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NewCo in association with New University of Technology & Science (“NUTS”) has undertaken R&D, as “Project O3FA”, to investigate suitable algal organisms from Australia that may be capable of producing Omega-3 Poly-Unsaturated Fatty Acids (“Omega-3s”) at commercial scale. The first two phases of R&D (Proof-of-Concept and Laboratory-scale) have been completed and the research undertaken has been successful.
Progress and Results
After testing hundreds of potential alga samples, NUTS has identified a particular Australian heterotrophic microalgae (“algae”) that grows quickly: approximately 50 grams of dry weight (DW) biomass per litre per 10-day cycle.
Furthermore, the laboratory testing of the algae has indicated that:
As a result, NewCo has made a decision to initially focus on commercialization of Omega-3s as a stable powder produced by drying the algal biomass, then to encapsulate the powder. If this proves viable, and much will depend on the results of scale-up from the laboratory to commercial production, then we believe that NewCo’s algal powder could be a new and potentially valuable pharmaceutical product targeting the human supplement market, in competition with fish oil capsules. By encapsulating the powder, a person taking 4 capsules per day is estimated to consume the recommended adult daily allowance of 500 mg of Omega-3s.
NOTE: This document is a mixture of fact and fiction, and has been created as an 1 example of project evaluation techniques applied to a potential biotechnology
opportunity, as part of Commercialisation of Science, 2018
At present, most Omega-3 as a human supplement is sold as a component of oil extracted from krill, anchovies or other fish. Such oil may not be environmentally sustainable, may contain contaminants such as mercury and other heavy metals, and is not suitable for the vegan market. Crude fish oils, typically do not contain high volumes of Omega 3 (<25%), and must be refined in order to increase the level for commercial application. This refining process often involves a dangerous and costly solvent extraction process. Growth of algal oil products aims to exploit these underlying negative marketing impacts. Existing fish oil products sell, in soft gel capsules, for around A$30-35, typically as a month’s supply.
To enable the powder to be sold as a pharmaceutical in Australia, with listing by the Therapeutic Goods Administration (TGA), the alga must first be entered as a “Permitted Novel Food” under Schedule 25 of the Australia New Zealand Food Standards (FSANZ) Code. In other words, the alga must be recognized as a food. This will require toxicity and bioavailability (absorption) testing. NUTS has the facilities to undertake this testing.
NewCo does not envisage that either the testing or the recognition of the algae as a novel food will be difficult to achieve. Indications are that the alga of most interest to NewCo is not toxic. And, most importantly, there are precedents for two other species of algae, similar to but not the same as NewCo’s alga, which have been already been recognized as novel foods. These algae are currently used in infant milk formulae and as a source of Omega-3 rich oil. The Food Standards confirm that our type of alga is not presently being commercialized.
To date, production has been carried out in the laboratories of NUTS using reactors with capacity of 10L and 100L. A number of important growth parameters have been identified at this level. However, these parameters must be verified in production trials at, or approaching, commercial quantities to verify competitive advantage and demonstrate commercial confidence.
As biomass production rates and ratios of lipid oils and Omega-3s may change during scale-up, to achieve commercial quantities, another two further production scale-up steps are proposed. NewCo has proposed that, in the next phase of development, the project proceed to a 1000L pilot-scale photo-bioreactor, and to undertake the animal tests for toxicity and bioavailability, at a total cost of A$1.12M. After this pilot-scale step, the next decision point will be to upscale to a 10,000L commercial demonstration- scale reactor.
Techno-Economic Evaluation of Algal-Production of the Omega-3 FAs
Using the data arising from laboratory tests conducted by NUTS, a preliminary economic evaluation for potential commercialization has been conducted. A purpose-built
NOTE: This document is a mixture of fact and fiction, and has been created as an 2 example of project evaluation techniques applied to a potential biotechnology opportunity, as part of Commercialisation of Science, 2018 spreadsheet model has been created, and the economics of a potential commercial production facility have been evaluated based on four underlying assumptions:
All remaining input variables are treated as uncertain and their impacts (upside and downside) on the economic viability have been assessed as part of this evaluation.
For the purposes of this evaluation, a “Base Case” using the laboratory test data arising from the NUTS work described above has been created. In practice, it is likely that production ratios will change on scale-up, and a scan of publically available literature suggests that significant upside in key production parameters is achievable. This upside potential and the threat of poor scale-up performance have been addressed in this evaluation.
Fig 1 in the Appendix provides a summary of the model inputs and outputs for the Base Case data. And in the Fig 2 Tornado Diagram, the sensitivity of 18 input variables on the project NPV has been assessed. This figure indicates that the top 5 input variables (measured by their potential impact on NPV) are:
These input variables are the key drivers of project value, and our future work will be to resolve the uncertainty around each of these variables, to manage the downside effects, and to exploit any upside potential.
From Fig 1, we can see that the Base Case (with all its’ input variables set to their mid- points) is estimated to deliver a potential NPV of A$8.11M, from a single 10,000L bioreactor. This NPV estimate assumes project success but clearly, several technical, implementation and commercial challenges/risks are yet to be resolved; the major risks are summarized in the Fig. 3 Risk Tree. This figure indicates that, for the current project risk profile, the expected value of the target Omega-3 product is estimated to be about $0.53M.
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