Union Tribune San Diego: A Taste for Business

Pareto co-founder applies biotech expertise to potentially profitable field of synthetic flavor creation

by Bradley J. Fikes · U-T 5:07 a.m. July 30, 2014

Biotechnology companies mostly concentrate on health care products such as drugs, which can be extremely profitable but are costly, time-consuming and risky to develop.

Some work on creating biofuels, which can be generated more rapidly but face brutal price competition in the wholesale and retail markets.

Pareto Biosciences, a spin-off of the Salk Institute for Biological Studies in La Jolla, aims for the flavor and fragrance market, which it regards as a fairly profitable yet less-expensive alternative to finding new medications.

Michael Mendez, a co-founder of the company, recently discussed its philosophy and operations with U-T San Diego. Here is an edited version of that conversation.

Q: What was your business background before you helped form Pareto?

A: Pareto is my ninth company that I’ve been involved in. And when you start companies, you learn from the previous companies. I’m a co-founder of (biofuels developer) Sapphire Energy. So Pareto has borrowed a lot from the previous companies.

I was at The Scripps Research Institute in La Jolla working in the back of Steve Mayfield’s (biofuels) lab, trying to get the technology for Sapphire.

And Pareto is very similar. The intellectual property came out of Joe Noel’s lab at Salk. That’s the basis for the entire company.

Q: Why did you and the other founders choose “Pareto” as the company name?

A: It’s based on the Pareto Principle (that 80 percent of the effects come from 20 percent of the causes). That’s from lessons we learned at Sapphire.

You’re working to make a commodity, fuel, and it’s a huge sector — a multitrillion-dollar sector. And everything has to work perfectly for you to enter that market. It’s a tough market to enter, but if you get into it, the benefits are huge.

When you’re making something that has to be cheaper than water, in all practicality, that’s brutal. At Pareto, that is not the kind of company we want to be. Instead of having to make everything work, if we can only get a small percentage to work, the 20 percent could pay for the 80 percent. The products will have a lot more value.

To pick a really important product, like a cancer drug, that’s completely on the opposite side of the spectrum. Because a cancer drug is going to take 10 years to 20 years to develop, and it’s going to cost hundreds of millions of dollars, and it’s a gamble. … No one is allowing you to play that game anymore.

So Pareto has to pick products we can deliver in a three- to five-year time frame.

Q: So fragrances and flavors presumably sit in the middle — not inexpensive commodities, but also not expensive drugs?

A: Completely. The platform we’re working with is called the polyketide pathway. It’s a very specific pathway that plants in particular use to produce all kinds of molecules.

Q: What about this polyketide pathway makes it attractive?

A: Most development has been performed on what is called the isoprenoid pathway. A lot of people worked on it and understand it very well. It’s used to make drugs.

The polyketide pathway just didn’t get a lot of people working on it. It was argued to be irrelevant because you could do anything you wanted with the isoprenoid pathway. Joe Noel did work on it (at the Salk Institute), for academic reasons. He was interested in why plants used it to make different repellents, hormones, things like that.

We would love to work on the isoprenoid pathway, but the intellectual property around that has all been taken. … The polyketide pathway can make very similar molecules to the isoprenoid pathway, but it’s not as well understood. So give it another couple of years under Pareto’s guidance, and I think it will take off.

Q: What’s the advantage of synthetic biology?

A: Flavoring companies find it difficult to get their flavorings consistent anymore. If a bad typhoon hits Madagascar, it takes out all the vanilla beans. You can’t count on agriculture on a year-to-year basis, because a drought or weather patterns can have a huge influence on productivity.

Q: How do you decide which products to develop?

A: We have approached some of the flavoring and fragrance companies, and they immediately told us what they wanted. It’s almost all flavorings. They want to take known flavors and tweak them. It might have started off vanilla, and it might have vanilla tones to it, but it’s not the vanilla we’re used to tasting. Or it could be a raspberry flavor, but it’s not really raspberry.

The flavoring companies want new and innovative flavors. From a marketing standpoint, it’s huge for them to say, “We have a unique flavor that no on else has and no one else can get.” They don’t care that it’s made through synthetic biology.

I learn from every new company, and I’m learning a lot about the tricks of the flavoring companies and what their wants and needs are. You have to make it so they can count on it.

And if we’re going into production, you have to show them you can make this consistently, at a particular cost. They’re not going to put something in that requires us to grind diamonds.
Michael Mendez

Current role: Co-founder and chief technical officer of Pareto Biotechnologies.

Past roles: Co-founder of Sapphire Energy. He also was co-inventor of the Xenomouse technology that forms human antibodies in mice. The technology was developed by biotech Abgenix, which Amgen later bought for $2.2 billion. In addition, Mendez developed “viral vector” technology that’s used in cancer vaccines.

Education: bachelor’s degree in molecular genetics at Oregon State University, then graduate studies at University of Colorado.

This article originally appeared at www.utsandiego.com on Wednesday, July 30, 2014.

Posted on July 30, 2014 in In the News, Pareto Biotechnologies

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