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Firm Seeks Sweet Smell of Success in Flavor, Fragrance Industry

ALLYLIX INC.

President and CEO: Carolyn Fritz.

Financial information: Company has raised $15 million since 2005.

No. of local employees: 20.

Investors: Tate & Lyle Ventures, Cultivian Ventures, Avrio Ventures, Middleland Capital, Bluegrass Angels and Tech Coast Angels.

Headquarters: Sorrento Mesa.

Year founded: 2004.

What makes the company innovative: It produces a biosynthetic version of terpene chemicals naturally found in plants, with an initial focus on nootkatone from grapefruit and valencene from oranges.

Key factors for success: Through synthetic production, Allylix reduces the price of normally rare plant chemicals for wider use as ingredients in flavors, fragrances, insect repellents and cosmetics, among other markets.

Allylix Inc. has carved out a promising niche in the $20 billion flavor and fragrance industry by focusing on a class of organic chemicals called terpenes.

Normally found only in plants, terpenes are extraordinarily useful to humans, not only because they smell and taste nice, but also because they repel bugs, kill bacteria and reduce inflammation, among other things.

“They can be used in citronella candles, sweeteners, cosmetics — it’s such a wide range of applications,” said Allylix President and CEO Carolyn Fritz. “But the challenge, historically, is that they come in such small quantities and they’re very hard to make, chemically. That makes them expensive.”

Of the 50,000 to 75,000 terpenes in the world, the San Diego biotech said it has found a way to synthetically reproduce two that are in especially high commercial demand: nootkatone from grapefruit and valencene from oranges.

Using yeast as a production platform, the company makes both of these valuable terpenes in quantities that have never before been possible, lowering their cost and opening the door for wider use in fragrances, foods, beverages and other consumer products.

“This is a new frontier,” said Craig Warren, visiting scholar at UC San Diego’s Chemosensory Perception Lab and former director of fragrance science at New York-based International Flavors & Fragrances Inc.

The nootkatone molecule is “always on the wish list” at companies such as IFF because consumers love the fresh, clean smell. But at a cost of $2,000 to $6,000 per pound, it was simply too expensive to use in most products. The biosynthetic version changes that, Warren said.

People Like It, Ticks Don’t

The basis for Allylix’s technology began in the 1990s, when company founders Joseph Noel, a structural biology professor at The Salk Institute for Biological Studies in Torrey Pines, and Joseph Chappell, a plant scientist at the University of Kentucky, began collaborating on terpene research.

Since 2004, the company has accumulated 37 patents protecting its methods for creating the biosynthetic chemicals. “Allylix has a very nice proprietary position,” Warren said.

In October, Allylix announced it had reached a major milestone when it launched large-scale production of valencene in 200,000-liter fermentation tanks. Traditionally, valencene can only be produced by extracting it from the peel of valencene oranges, with the cost and supply fluctuating depending on the yearly harvest.

“Our ability to scale production solves this problem,” said Fritz, who previously led Dow Chemical’s Biomaterials and Biopharmaceutical businesses.

An almost identical announcement followed in early December for nootkatone, which is used as an ingredient in beverages, confections, frozen dairy and baked goods, as well as a fragrance in perfumes and colognes.

Meanwhile, nootkatone has caught the attention of the U.S. Centers for Disease Control and Prevention. Marc Dolan of the CDC’s Division of Vector Borne Diseases in Fort Collins, Colo., has been working with Allylix to test the chemical as a natural tick repellent.

“It’s nongreasy, dries very quickly,” he said in an April interview that aired on National Public Radio.

Already on the Shelves

Even before the company upped its production quantities this fall, it had been selling its biosynthetic terpenes to customers in the flavor and fragrance markets. Fritz said that she cannot mention product names due to client confidentiality agreements, but noted that the company’s terpenes are used in products currently found on supermarket shelves.

She estimates that the segment of the $20 billion flavor and fragrance industry that Allylix can go after is about $2 billion internationally, with the company’s “total addressable figure” at $11 billion — a figure that covers other categories such as household cleaners and pesticides.

Fritz would not provide revenue figures for the company. Allylix has raised $15 million in venture funding the past six years, with backers from some major food ingredient companies.

“Our focus is to get to profitability,” she said. “We’re building the company so that we can take it to an IPO or an acquisition, whatever makes the most sense.”

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