Crain's Detroit Business
January 22, 2012 By Chuck Soder
A company near Cleveland hopes to build a pilot plant where it would grow algae to produce a popular nutrient. The question is, where will it build? Perhaps Michigan?
According to a report from Crain's sister publication Crain's Cleveland Business, AlgiSys LLC of Mayfield Heights has received a $5 million commitment from Michigan investors, said CEO Michael LoPresti, who would not identify them. The state of Michigan also has indicated it will provide a "generous, aggressive loan package" if it moves, LoPresti said, adding that AlgiSys plans to seek incentives in Ohio, too.
AlgiSys, which employs three people full time and five part time, would like to stay in northeast Ohio, LoPresti said. But the company wouldn't fit easily into the sectors targeted by Ohio's economic development program, he said.
The company aims to grow algae to produce both omega-3 fatty acids and high-protein biomass. There is particularly high demand for omega-3s, which studies have shown can reduce the risk of heart disease and stroke and can be used to treat depression, rheumatoid arthritis and high blood pressure.
An official from the Michigan Economic Development Corp. said that AlgiSys has not been approved to receive incentives, but that it's possible the parties are in conversations about them. LoPresti did not respond to a phone message and an email requesting additional information.
A biotechnology startup that’s developed a manufacturing process for producing omega-3 fatty acids from algae has closed $2.5 million of an anticipated $5 million series A round.
Two AlgiSys executives — CEO Michael LoPresti and chief technology officer Charles Roe — confirmed the funding but were hesitant to reveal much more because the round is still open. The Cleveland-area company’s funding was revealed in a regulatory document filed with the U.S. Securities and Exchange Commission.
AlgiSys plans to sell its omega-3 oils to many markets: nutritional supplements, food and beverage,
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animal feed and pharmaceuticals.
Currently, the company is working to perfect its pilot plant and expects to begin commercializing its omega-3s in the first half of 2013, LoPresti said. Roe likened the technique AlgiSys has developed to manufacture omega-3s from algae to the fermentation process used to make products like pharmaceuticals and even beer.
The omega-3 market looks like a good one to be in. A report by research group Packaged Facts valued the global omega-3 market at $13 billion in 2011. More impressively, the market’s growth rate is estimated at between 15 percent and 20 percent annually through 2015.
Growth in the European and Asian markets is expected to be particularly high because of a higher concentration of heart disease, according to a report from research firm MarketsAndMarkets.com.
Fish oil accounts for about 85 percent of the global omega-3 market. Flax seed is the major source of omega-3s in the vegetarian market, which is what AlgiSys is targeting.
As for algae omega-3 like what AlgiSys is producing, market dynamics are expected to change in the near future with the entrance of new players, NutraIngredients-USA.com reported. Martek Bioscience is the leader and other players include Aurora Algae and Algae BioScience.
AlgiSys was started in 2009 to commercialize research from Virginia Tech. The company has received funding from suburban Cleveland financial firm Tower Wealth Management, as well as a Small Business Innovation Research (SBIR) grant from the federal government.