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Just listening to William Dean talk from his Palo Alto, Calif., office at 7:30 a.m., you get a sense of the excitement surrounding the coming biobased economy. "Carbon sources will be a key thing in the future," says Dean, who is vice president for process sciences for Genencor. "A lot of the materials that are produced are going to come not from petroleum but from other carbon sources like biomass."

William Dean, vice president for process sciences, Genecor
What Dean and others in the biotech world envision, he goes on to explain, is a future of manufacturing that is totally different from the way many of the world's base products are created today. The changeover might be even more profound than what happened when personal computers appeared in offices.

In a biobased economy, many of the substances vital to our lives - things such as plastics, fabrics, paints, dyes and lubricants - will no longer be produced in giant refineries. Instead, bioengineered enzymes will create them. Not only that, many of the raw materials themselves that are used in manufacturing will be different. Instead of pumping oil from the ground half a world away and shipping it back to the United States to be converted into gasoline, plastics and the like, the biobased economy will harvest materials that we currently think of as trash: grass clippings, corn stalks, garbage, maybe even the rotting leaves - all scooped up from America's own backyard.

Collectively, these substances could one day replace billions of gallons of imported oil. What's more, transforming them using bioengineered enzymes, instead of chemical refining, could all but eliminate pollution along with the often-toxic byproducts that conventional refining produces.

As a Genencor white paper on the subject explains, "In the biobased economy, we would begin to minimize 'waste' - the byproducts of one process are the raw materials for another. When biomass is the starting material, waste products from bioprocessing can be reapplied to the fields, returning nutrient-rich material to the process."

"It is a huge area," echoes Dean with undisguised enthusiasm. "And, of course, the U.S., especially in the Midwest, has tremendous resources to apply against that."

Third Wave Biotech

Genencor, it turns out, is one of only a handful of companies around the world that has been quietly building up its expertise in bioprocessing over the past 20 years. The $350-million (estimated 2003 sales) company, which is the world's 14th largest biotech firm, also fields divisions engaged in medical research and agricultural products. But many inside the company believe Genencor's expertise in industrial biotech processing might be where the largest opportunities lie.

"The types of opportunities in industrial biotech really span a lot of areas that one might label new materials and chemicals," says Tom Pekich, Genencor's group vice president for bioproducts. Collectively, some have estimated the worldwide market at $1.5 to $1.7 trillion, he says.

Many outside the company agree. The consulting firm McKinsey & Co. estimated that bioprocessing will encompass 20 percent of the chemical market by decade's end, while at the same time representing $160 billion in value creation.

A National Academy of Sciences report went even further, stating that, "biological sciences are likely to make the same impact on the formation of new industries in the 21st century as the physical and chemical sciences have had on the 20th."

Some also view the transition to industrial biotech as the third wave in biotech's short but illustrious history. In that vision, the first wave took place in health care, resulting in a still-growing list of bioengineered medicines. The second wave centered on genetically modified foods.

Cleaner Clothes

Genencor got its feet wet - literally - in biotechnology's third wave some years back when it developed enzymes for household detergents.

In 2001, the company signed an enzyme development deal with Procter and Gamble reportedly worth $600 million. A Forbes writer visiting the company at the time noted that, "Take away the goggled scientists, and you could mistake the Genencor laboratory for a Laundromat." As rows of washing machines at the facility churned, the Genencor researchers scrutinized how well their bioengineered enzymes scrubbed away spaghetti and chocolate stains.

Tom Pekich, group vice president for bioproducts, Genecor
The company has expanded into other product areas as well. In a partnership with DuPont, for example, Genencor-developed enzymes will aid in the production of DuPont's polyester fabric Sorona®. As Pekich describes it, doing so involved some "very significant technical challenges that we overcame, and now there's a biological process that's in place that's very competitive with the chemical process."

Bioprocessing's Killer App

Enzymes lie at the heart of these biological processes. Much of the roughly $70 million Genencor plans to spend on research and development this year will go toward discovering ways to fine-tune the complex protein compounds so they can be applied to yet more tasks.

In particular, the world needs enzymes that can cost-effectively break down raw biomass into sugars. That's so those sugars can in turn be transformed into other products.

Nowhere is this need more acute than with the production of ethanol. Without present tax subsidies, ethanol couldn't compete with imported oil. But if a way could be found to produce ethanol more efficiently, new generations of so-called hybrid-fuel vehicles could one day run on high concentrations of the alcohol-based fuel - effectively freeing this nation from its dependence on foreign oil.

One of the chief obstacles to that goal: enzymes. Currently it takes $80 million worth of enzymes to create 1 billion gallons of ethanol. The enzymes break down biomass - mainly corn stalks - into sugar, which in turn can be transformed into alcohol, via an industrial-scale alcohol distillery. Genencor signed a $17-million research deal with the Department of Energy's National Renewable Energy Laboratory to reduce the cost of creating enzymes used in ethanol production by tenfold, a goal company officials recently announced they'd met.

Perhaps to capitalize on this research, Genencor bought Wisconsin-based enzyme maker Enzyme Bio-Systems Ltd. As the Silicon Valley Business Journal noted, the "purchase gives Genencor a modern enzyme factory."

Before ethanol can really take its place as a viable gasoline additive, more obstacles must be overcome - namely cost effectively gathering biomass for ethanol production and refining it in an economically efficient manner. And as Pekich sees it, the next "big step would be to link the technologies together in the form of a demonstration plant to actually validate that the technologies can be integrated to produce ethanol at some reasonable cost."

Meanwhile, Genencor is looking to other yet-untested markets. Under an arrangement with Dow Corning, for instance, the company will look into ways to combine bioengineered substances with silicon. A Reuters profile of the company notes that the alliance could result in much-needed sensors to detect bioterror threats and also home medical testing equipment.

Renewable Knowledge

From a business standpoint, the great appeal of industrial bioprocessing as compared to other areas of biotech is that the product development costs, timelines and regulatory hurdles aren't nearly as formidable as they are in, say, the medical biotech arena. Indeed, unlike many fledgling medical biotech firms that burn through cash for years, Genencor, thanks to its multipronged approach, projects it will earn from 18 cents a share this year, despite 2003 estimated operating losses of $34 million or more in its health care division.

Operating income from its bioproducts division could top $62 million this year. One thing that's liable to help earnings in the future is the simple fact that discoveries made in one area of industrial bioprocessing - say producing enzymes for the manufacture of polyester or dyes - can later be readily applied to other areas like detergents.

"There's a lot of great science going on," Pekich observes, "blending the work that's taking place in renewable resources with the work that's going on to create new and undifferentiated chemicals. You come to 1+1=3, which means a lot of opportunities for companies like Genencor."

In the long term, the company has a loftier goal - firmly establishing itself as a major player in the biotech revolution's industrial third wave. It's a goal that comes with monetary rewards, to be sure. But there are intangible benefits as well, says Pekich. "If we can create a set of products that come from biomass and renewable resources, I think that Genencor and others will make a great positive statement for the world."

Mark Ingebretsen writes on technology, business and finance from his home in Iowa. His most recent book on the history of the Nasdaq stock market was published in March 2002.

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