Iogen Corporation

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Iogen Corporation

300 Hunt Club Road East
Ottawa, Ontario K1V 1C1
Canada
Telephone: (613) 733-9830
Fax: (613) 733-0781
Web site: http://www.iogen.ca

Private Company
Incorporated: 1974 as Iotech Corporation
Employees: 180
Sales: $43.7 million (2004 est.)
NAIC: 324199 All Other Petroleum and Coal Manufacturing; 325199 All Other Basic Organic Chemical Manufacturing

Iogen Corporation is a world leader in the development of cellulose ethanol, a renewable transportation fuel made from agricultural waste such as straw and corn stalks. The Canadian biotechnology company owns the world's only cellulose-to-ethanol demonstration plant and is responsible for the world's first shipment of bioethanol for commercial use. Iogen's advanced fiber-digesting enzymes are also used throughout Canada, the United States, South America, Europe, India, Australia, and the Pacific Rim to reduce the use of bleaching chemicals in the pulp and paper industries, to soften denim fabric in blue jeans in the textile industry, and to aid in the processing of animal feed.

EARLY YEARS

From its beginnings in 1974 as Iotech Corporation, founder Patrick Foody's vision of converting low-grade wasted biomass into something useful has been the driving force of the biotechnology company based in the Canadian capital of Ottawa. Prompted by the widespread belief that a worldwide food shortage was looming, the engineer and financier initially devoted his spare time to finding ways to break down natural fiber sources such as surplus wood chips into additives for animal feed, thus increasing the amount of grains available for human consumption. Using money from Techtrol Limited, his successful Montreal engineering firm, Foody and three employees worked out of an industrial warehouse and within a few years developed a process that pressure-cooked the chips with steam until they exploded and turned to mush.

In 1978, with the world fearing a potential oil shortage and scientists scrambling for alternative fuel sources, Foody turned his attention, his money, and Iotech's innovative steam-explosion technology toward the revolutionary idea that forestry and farm waste could be turned into alcohol fuel for cars. At the time, the technology to make ethyl alcohol, known as ethanol, relied on grains such as corn and wheat that could easily be broken down into sugars and fermented by yeast into alcohol. What Foody had in mind was to make ethanol from renewable feedstocks drawn from agriculture residues, the inedible parts of plants that would otherwise be discarded or left in the fields.

For the next several years, Foody directed Iotech's research and development efforts toward discovering a method that would speed up the process of converting cellulose—the fibrous, woody components of corn and wheat plants found in stalks, cobs, and straw—into glucose, or sugar, which could then be distilled into ethanol or used to manufacture industrial products. His collaboration with American university-based and government researchers working on ethanol projects brought Foody into contact with an enzyme-secreting fungus that proved essential to many of the company's future advancements. Foody brought the microbe, called trichoderma, to Ottawa and in 1982 directed his eldest son, Brian, to head a 12-member research team to study the fungus. The Iotech team continued to work with leading American scientists and learned to cultivate the fungus in large fermenters and began to customize its properties.

The year 1983 was a big one for Iotech. The Patrick Foody-led enterprise opened a CAD 7.8 million pilot plant on the edge of the Ottawa airport, partially funded with CAD 2.7 million from the Canadian government. The new facility demonstrated on a small scale how to make ethanol from biomass waste. The patented Iotech steam explosion method initially broke down the fibers, which were then converted to sugar using Iotech-developed enzymes, fermented with yeast and distilled into ethanol. In addition to creating a fuel that could be added to gasoline to power cars, the whole process created a glue byproduct called lignin, an environmentally friendly substitute for coal in electrical generation.

1986: IOGEN EMERGING AS INDUSTRIAL ENZYMES LEADER

In 1986, government and corporate support for ethanol research evaporated as the world's crude oil prices fell dramatically and oil suddenly appeared plentiful and cheap. Iotech had to cut its staff in half and rethink its strategy to stay in business. The name Iotech had been a play on the words "I-owe-Tech," and referred to the source of the company's start-up and operating funds, Patrick Foody's Montreal firm, Techtrol Limited. Techtrol continued to fund the enterprise but during this transition time the company decided to change its name to Iogen Corporation. The newly named company sought government contracts for industrial applications of its enzyme technology and searched for commercially viable products, briefly experimenting with glues for plywood and non-caloric sweeteners.

As the 1980s came to a close and the threat of global warming began to emerge as a public concern, Iogen announced its intention to build a CAD 30-million demonstration plant that would prove that its so-called bioethanol (ethanol made from biomass, not grains) technology was ready for widespread application. Simultaneously, Iogen continued its research and development of other industrial applications for its enzyme technology. In 1991, the company entered into an agreement with Royal DSM N.V. (formerly Roche Vitamins) for the exclusive manufacture and distribution of animal feed enzymes sold under the brand name Roxazyme G2. In 1994, the company posted its first sales revenues from its first commercial product, an enzyme that helped clarify apple juice.

By the end of 1994, Iogen had again entered into a partnership with the Canadian government. The company's collaboration with the National Research Council of Canada (NRCAN) resulted in the advancement and commercialization of unique enzymes that decreased the need for chlorine in the pulp bleaching process and lowered the amount of environmentally harmful organiochlorine effluent and dioxins from the mills. With the successful introduction of an enzyme designed to soften the denim fabric of blue jeans, Iogen made a name for itself as Canada's only manufacturer of industrial enzymes and quickly established itself as a world leader and supplier of enzymes for commercial purposes. NRCAN and Iogen continued their collaboration and in April 1997 released the world's first pulp bleaching enzymes that used sophisticated protein engineering technology, further reducing the reliance of pulp mills on chlorine as a bleaching agent.

COMPANY PERSPECTIVES

"Iogen is a results-driven company with a vision: to produce a clean, renewable fuel that can be used in cars today, and to lead the way in the reduction of greenhouse gas emissions worldwide. Our employees are key to our success. Working at Iogen means being part of a dynamic environment, and working with talented, committed people. Iogen provides opportunities to learn, develop, contribute and positively impact the environment and the world. Together, we're building a strong, leading edge technology that will benefit everyone."—Brian Foody, company president

1997: IOGEN'S BIOETHANOL R&D GETTING A BOOST

In November 1997, Iogen and Petro-Canada began a partnership that signaled the beginning of renewed corporate interest in the company's bioethanol technology. The announcement came on the heels of a U.S. Department of Energy report that found ethanol made from corn had an emission level only slightly lower than conventional gasoline but motor fuel produced from converted agricultural and wood wastes reduced carbon dioxide emissions by more than 90 percent. The deal included a CAD 15.8 million commitment from Petro-Canada toward building Iogen's planned industrial-scale ethanol demonstration plant, as well as jointly funded research and development, and a licensing option for Petro-Canada to build full-scale commercial ethanol refineries.

In January 1999, Iogen secured a CAD 10 million loan from Canada's federal government toward its biomass-to-ethanol demonstration plant, which was under construction on company grounds in Ottawa. The funds came in equal parts from Technology Partnerships Canada and Natural Resources Canada's Climate Change Fund. The loan was part of a greater effort by the Canadian government to fulfill 1997 Kyoto Protocol commitments to reduce the country's greenhouse gas emissions from such sources as gasoline-powered cars.

Iogen's troubled efforts to achieve targeted production goals received needed help in April 2002 when the government of Canada awarded a CAD 2.7 million three-year grant to the company. Then, in May 2002, Iogen received a dramatic boost when the Royal Dutch/Shell Group, at the time owner of 72 percent of Shell Canada Ltd., invested CAD 46 million for a minority stake in the company. Some hailed the deal as the first major investment into bioethanol from the oil industry. It provided Iogen with a guaranteed customer, a distribution network, and capital toward the goal of developing the world's first commercial-scale, biomass-to-ethanol plant.

2003: WORLD'S FIRST BIOETHANOL FOR COMMERCIAL USE

In January 2003, Iogen's demonstration plant was successfully processing 25 tons of wheat straw per week into fermentable sugar and on track to produce 320,000 liters of ethanol annually. It was the first time enzyme technology was used on such a scale to produce fermentable sugar for ethanol from straw. By April 2003, Iogen's pre-commercial plant had doubled its weekly capacity and was on target to produce 700,000 liters of bioethanol annually. The company's achievement of major technical and economic milestones at its demonstration facility triggered Petro-Canada in December 2003 to renew its opportunity to participate in the launching of Iogen's first Canadian commercial-scale cellulose-to-ethanol plant, a right they secured with their 1997 investment.

After more than 25 years and CAD 110 million of research and development, with help from two major oil companies and the government of Canada, Iogen in April 2004 announced that the world's only cellulose ethanol demonstration scale facility was producing the world's first cellulose ethanol fuel for commercial use at an annual rate of one million liters. With CAD 24.7 million invested, Petro-Canada announced that it would be Iogen's first customer by receiving an initial shipment of 5,000 liters of cellulose ethanol at its Montreal refinery, where it was blended with high-octane gasoline. At the same time, Iogen announced that it was continuing to evaluate locations in four possible countries for its first commercial bioethanol plant: Canada (three prairie provinces); the United States (Idaho, Nebraska); the United Kingdom; and Germany. The facility, which would also include an enzyme and power plant, was projected to cost approximately $250 million and would produce about 50 million gallons annually.

KEY DATES

1974:: Patrick Foody founds Iotech Corporation to find practical uses for wasted biomass.
1983:: Iotech opens pilot bioethanol plant with financial help from Canada's federal government.
1986:: Company lays off half its staff and changes its name to Iogen Corporation.
1994:: Iogen's breakthrough enzymes find widespread use in pulp and textile industries.
1997:: Petro-Canada invests CAD 26 million in Iogen's cellulose-to-ethanol demonstration plant.
1999:: Iogen secures CAD 10 million loan for demonstration plant from Canadian government.
2002:: Royal Dutch/Shell Group buys minority stake in company for CAD 46 million.
2003:: Bioethanol demonstration plant hits economic and production targets.
2004:: Iogen delivers world's first shipment of cellulose ethanol for commercial use.
2006:: Goldman-Sachs invests CAD 30 million to accelerate Iogen's commercialization efforts.

In June 2004, Iogen became the first company to acquire a nonexclusive license to use a strain of yeast developed at Purdue University that increased by about 40 percent the amount of ethanol that could be made from sugars derived from agricultural residues. Using the Purdue-developed yeast, Iogen's process converted about two-thirds of the straw to ethanol, with a yield of almost 300 liters of ethanol per ton of straw. The year also brought further support to Iogen's bioethanol enterprise from the Canadian government as Ontario announced a renewable fuels standard (RFS) that required gasoline in the province to contain 5 percent ethanol by 2007 and 10 percent by 2010. In December 2004, Canada's federal government announced that its vehicle fleet would become the world's first to use cellulose ethanol on an ongoing basis, and that Iogen would supply the fuel for its 900 flex-fuel vehicles that ran on E-85, a blend of 15 percent ethanol and 85 percent gasoline.

2005: ON THE BRINK OF FULL-SCALE COMMERCIALIZATION

In 2005, Iogen scored public relations victories when its bioethanol fuel helped power various vehicles used to shuttle leaders of the world's major industrialized nations when the Group of Eight (G8) met in Scotland in June, and again in November, when the United Nation's 11th Conference of Parties Framework Convention on Climate Change was held in Montreal. Perhaps the most important development for Iogen in 2005 was the summer passage by the U.S. Congress of the U.S. Energy Policy Act, which established grants and loan guarantees for the commercialization of cellulose ethanol technology. The bill also required that gasoline refiners collectively blend four billion gallons of ethanol into their products in 2006 and 7.5 billion gallons by 2012.

The company remained in the news in January 2006, when Volkswagen, Europe's largest car producer, and Royal Dutch/Shell announced at the North American International Auto Show in Detroit that they were exploring a partnership with Iogen to locate the world's first cellulose ethanol plant in Germany. The development from Volkswagen was spurred in part by tough European Union objectives for reducing greenhouse emissions from transportation to comply with the Kyoto Protocol. With the price of crude oil at $70-plus a barrel and oil company profits at record highs, U.S. President George W. Bush in his 2006 State of the Union address said, "America is addicted to oil," and indicated that his 2007 budget would include $150 million for biomass-to-ethanol research and development. The president also specifically claimed that cellulosic ethanol could be cost competitive by 2012 with the potential to replace up to 30 percent of the country's fuel use.

In May 2006, Iogen became the first bioethanol technology company to attract a significant investment from a major Wall Street firm when Goldman Sachs & Co. of New York bought a minority stake for CAD 30 million. In June 2006, Iogen announced that it had negotiated tentative contracts with 320 farmers in Idaho to provide 400,000 tons of barley straw a year if the company decided to build its first bioethanol plant in the state. Construction of the plant could begin in the fall of 2007, but company officials said they needed loan guarantees from the U.S. Department of Energy that would cover investment losses if the project failed. An announcement on the loan guarantees was expected in early October.

After more than 30 years of research and development, Iogen's advanced ethanol-making technology seemed on the verge of commercial success. With environmental, economic, and political forces aligning and deep-pocketed partners such as Petro-Canada, Shell, and Goldman Sachs behind it, Iogen was primed to excel in a world where demand for cellulose ethanol was skyrocketing into a multibillion-gallon, multibillion-dollar industry.

PRINCIPAL COMPETITORS

Abengoa, S.A.; Novozymes A/S; Genencor International, Inc.; Cargill, Incorporated; Codexis, Inc; Ag Processing Inc; Badger State Ethanol, LLC; Archer Daniels Midland Company.