cell that no other company has nor can develop without infringing Dyadic’s international patents. The C1 fungus can be used to produce enzymes and proteins to break down plant cells to produce fermentable sugars which may be used to more cost effectively manufacture bioethanol, biobutanol, bioplastics, biopolymers and many other replacement products for petroleum-based products.

Dyadic has already licensed, on a non-exclusive basis, its novel C1 fungus to two major energy developers (Shell partner, Codexis, and Abengoa Bioenergy ) for use in the production of bioethanol, and other sugar based products from biomass and energy crops. Dyadic is seeking additional non-exclusive licensees, collaborations and strategic partnerships for biofuels as well as trying to leverage its technologies and expertise into a variety of other industries such as pharmaceuticals, nutraceuticals, cosmetics, and industrial enzymes (such as animal feed enzymes).

In this, Renewable Energy Magazine’s latest in-depth interview, Mark Emalfarb describes the interesting path that led him to develop Dyadic’s patented C1 technology platform and his thoughts on the future of the production of sugars from biomass and energy crops for the production of bioethanol to help wean the world off its dependence on oil, help reduce the carbon footprint on our planet and improve energy security.

Interview date: October, 2009

Interviewer: Toby Price

So, Mark, how did you end up in the biofuels industry?

I was a journalism major who was a member of the University of Iowa wrestling team. I graduated in 1977 with a BA in journalism and embarked upon an interesting career that led me to stonewashing jeans with pumice stones, which led me to enzymes to replace the pumice, which led me to biotech what was needed to mass produce the cellulase and other enzymes we sell worldwide into the multi billion industrial enzyme business.

We started off selling pumice stone to Levi, Guess, Lee, Wrangler and others to teach them how to stonewash blue jeans to soften and fade the denim, helping to pioneer the stonewash industry. Of course, denim is cotton, and that's cellulose. So in the mid 1980's Novozymes [a Denmark-based biotech pioneer] came out with an enzyme to displace the pumice in the stonewash process. Dyadic had the customers; we became the distributor to market and sell the enzymes in conjunctions with pumice and other chemicals used in the stonewash process to create more fashionable and comfortable jeans. They added more distributors, the market shrank, my volume shrank. My competitive wrestling background came in and I thought it was my birthright to sell to these laundries, whatever it was. Whether it was pumice or enzymes, they were going to buy it from me. So I saw the writing on the wall and embarked upon a journey to search the world to find out which scientists could help me make our own [cellulase enzyme products] rather than just distribute them.

Then the [Berlin] Wall fell. We sought out the world’s scientific experts in this field and found a bunch of scientists at Moscow State University that had been conducting research and development on the classes of enzymes needed in order to produce cellulosic ethanol from biomass or energy crops. The Russians had been conducting such biofuel R&D since the early 1970s; the first time we had an oil crisis. Cotton is what makes up denim and there is the thread of how this all links up to enzyme-liberating sugar from biomass and energy crops to produce bio-based products such as biofuels.

We worked with the Russian scientists and launched our first commercial cellulase product, “ACE”, in 1994. This product was based on a fungus called Trichoderma which some guy picked off a tent in World War II because it was breaking down the cotton tents and the soldiers were getting rained on. So the world spent 70 years trying to engineer this particular fungus to do certain things.

It wasn't necessarily the best fungus to do the job, it was just the first that somebody came across and the scientific community basically just adopted it. So we hired the Russian scientists to screen for a fungus that had the properties we were looking for which naturally made enzymes to soften and fade jeans at a more neutral pH, and we found this organism we call C1. It seemed to do the job on cotton better than the enzymes from Trichoderma. As we bred the natural C1 isolate, a fungus we found in the Far East of Russia from alkaline soil, to make more and more of what we wanted (cellulases), we had a serendipitous mutation that micronized the C1 fungus which meant it could be cultivated industrially with greater productivity, under lower viscosity to produce C1 neutral cellulases at a lower cost.

We then embarked upon a decade long R&D program to turn C1 into a bio factory, applying cutting-edge genomics (proteomics) as well as creating the necessary molecular tools that are needed to up regulate and down regulate proteins and enzymes of interest from their genes. We now have a functional protein expression technology where we can use to produce recombinant proteins and enzymes from the almost endless pool of genes emerging from the sequencing efforts that originated from the sequencing of the human genome and since led to the sequencing of numerous other organisms like bacteria, yeast, fungi, plants, etc.

In fact, in 2005 and 2006 we worked with Agencourt Bioscience and Scripps Florida to sequence and annotate the C1 genome to find novel genes to develop new products and to further improve the performance characteristics and productivity of the overall C1 technology platform, and we later found that [C1] seems to have almost twice the biofuel genes in its genome as compared to Trichoderma. The C1 genome means that enzymes can, in many instances, operate at broader temperature and pH ranges, which means the C1 enzyme mixtures potentially offers some commercial advantages over trichoderma enzymes. C1 enzyme mixtures can be used to create fermentable sugars from diverse varieties of biomass and energy crops which can be used with both bacteria and yeast based systems to produce ethanol, butanol, polymers, plastics and other emerging biobased products which can be manufactured from sugar in lieu of petroleum.

Who has licensed Dyadic's technology for biofuel production so far?

Codexis - We have licensed our patented C1 Technology Platform to Codexis, a Shell Oil biofuel partner, which entered into a non-exclusive license for C1 in November 2008. It should be noted that Dyadic, actually C1, first had to meet certain performance criteria, which were met, and Codexis paid us $10 million upfront in the middle of April. There are some back-end payments as well once they commercialise various products using our technology down the road, but I can't disclose the specifics of what those payments might be because of confidentiality.

Abengoa Bioenergy - In November 2006, Abengoa Bioenergy invested $10 million in Dyadic purchasing common stock. These funds were used in a joint research and development project entered into at the same time with Abengoa with the goal of further improving the C1 Technology Platform’s ability to produce enzyme mixtures for converting Abengoa’s pre-treated biomass into fermentable sugars for the production of cellulosic ethanol.

The scientific milestones reached in this collaboration led to Abengoa Bioenergy entering into a non-exclusive license agreement for the use of Dyadic’s patented C1 Technology Platform in May 2009. The non-exclusive license agreement grants Abengoa Bioenergy certain patent rights and know-how owned by Dyadic relating to its patented C1 Technology Platform for the large-scale production of enzymes for use in manufacturing biofuels (including cellulosic ethanol and butanol), power and/or chemicals. The license agreement additionally provides for facility fees and royalties to be paid to Dyadic upon commercialisation.

Abengoa is one of the world's largest alternative energy companies and is involved in ethanol, solar and other alternative energy solutions. They are one of the leaders in the development and commercialization of cellulosic ethanol. Among other previous awards Abengoa has received from the US Department of Energy Abengoa, in 2007, was one of six companies selected by the US Department of Energy to receive and award for up to $76 Million to construct and operate one of the first commercial cellulosic ethanol facilities, which is projected to produce 11.4 million gallons of ethanol.

You mention that the Codexis license agreement establishes that your C1 product had to meet certain “certain performance criteria” in order to obtain the $10 Million upfront cash payment from Codexis. What are these criteria?

Because of our confidentiality agreement with Codexis and in order to protect Dyadic’s proprietary information and technology, I can only speak in general terms about “certain performance criteria”.

The first thing to recognise is that Codexis is one of the world’s leading biotechnology companies and therefore had certain minimum requirements that they were in need of when setting the performance criteria. The performance criteria was based on an agreed set of reproducible productivity (yield) targets, specified levels of efficiencies, performance and reproducibility of the various molecular tools that in conjunction with various C1 cell lines that make up the licensed C1 Technology Platform, along with proper training and the delivery and viability of specified agreed to biological materials which are needed for Codexis to carry on and meet its ongoing research and development and commercial objectives.

On 15 April 2009, the C1 Technology, in Codexis’s laboratories, met the specified performance criteria and Dyadic received the final portion of the $10 million payment from Codexis. We look forward to Codexis commercialising various products with our patented C1 Technology Platform which we would then enable us to receive some back-end payments upon such commercialisation.

Some say that bioethanol produces more greenhouse gases during its entire life cycle than it avoids, although this is strongly disputed by the bioethanol industry. What are your views on this?

Biofuels are “ecological” fuels that replace the use of oil in transportation to a greater or lesser extent. One of the main purposes behind the use of these biofuels is to reduce the greenhouse effect gas emissions that overheat the earth's surface and accelerate climate change.

There is also a second goal, which is to reduce our dependence on imports of crude oil from hostile nations and to improve the balance of trade by growing and producing fuel where it is consumed. So, I would also argue that a third and major factor of producing biofuels is the economic impact of being able to produce them on your own soil (in your own county, state or country), which will help to provide local jobs, stimulate domestic economic growth, and help reduce the balance of trade, while simultaneously reducing greenhouse gas emissions and strengthening national defences.

With two major clients already, what are your growth forecasts for the coming years?

We are actively seeking additional non-exclusive licensees to further penetrate the global efforts of developing fermentable sugars for the production of fuels, plastics, polymers and other chemicals. Additionally we believe our C1 Technology Platform and our other technologies, and our commercial and R&D knowledge and expertise can be leveraged into various other licensees, collaborations, partnerships or joint ventures in industries such as pharmaceuticals, nutraceuticals, cosmetics, and industrial enzymes (such as animal feed enzymes).

Has your company benefited from the American Recovery and Reinvestment Act of 2009, which includes $16.8 billion designated for the Office of Energy Efficiency and Renewable Energy to help grow renewables and save energy?

Currently not, however we hope that the USDA, the Department of Energy, Office Of Science and other governmental agencies will provide us with a forum to obtain funding so we can accelerate the development of our C1 technology so it can become embedded in biofuel plants across America and the world, similar to an Intel chip is embedded in a computer. In fact, Dyadic has registered the trademark “INSIDE ®” as it applied to its use in the biotechnology industry.

Our Dutch subsidiary, Dyadic Nederland BV in Holland, has and continues to participate in and receive financial support from various European Union and other European agencies. We are grateful for that support and will be looking to expanding that support as these agencies recognise C1’s technology prowess and promise to help stimulate economic growth in the EU and elsewhere across diverse industries in an environmentally beneficial manner.

Do you think the Act has been effectively designed and implemented to help private business move forward in developing clean energy technologies?

Yes and no. It seems that there is an extensive amount of money being put out into building infrastructure and only a fraction of the money being targeted to improving the technologies, such as Dyadic’s C1 Technology Platform, which will in many ways will help determine the economic viability of the infrastructure being put in place.

The bottom line is that cracking the code of converting various biomass and energy crops into fermentable sugars at high yields and low cost will be critical to the development and economic survival of the bio-based economy. If you have limited quantities of expensive sugars feeding these fermentation facilities, you are doomed to fail and these plants will sit idle or worse yet rust away. It is therefore critical for governments to realise that they need to step up and fund the technologies that, if successfully developed, will determine the viability of this transformation to sugars from oil and the scale at which it can be realised.

If we really want to achieve these goals, rather than just talk about them and strengthen our national defence, combat global warming and build a economic engine to provide jobs where the fuel, plastics, polymers and chemicals are consumed, then we need low cost, abundant sugar. When you have that, the rest will follow.

We believe that efficient low cost enzymes are one of, if not the major catalysts to achieving low cost abundant sugars.

This year, the European Commission enacted the EU Renewable Energy Directive (Directive 2009/28/EC) obliging member states to ensure that 10% of their transport fuel comes from renewable sources, including biofuels, by 2020. Do you expect to see your business grow significantly in Europe as a result of this obligation? What are you doing to target possible European clients?

As mentioned before, we have a 100 % subsidiary, Dyadic Nederland, BV, located in Wageningen, Holland where we already carry out cutting edge biofuel research. With various EU companies and government support, we are working on cracking the code of affordably breaking down plants (biomass and energy crops) into sugar at high yields.

Abengoa is also a Spanish company, and they have a desire to utilise Dyadic C1 technology in the EU as well as across the globe. In fact, Abengoa is nearing completion of its cellulosic ethanol plant in Salamanca (Spain). Codexis, is a partner with Shell Oil, another EU company, so in many ways Dyadic is closely tied to the European Union already.

Are you looking to penetrate the burgeoning Asian markets too?

Dyadic has many customers in Asia that currently buy our enzyme products for use in animal feed, food, brewery, pulp & paper, textiles, etc. We have had various inquires from Asia about our C1 Technology Platform for developing and producing biofuel enzymes for producing cellulosic ethanol.

In particular, we have had discussions with companies in China and India and are studying ways in which we may be able to address those markets without jeopardising our IP, and other opportunities that could be impacted by such licensees, collaborations, strategic partnerships, etc.

In an interview you did at the Sixth Annual World Congress on Industrial Biotechnology & Bioprocessing back in August you said it is not if we are going to move from an oil-based economy to a sugar-based one, but when. What timeframe do you calculate we are realistically looking at before we shake off our dependence on fossil fuels?

If there is a will there is a clear path forward, it is really a matter of action vs. inaction. If the resources are put in the right hands of the right people, companies and other institutions that have the necessary technologies for driving the economics to levels where we can compete with oil head to head we will get there sooner than later. I am seeing a lot of rhetoric about this effort, yet its seems that it takes too long to make decisions.

Decisions are being made based on politics where the majority of funding is being given out to the good old boy network as opposed to companies like Dyadic which, with a fraction of the resources others have had at their disposal, have developed a proven technology in hand which appears to provide a viable path forward. With the proper government support, these companies can reach the desired economic goals sooner than later with greater probabilities. It seems like the world is now on board with weaning itself from being completely dependent on oil, and its harmful effects to the environment and its depleting supply, yet there are still too many political barriers and lobbyists in place to keep the money from getting into the right hands.

If we are to get to where we all want to go to make the world a safer and cleaner place for future generations then we need to provide the funding to the right technologies and people who have shown a propensity to achieve what they have set out to do.

What has to be done by private business and governments to trigger this global shift away from oil?

I think the governments need to quit talking about making the transformation from oil to renewable sugars and make it happen (i.e. a Manhattan project), just like the Nike commercials say “Just Do It”!

Governments around the globe need to follow through on their rhetoric, just as Brazil has done already. If they are truly committed and have the desire to follow through then their mandates should be just that, a mandate. Currently the ethanol industry is in turmoil and provides the government with an opportunity to truly require that higher and higher concentrations of ethanol be blended into our fuel supply. They allow the refiners to pay instead of play and that has to stop. What I mean by this is that a refiner can either pay a fee to avoid blending ethanol into their gasoline or blend in ethanol. They should not have a choice, if there is a supply of ethanol available they should incorporate it into their blends. Allowing them an out has put the ethanol industry and our country’s national defence at risk and has and continues to hinder our goal of energy independence.

Also, it seems to me that there is not enough money being spent on what I consider to be the most important aspect of the development of cellulosic ethanol, the chip that runs the process (similar to an Intel chip “Inside” a computer). What is critical to driving down the economics of a cellulosic ethanol in the end will be how inexpensively one can produce fermentable sugars from non-food plant materials (i.e. biomass and energy crops). That is where biotechnology plays a very critical role, as the enzymatic conversion of those biomass sources into different types of fermentable sugars (i.e. glucose, xylose and arabinose), along with the next stage of the process which is where the yeast or bacteria consume these sugars to produce ethanol, butanol, plastics, polymers and other chemicals all replacing hostile oil.

There is plenty of government funding going to building cellulosic ethanol pilot and small scale commercial plants, but not nearly enough government funding nor support for the real critical component of this opportunity. It is the enzymes that play a special and unique role in the fact that they need to be designed and produced in a way that allows for the efficient conversion of these fermentable sugars at economically viable costs. So the pre-treated biomass has to prepared in a way that is most compatible with the enzymes that will digest them into fermentable sugars and in a way that these sugars can be consumed by the microorganisms most efficiently to produce higher yields of liquid fuels (such as ethanol and butanol), plastics, polymers and other chemicals that may be derived from sugar.

It should therefore be crystal clear to our government officials that they need to provide significantly more funding targeting the engineering of fungal cells, such as Dyadic’s C1 fungus, so that they can be programmed to do what needs to be done in a more efficient way that drives down the cost of producing the right sugars from the right biomass and energy crop feedstocks that result in the right types of sugars that can be most efficiently consumed by the different microbes that will be used to produce the bio products of today and tomorrow.

We need efficient technologies to reach our goals and objectives, just as the computer industry has gone from a 384, to a 484, to a Pentium, to today’s highly efficient computer chips, we need to find the Intels of the biomass to fermentable sugars industry and take those platforms to the desired levels needed sooner than later.

I would argue that Dyadic’s C1 microorganism potentially has the inherent properties to take us where we seek to go. Abengoa Bioenergy, Codexis, Dyadic and future licensees can achieve great scientific breakthroughs using our C1 technology Platform. However with the proper government support and assistance we can all do a whole lot more a lot quicker, including helping to wean the world from its addiction to oil.

Just as the race to the moon and the R&D funding that went into NASA led to a lot of other technology development and products I would argue that the same or even greater benefits may be realised for both humankind and our planet from such biotechnology research and development efforts. In addition to developing economically viable biofuels, Dyadic’s C1 technology may potentially be used as a platform to improve the efficiencies and costs of developing and manufacturing new and better medicines such as bio therapeutic proteins and vaccines to supply the world’s aging population. Such a technology breakthrough could dramatically help the nations of the world reduce their costs of prescription drugs making a real dent into the burgeoning health care costs.

As shown by our recent announcement regarding a C1 enzyme receiving a non-objection notice from the US FDA, further improvements to the C1 technology Platform also can safely be leveraged into producing more nutritious lower cost foods to supply a growing worldwide population. Additional environmental and economic benefits may arise such as reducing the environmental footprint we are leaving behind, reducing the use of harsh chemicals being dumped into our waterways, cutting energy consumption, and allowing for more recycled paper to be mixed into the manufacturing of pulp and paper helping to save the rain forest and further reduce the carbon dioxide emissions into the atmosphere.

Florida, the state where Dyadic is based, is one of the smallest oil producers among US states. Have you had a chance to discuss your views on an economy fuelled by sugar with any of your neighbours along the coast in Louisiana and Texas?

Florida is considered by some to potentially be the Saudi Arabia of biomass, it has one of the greatest potential opportunities to take advantage of the emerging bio-based economy. Florida can grow plants quicker; more often and at higher yields do to favourable climate conditions.

You may find it interesting that former Governor Jeb Bush was laser-focused on this opportunity, as is agriculture commissioner, Charles Bronson. The general public doesn’t realize that it was actually President George W. Bush who elevated public awareness of the opportunity of transforming the world from petroleum to renewable sugars. The now famous January 2006 State of the Union Address that President George W Bush gave on “America Is Addicted To Oil” was one of, if not the most important, catalysts to accelerating the alternative energy push worldwide.

Another interesting fact is that then Florida Governor Jeb Bush was simultaneously pursuing this same transition and was working hand in hand with Dyadic and others to emulate the success the Brazilians have achieved with their transformation from petroleum to sugars for producing ethanol from sugar cane.

President Obama’s, Agriculture Commissioner, Tom Vilsak, and Energy Commissioner, Stephen Chu, are in my opinion the Dream Team for biofuels, others have actually called them “the Green Team”. These two Secretaries understand both the science and the opportunity, and like President Obama they have the vision to make the transformation from petroleum to renewable sugars a reality.

The main problem in my eyes is that the system in place underneath these talented and visionary individuals is still the same good ol’ boy political system that rewards mediocrity and continues to create pools of money and awards grants and funding based on lobbying power and not necessarily on what is actually needed to achieve the country’s stated goals. It seems that the lion’s share of money goes to the best known universities and companies who have the lobbyists and political clout. Amazingly, these are the very institutes (oil tankers) that often get bogged down and even if they eventually become successful, it generally costs more and takes more time than what may be achieved by smaller, more nimble companies (speed boats) such as Dyadic. After all it takes an oil tanker a lot longer and a lot more territory to turn around than a speed boat. Small technology companies with a proven track record of achieving more with less in a shorter time frame should not be overlooked, but that is too often the case, because its safer to give the money to a bigger more well known enterprise because if they are delayed or fail then there is less risk of them having to answer questions about why they gave the money to a small entrepreneurial company even if they may have more efficient and better technology to do the job at hand.

What about with some of the oil barons over in the United Arab Emirates, who appear to have better assumed the need to move away from oil; helping to develop Masdar, the Abu Dhabi Future Energy Company?

I was reading an article, with fright, recently by James Rickman (“The Economic Impact of the G20 Nations Ending Oil Subsidies”), where he stated: “Consider at $100 price per barrel levels, the results meaning OPEC could potentially buy Bank of America in two months worth of production, Apple Computers in two weeks and GM in just six days. At that price production level, in less than three years, OPEC could take a 20% ownership of every S&P 500 company listed (which essentially ensures a voting block in major corporations that employ Americans).”

Why wouldn’t the oil barons place a bet on various approaches to alternative energy, they would be wise to invest in such potentially transformational technologies such as Dyadic’s C1 technology Platform. If sugar will displace petroleum, just as enzymes displaced pumice stones in the stonewash industry, wouldn’t it be wise to be at the cutting edge of such technology?

It would be wise for the US, EU and other governments to make sure that they invest heavily in cutting edge technologies that hold such promise. As indicated in the Rickman article, if they could buy Apple Computers in just two weeks, companies like Dyadic may potentially be even greater targets for similar investments by the oil barons and other Arab investors because they will surely want to be involved in such a promising industry.

The beautiful thing about the production of fermentable sugars from biomass is that no matter who owns the technology, it will always be produced locally, and unlike oil it will provide local jobs and economic growth where it is actually consumed. Renewable sugars can be produced enzymatically from any plant material, and that provides for the global exploitation of this technology, which will help to better distribute the wealth created from such commercial endeavours and this is one of the best reasons for accelerating its adoption and for continuing to fund its development.

Editor's note: If you are interested in obtaining a better insight into how the world’s economies may shift from a petroleum-based economy to a bio-based economy then you may want to watch a recent video of Mark Emalfarb at the Sixth Annual World Congress on Industrial Biotechnology & Bioprocessing.

For additional information:

Dyadic International

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