It’s a food contaminant and known carcinogen that’s found in baked goods. Acrylamide is also squarely in Functional Technologies’ (TSX:FEB-V) business crosshairs.
The Vancouver-based biotech company is close to commercializing a proprietary solution for reducing levels of acrylamide in baked goods. To that end, it’s testing a modified strain of yeast with an improved natural ability to reduce the presence of asparagine, the amino acid precursor to acrylamide.
“These are known in the industry, and they work hard to get rid of them,” said Functional Technologies co-founder Geoff Lee.
“But we’ve developed products derived naturally from yeast that are proven to be far more efficacious and economical to use than what may currently be in use now.”
Acrylamide is formed naturally when asparagine is heated to high temperatures during the baking process.
It has been known for decades as a carcinogen, but was only discovered in food products in 2002, specifically carbohydrate-based foods like potato chips and breads.
According to Lee, acrylamide first became a public health and regulatory issue through health regulators in Sweden around that time and has since come under scrutiny from the World Health Organization (WHO), the U.S. Food and Drug Administration (FDA) and Health Canada, all of whom are doing advanced assessments on its impact on consumer food products.
Lee said the presence of acrylamide in fast foods sparked a class-action lawsuit in California in 2005, when the state’s attorney general sued snack-food companies such as McDonald’s, KFC, Burger King and Cape Cod Chips under Proposition 65.
Lee said acrylamide continues to be a major health issue. He pointed out that in its 2009 annual report, Lay’s potato chips owner Pepsi-Co singled out acrylamide as a threat to its business.
“Obviously, the industries have a concern, but to their credit they’re looking for a way to fix it.”
The primary target for Functional Technologies’ product is the global baking industry, where acrylamide is the most prevalent. According to Lee, while other companies have developed similar acrylamide-reducing technologies that are enzyme- or pesticide-based, Functional’s product is a natural alternative that uses ingredients that are already in the baking process.
“The product is essentially the same as baker’s yeast, with only the acrylamide-reducing modification,” he said, “thus it’s easy for bakers to transition to the new yeast.”
Lee added that his company’s product is also a preventive rather than a remedial solution. “We prevent the contamination from happening in the first place.”
But the market appears to be limited to major potato chip manufacturers.
Sepp Amsler, co-founder of Vancouver-based Hardbite Potato Chips, said acrylamide isn’t a problem for him because it forms only at high temperatures, and his brands of chips are never heated above 300 F. According to Amsler, acrylamide affects only potato industries and restaurants that have to use high heat to increase their yields.
“Restaurants have that problem, too, because they heat their oil to 350 degrees, but they don’t have a choice. The customer wants his food right away, not 10 minutes from now.”
Functional Technologies has also developed a related yeast technology for eliminating two well-known contaminants in bottled wine: hydrogen sulfide and ethyl carbamate.
Hydrogen sulfide is a common byproduct of the wine fermentation process and gives off a noxious odour (the “rotten egg” smell) that can render a bottle of wine unsalable.
Ethyl carbamate, also known as urethane, is produced naturally when yeast metabolizes arginine in grape juice, producing urea. Since 2007, WHO has identified ethyl carbamate as a high-level carcinogen. It has also been found in significant quantities in several alcoholic beverages, specifically wine.
Functional Technologies’ roots are in UBC’s wine research department, according to Lee, where he and co-founder Howard Louie started the company in 2000.
Functional’s growth paralleled the technological advancements in analytics.
“Without the advancements in the analytics, you really couldn’t make any meaningful headway into this area,” said Louie. “The industry itself didn’t really exist as recently as two decades ago.”
To date, wine contaminant reduction is Functional’s most advanced product area.
“There’s hundreds of thousands of cases of wine right now in the United States with our product,” Lee said, “and we’re looking to commercialize that product worldwide.”
According to Lee, his company is working on product development with academic and research institutions in the United States and Canada and in Europe.
It also conducts product research and development at the Institute for Nutrisciences and Health laboratory in Charlottetown.
“It’s a world-class facility,” Lee said. “We’re really lucky in terms of the people who are involved.”
Louie is optimistic that the rollout of Functional Technologies’ acrylamide products will have the same reception as its wine products: “It’s definitely an exciting time in the immediate future for us, and we expect to be able to push out more good news on that front.”
Vancouver
CEO: Howard Louie
Employees: N/A
Market cap: $22m
P/E ratio: N/A
EPS: ($0.11)
Sources: Stockwatch, TSX, globe investor