65.5 F
San Diego
Monday, Mar 18, 2024
-Advertisement-

A Formula For Success

Business opportunity can come in some unwelcome ways.

Citrus greening — a devastating worldwide disease for crops like oranges, grapefruits and limes — may prove beneficial for a San Diego developer of fragrance and flavoring agents.

Allylix Inc., a biotech founded in 2004 that produces naturally occurring organic chemicals called terpenes, is commercializing two of its essences — valencene, found in oranges, and nootkatone, found in grapefruits.

Allylix’s sales team is positioning itself to provide a consistent and less expensive alternative to what could very well be an increasingly costly and dwindling industry of producing fruit-derived flavors and fragrances, said marketing director Walter Crawley.

“Some manufacturers of citrus-derived products find they can’t economically produce things like nootkatone or valencene based on the cost to extract the essential oils and aromas,” Crawley said. “But because we’re not connected to any commodity markets, we can provide consistent quality, price and supply.”

And the citrus market is in danger, as millions of acres of the crops have been destroyed in the past few years, according to the U.S. Department of Agriculture. Citrus greening is an as yet incurable bacterial infection of citrus trees that renders their fruit bitter and unable to fully ripen. It eventually kills the tree.

Florida Takes a Hit

The disease reached the U.S. from Asia in the 1990s, and of late has proved to be a serious blight on the $9 billion Florida citrus industry in particular. It has popped up in Southern California citrus as well, though not to the extent that it has in Florida and around the world.

“One of America’s most precious natural resources — our citrus — is literally being attacked and destroyed by citrus greening disease,” said Larry Hawkins, spokesman for the USDA Save Our Citrus campaign which is educating farmers on ways to prevent the crop disease.

At the same time, the demand for these citrus essences, which are widely used in perfumery and as food flavoring agents, is on the upswing, said Craig Warren, an adviser to Allylix and the former research director of the New York-based International Flavors & Fragrances Inc. — a $6.29 billion market cap company.

“If you sell a formula that requires naturally occurring terpenes and have a crop failure, you really are up the creek — either you can’t supply the material, or you have to buy it at a very expensive level,” Warren said.

The current price for grapefruit flavoring is about $2,000 to $6,000 a pound and orange essences about $600 a pound, with prices fluctuating as the citrus market expands and contracts. Warren said that Allylix offers it for less, though keeps its pricing information proprietary.

He said that when he was at International Flavors & Fragrances, he was always hesitant to use anything where he had to source nootkatone, because he didn’t know if it’d be available.

A Crisis, an Opportunity

“Now, with the greening of the citrus fruit, this is going to have a very dire consequence, and the shortage will really goose up the cost of grapefruit and orange oil,” Warren said. “Allylix is really going to get some business out of this.”

Crawley said that sales for nootkatone and valencene have increased over the past year, though conceded that it’s difficult to pinpoint whether the citrus market fluctuation is the cause for the company’s growth.

The worldwide flavor and fragrance market is expected to increase 4.4 percent yearly and reach $26.5 billion by 2016, according to a September 2012 report from Cleveland, Ohio-based Freedonia Group, a business research company. The report cites growing global production of processed foods, particularly in developing countries where more and more citizens are earning higher incomes than before.

Allylix would not disclose its current clients, but Allylix President and CEO Carolyn Fritz said the markets the company is interested in expanding in are flavors and fragrances, food ingredients, cosmetics, pesticides and fuel additives.

Initially, Allylix said it will focus upon a class of terpenes called sesquiterpenes, which are part of the $1.9 billion aroma chemical segment of the flavor and fragrance market.

The company told Forbes in 2010 that it would target flavor and fragrance makers, as well as consumer product giants like Cincinnati-based Procter & Gamble Co.

Allylix last year received $13.5 million in an investment round from BASF SE, a giant German chemical corporation that reported about $95.4 billion in 2011 revenue. The company reached out to Allylix two years ago, and kept up an active partnership in terpene product development, Fritz said.

The privately held Allylix has raised a total of about $34 million to date. It has 64 issued patents. The company wouldn’t disclose its revenue current number of employees, but told the San Diego Business Journal that in 2011 — before the BASF investment — it employed 20 in its Sorrento Mesa campus. It also operates a production facility in Lexington, Kentucky.

“The future of flavor production lies with the fermentation method Allylix is using,” said Donald Wilkes, president of the City of Industry, Calif.-based Blue Pacific Flavors Inc. and a customer of the San Diego biotech.

Production Method

Allylix’s production method is at surface level somewhat similar to brewing beer — it involves engineering baker’s yeast strains to produce the fragrances after stewing with sugar for five days in a 6,000-gallon tank.

Terpenes can’t currently be made through synthetic chemistry — they’re just too complicated to produce, Warren said. Allylix has several other fragrances and flavors in development, including vetiver — an essence found in certain grass roots that is widely used in perfumery.

Research shows that terpenes also show a great deal of promise as ingredients of natural agricultural pesticides, or as potential antimicrobials that could be used in patient therapy. Allylix plans to explore this pathway as well, by first developing the production science then partnering with larger companies to commercialize.

“In nature, terpenes play a number of roles — flavors and fragrances, but they can be antiviral, antifungal, antibacterial, and can be insect repellants and attractants,” Fritz said. “They’re complex in structure, too expensive to chemically synthesize, and usually too low in abundance in plants. Very hard to extract or produce — until now.”

It is in the process of scaling up its production — currently, it’s in the process of trying to keep up with demand, Fritz said.

“Companies are really starting to focus on biotechnology to economically produce these complex terpenes that can then be used instead of extraction from the natural fruit,” Crawley said. “We think it is going to change the industry dramatically.”

-Advertisement-

Featured Articles

Oberon Eyes Europe for Renewable DME

Leaders of Influence in Law 2024

-Advertisement-
-Advertisement-

Related Articles

-Advertisement-
-Advertisement-
-Advertisement-