Is This the Life Sciences Century? A Washington, DC, Conversation

January 27, 2010

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by Joanne Ivancic (Advanced Biofuels USA) “Maybe the “Valley of Death” is working as it should for the biofuels industry. First generation biofuels seem to be finding their place in the market. Maybe there are good reasons that other technologies are not.”

This was one sentiment expressed during a dinner sponsored by the Life Technologies Foundation and hosted by the Information Technology and Innovation Foundation in Washington, DC, for a group of about 20 scientific and business leaders, policy experts, government officials and leading media representatives to discuss “Is This the Life Sciences Century?”

As executive director of Advanced Biofuels USA, I represented the biofuels perspective at this gathering and brought up the “Valley of Death” problem.

Biofuels research and financing exists in a different universe from that familiar to the investors in pharmaceuticals or information technology at the dinner. Participants from those sectors mentioned that the complexities of our healthcare financing and delivery system discouraged new investments; that the old drug approval procedures used by the Food and Drug Administration were not appropriate for personalized treatments/technologies of the future based on individuals’ genetic information. For these and other reasons, they described a slow-down in investment interest in this sector even as they discussed the extraordinary benefits of longer, healthier lives that could be achieved by gene-based technological developments.

So, with shrinking interest in medical biotech, the participants looked at biofuels, biochemicals, bioenergy and agriculture as promising investment frontiers.

Comparing some new biotech ventures, one participant described a scenario we would like to avoid: one developer starts a new community and it fails, goes bankrupt; a second developer buys the project and also fails; the third buys the assets and makes a ton of money.

Unless we become more thoughtful about advanced biofuels investment, that is exactly the future investors face. What can we do to avoid and prevent those initial private investment failures while developing an industry of technologies that, like landing on the moon or splitting the atom, have never been done before?

There was a general agreement, even in a group not expert in biofuels development, that existing funding systems for advanced biofuels are not working. What else could we try?

Building on recognition in the group of the value of the National Institutes of Health in funding and conducting essential basic research that has lead to numerous financially successful medical, pharmaceutical and healthcare breakthroughs , the notion was raised of something like a National Institutes of Advanced Biofuels. Like NIH, this could be a vehicle for funding and conducting a wide variety of research directed to overcoming roadblocks such as biomass recalcitrance; improving efficiency of converting cellulose, hemicelluloses, pectins and lignins into carbohydrates; developing inexpensive sugars for “green crude;” and finding the most effective, safe uses for food, feed and fiber co-products.

Why does NIH exist? Because basic research that may require many years of financial input before results are achieved has no value to venture capitalists. There is no return on investment until the research can be transformed into a saleable product. Investors are not interested in tying up their funds when they can be using them more productively, according to a purely financial measure. They make no money on the social benefits of basic research.

In the advanced biofuels universe, we ask venture capitalists, private investors, to take enormous risks in funding basic research that may take years to prove on a bench scale; then more years and “bricks and mortar” to prove at a pilot, then commercial scale. We are asking the private sector to do what this country has previously taken on as important government service.

For example, NIH conducts and funds research up to and sometimes through pilot levels of investigation before expecting private enterprises to take over and find a place in the market for products based on government-developed technology. Government funded technology development in the Apollo Program to land humans on the moon and the Manhattan Project to understand how the atom works constructively and destructively. All have spun off enormously successful private investment opportunities. And those investors didn’t have to pay for the initial, tedious, lengthy scientific and engineering investigations and development.

The concept of establishing a sustainable funding source for advanced biofuels research and development as part of maintaining the nation’s transportation infrastructure was raised. With a steady, reliable, dedicated fund not subject to the trade-offs of annual Appropriations procedures or to “flavor-of-the-month” grant approvals, the investment community can have more faith that they will reap benefits from match funds or from eventual commercialization of basic government research.

Where will the money come from? Consider that energy security is a national security concern; that the US highway system was created as a national security project; and that the concrete of those roads without fueled vehicles to use them is as useless as a backyard pool without water. Advanced biofuel development is a national security issue as well as a transportation infrastructure concern. Recall the disruption to our economy due to lack of gasoline in Hurricane Katrina’s aftermath.

Certainly, the highway users’ fees, collected to build and maintain the nation’s surface transportation infrastructure, must rise this year. Set in 1993 at $.184/gallon when gas cost $1.11/gallon, the rate was 16.6%. The fee was not indexed to the price of gas, so now with gas prices around $2.75/gallon, the rate is only about 7%; if the rate was indexed, the fee would be around $.45/gallon. We are seeing the consequences of this lack of funding in fatally failing bridges, delayed construction and deferred maintenance.

Highway users, i.e., purchasers of fuel, have seen prices rise a good twenty cents per gallon in the past few weeks. In effect, that is a tax they grudgingly pay to what is often referred to as “people who don’t like us.” Wouldn’t it be better to pay a small part of an extra twenty cents and more to develop ways for that money to stay in the US, paying US individuals and businesses to grow and harvest feedstock, to gather feedstock from food processing residues; to convert that home-grown biocrude into fuels and useful co-products and to deliver it back to highway users as cleaner products supporting energy security objectives?

This will continue to be the Life Sciences Century only if we bring into this century the structures and functions for new technologies that worked well in the past, with prudent revisions to make them successful in the future.

Also, we must incorporate into our decision-making the three bottom lines of sustainable investment: social, economic and environmental values; not only monetary reward. And if private enterprise cannot achieve a satisfactory return on initial investment for high social value products, then government must step in, as it has before, to provide the path through the Valley of Death to private commercialization.