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The A.I.M. Interview: Cellana’s CEO Martin Sabarsky
July 24, 2011, by David Schwartz

Martin Sabarsky was promoted to President and CEO of Kona, Hawaii-based Cellana in April of 2011. He now has the challenging and, if all goes well, rewarding job of escorting Cellana into commercial operation. This comes in the wake of a recently concluded three-year partnership with Shell Oil that resulted in the development of an algal production demonstration facility as the centerpiece of a nearly $100 million total investment to date.

Now in his second decade working in the industrial biotechnology industry, Martin came to Cellana with an A.B. in Biology and Political Science from Brown University, a J.D. from Harvard Law School, and an M.B.A. from the Rady School of Management at the University of California, San Diego.

Martin began his career as a transactional attorney and investment banker in the life sciences sector. He entered the industrial biotech industry in 2000, heading up corporate development for industrial enzyme producer Diversa Corporation, now known as Vereniun, shortly after he helped take the company public in February 2000. “Up until the Solazyme IPO I think we held the record for largest IPO,” says Sabarsky. “In 2000, right before the tech bubble burst, it was a $200 million IPO.”

His experience taking Diversa public gave Martin a chance to learn about the power of industrial biotechnology to transform the world and manufacturing processes. “It was very exciting,” he remembers. “I’d originally been attracted to the life sciences industry more for the pharmaceutical applications, mainly because I wanted to be able to do good and do well at the same time, and there aren’t that many opportunities in work, or in life, to be able to do that simultaneously.”

The former interim CEO of Diversa, Ed Shonsey left the company in 2007 to become the CEO of HR BioPetroleum, the precurser to Cellana. Ed recruited Martin in 2008 to become CFO and COO of HR Biopetroleum.

At Cellana’s Kona six-acre demonstration facility on Hawaii’s big Island

At Cellana’s Kona six-acre demonstration facility on Hawaii’s big Island, algae are cultivated in Cellana’s proprietary hybrid system, using a combination of open seawater ponds and photobioreactors.

We spoke with Martin recently to get the story on Cellana, past and present.

What was the original concept for the company?

The original technology, even before HR BioPetroleum was formed, was built to grow algae at industrial scale, and it was actually validated more for nutraceuticals. That’s been a traditional way for folks who grow algae—to commercialize in a higher value, smaller quantity context.

Our technologies were built in Hawaii. The company’s scientific co-founders had optimized, and then patented, a hybrid way of growing algae at large scale. They figured out a way to do batch production, but on a continuous basis so that open pond contamination no longer was an issue.

The trick was in using a small amount of PBRs—less than 20%—and a large amount of open ponds—more than 70%—and complete harvesting of the open ponds on a frequent basis—every two to five days. This way you are able to grow a strain, or multiple strains, of algae continuously, but you don’t leave them continuously in the open ponds. You completely harvest, say on day three, and reinoculate overnight, and you have a new batch on day four. As far as the pond is concerned, it’s doing continuous production during sunlight.

We call this ALDUO™, a combination of the two systems—photobioreactors and open ponds. This technology was originally used in one form or another in order to make astaxanthin and other antioxidents in a commercially viable way. But at the same time they noticed that the algae were making a lot of oil. This is before oil really took off as a commodity in the mid-to-late 2000s.

People have been trying to do open pond-only production without success for decades, mainly due to contamination problems. Contamination comes from two sources—other strains of algae that will find their way into the ponds and, worse than that, little pests like rotifers coming in and clearing the pond entirely. In the first case, over time you don’t have a monoculture anymore. You don’t have the strain that you want to produce, though you can still have biomass. In the second case you’ve got nothing and you have to start over.

Our system is set up so that as long as we don’t have contamination coming into the PBRs from the seawater that we use, we have very good control over our system, and we have a very good track record of not having issues with the harvest at the end.

Do you flush your ponds between batches?

There’s a modest amount of cleanup that needs to take place. The open ponds can be fairly easily washed out. We don’t have to keep them sterile. Conditions can only be controlled to an extent, because they’re open and exposed to the environment. What’s more serious is to make sure that the photobioreactors, which are intended to be contamination-free, are kept clean. So we replace the tubing every so often.

We’re not opposed to genetically modified algae, we just think it’s easier to get regulatory and customer and partner acceptance when you’re dealing with natural strains.

If the ponds recycle every two to five days, do the pbrs have a synchronized cycle with them?

The PBRs do continuous production. The volumes are doubling pretty often, so the idea is that you want to be moving a significant quantity from the bioreactors to the ponds every day or so. So we do continuous production in the PBRs, but it’s batched as far as the open ponds are concerned.

This technology was in-licensed when HR BioPetroleum was formed in 2004. Together with access to the extensive strain collection from the University of Hawaii that came later, it was really the combination of new strains with a proven industrial scale algae production system that created the enthusiasm around HR BioPetroleum and led to the Cellana joint venture relationship that we recently wrapped up with Shell.

What role did Shell play in the development of Cellana?

What the joint venture with Shell helped us to do was validate the technology at demonstration scale. Over the course of the three years of the joint venture, we built the world class, state-of-the-art, six-acre facility in Kona, across the street from the pilot facility. This was a build-to-suit facility, so it was even more optimal than the pilot facility that we had leased prior to the construction and operation of the demo facility.

It’s intended to be a fully integrated facility and we’ll be able to test out different downstream processing regimens, though that processing is currently done off-site. We have the space in our facility for downstream processing, but we are still testing various processing approaches and have not yet put that in place in Kona. But that’s the next step for the demo facility.

How many batches have you run so far?

We’ve done hundreds and hundreds of runs so far in our new demonstration facility. The next intended leap is to small scale commercial.

The demo facility is now in its third year of operation and we’ve grown over seven tons of algae there since January of 2010 alone. We’ve done a lot of good production optimization there, and through the joint venture there’s been a lot of research and development on strains, as well as optimized methods of cultivation using the ALDUO hybrid system.

Cellana’s core technology is a photosynthetic production system

Cellana’s core technology is a photosynthetic production system that economically grows proprietary algae strains at a commercial-scale. The patented production system, called ALDUO™ technology, is unique in that it couples closed-culture photobioreactors, with open ponds, shown here, in a two-stage process.

What type of processing are you doing to the biomass?

We’ve been testing a variety of wet and dry processing routes. Each has their pros and cons in terms of cost or types of products that are best achieved using those different processing systems.

This gets to the fact that we have a biorefinery model, although we could make money three different ways. As a first step, we know we can grow and cultivate algae at large industrial scale economically, so we can leverage the hundreds of candidate strains we’ve been testing for high value feeds or human supplements.

We are also looking at the nutraceutical content, or the nutritional oil content, of the biomass as a product area. The highest value comes in separating the components, giving you more options and more products to address.

What are the products you are pursuing first?

What we’re looking to do is to produce a portfolio of products—renewable fuels, renewable chemicals and sustainable feed.

We’re also looking at nutritional oils and we’re very mindful of what others in the space using algae—Martek, Solazyme and the like—have been able to do using heterotrophic approaches. But those same product markets can be addressed using photosynthetic algae as well. We’re looking at the use of oils as a feedstock for cosmetics and skincare types of products as well. Again, we’re not doing anything that hasn’t been done before, we’re just coming up with a better and more sustainable way to deliver those types of products using photosynthetic algae.

The demo facility is now in its third year of operation and we’ve grown over seven tons of algae there since January of 2010 alone.

How far will you take these product lines in production? Will you be partnering in each of the areas?

It’s still the early days since the transition with Shell and the joint venture, but we intend to bring on co-development partners and distribution channel partners relatively soon. We don’t intend to sell to end users, we’d like to work with large multi-national companies that are already leaders in these areas and be a key part of their supply chain.

When do you anticipate beginning to bring commercial products to market?

In terms of commercial, we have the option to do things at the demonstration facility that might be considered commercial and we’re already getting grants for some of them. Obviously we’ve gotten a lot of funding through our partnership with Shell and the joint venture, but in terms of actual commercial product launches, those will be coming from our proposed commercial facility and other commercial facilities. We’ll be signing deals over the next twelve months for co-development partnerships and offtaking agreements for the products of our proposed Maui and other commercial facilities.

How do you quantify your move from demonstration to commercial scale?

Right now our entire facility is six acres. Half of that is under production. We intend to go to about 100 hectares and, depending on the specific strains that we’re going after and the specific products that we’re looking at, we’re talking about 12-15,000 tons of biomass per year. Right now we’re not in continuous production. If we were, we’d probably be somewhere from 15-20 tons a year at our demo facility.

How do you see Cellana’s expansion of commercial production facilities?

We are establishing a pipeline of commercial facilities and relationships with customers based all over the world. You want to try and produce close to where you’re going to supply, ultimately where your customers are going to be. We prefer to be in the tropical or subtropical regions because we want to rely on natural algae if possible, as opposed to genetically modified algae.

The strategy is initially to commercialize in Hawaii for a number of reasons. One is there are both fuel and feed markets that are local and right now not very sustainable because the feedstocks for them get shipped in from out of the state, so it’s both a cost and a carbon issue. Also because the technology was developed in Hawaii, and from a technical standpoint we think it makes most sense to initially commercialize at large scale there to help de-risk the commercial scaling.

Hawaii is an excellent place—from a sunlight standpoint, from a water availability standpoint, from access to markets that are local, and where there’s demand for both fuel and feed. And, being part of the Pacific Rim, it is a nice bridge between the mainland and Asia.

You mentioned working with natural strains. Is that part of your platform?

That’s the strategy. We’re not opposed to genetically modified algae, we just think it’s easier to get regulatory and customer and partner acceptance when you’re dealing with natural strains.

Why did the relationship with Shell terminate?

As far as Cellana Inc. is concerned, we feel very good about the work done through the joint venture and accomplishing what was set out from an R&D standpoint: building the facility and generating the data around the ability to grow algae at industrial scale using this process.

In terms of wrapping up of the joint venture, as far as I’m concerned, they made a portfolio review and they were narrowing their focus. Some time after we formed the joint venture they announced publicly that they were going to be shifting away from wind and solar to focus more on biofuels, and then were going to be narrowing their focus even further within that regime. In between time they signed a very large deal with Cosan for Brazilian sugar cane-based ethanol.

As far as their portfolio review, they chose to focus on ethanol, best I can tell. Love it or hate, ethanol is a current fuel. It is part of the current energy and fuel mix. And in Brazil it’s a very significant part. My personal opinion is the other investments in biotech that they have around the use of sugar or carbohydrate, those are much more consistent with their current strategy.

In these early pre-commercial days, what do you think about as you assess other operations in similar stages of development?

When I think about other algae companies that are in our space I want to know are they at 10 (gm/m2/day) or are they closer to 30? And what’s their oil content? Does the amino acid profile look like it lines up for the proteins for feed?

Fuel and feed—energy and agriculture—are the two biggest sectors of our economy from a volume basis, so I’m optimistic about finding homes for the products that we make. What helps me look at the economic model is looking at the high value, low quantity type products that are the rising tide that lifts the boats that right now are at the somewhat lower value on the fuel or feed sides.

Commercialization in the algae industry is a capital intensive business, which is why it’s important to have a model that shows multiple ways of making money, because whatever the current environment is right now for the products our technologies address, I think we can be assured that five or ten years from now, it will be different. Having flexibility and options, and building in those from a technical and design standpoint, from a strain availability standpoint, is really important for all of us in this industry so that we can in fact survive over the long haul.

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