When we hear the word “biotechnology,” we tend to think about new and exciting drugs… and for good reason. According to FiercePharma, four of the top five best-selling drugs worldwide in 2013 were biologics (as opposed to other drugs like small molecules). These four drugs (Humira, Enbrel, Remicade, and Rituxan) alone generated sales of nearly $36 billion last year. That’s compared to just $7 billion in worldwide sales for all biologics in 1997.

But in addition to healing the world, biotechnology also promises to help fuel the world and help feed the world. It’s that third promise that we’re going to focus on today.

A technology in general is just a means to fulfill some purpose or goal. When we talk about biotechnology in the broadest sense, we’re referring to the use of biological organisms—or their systems or components—to develop new products or processes in an attempt to solve a problem or improve our lives in some way.

You may or may not have heard the term “industrial biotechnology,” which simply refers to applying biotechnology to industry—creating biobased products for sectors such as chemicals, food, plastics, and energy.

Rudimentary industrial biotechnology dates back thousands of years, to the time when our ancestors first started to make beer and wine through fermentation—and then cheeses and yogurts as knowledge of the fermentation process grew. The basic idea is the same today, though the science is a bit more complex.

For example, let’s take Solazyme (SZYM), a company that’s poised to become a major player in the industrial biotech space. Solazyme synthesizes renewable oils using a proprietary microalgae process; it started with the singular goal of producing biofuels. But it has since broadened its reach into higher-margin, less price-sensitive markets, including chemicals, skin and personal care, and most important for our purposes here, nutritionals (i.e., food).

Solazyme’s process for making the oils goes like this:

Depending on what the company wants to make, it first selects one of its microalgae strains—either native or genetically enhanced, but in either case capable of flourishing without light—and puts it into a large fermentation tank. It then adds a renewable feedstock (like sugarcane or switchgrass) and through the magic of fermentation, the microalgae convert the sugars into the desired oil.

Here’s an illustration from Solazyme’s investor presentation:

The basic process by which Solazyme’s microalgae produce oil is nothing special; the organisms themselves are some of the world’s original oil producers. The difference with Solazyme is that its process has improved on the technique on every conceivable front: it’s much faster; produces much higher concentrations of oil per unit of input; is more easily scalable; and allows the company to produce higher-value products due to its ability to tailor oils to customer specifications.

Some of those higher-value oil products are poised to make a big impact on the global food market.

The world’s population is about 7 billion, and it’s growing by about 80 million per year. At the same time, in developing economies such as China, India, parts of South America, and Africa, there’s an expanding middle class with rising disposable incomes. This has led to a rapidly increasing demand for numerous plant oils important to the food industry, and that has translated into much higher prices for those oils because the supply side of the equation is basically fixed. Over the last decade, the price of rapeseed oil has increased by 45%, while palm oil and sunflower oil have increased by 77% and 71% respectively. Solazyme’s algal oils, tailored to food industry needs, could have a big impact here.

That the company is on the right track was evident when it was honored at the 2014 Institute of Food Technologists (IFT) Annual Meeting & Food Expo as the recipient of an innovation award for its high-stability, high-oleic oil. The oil can replace partially hydrogenated vegetable oils (which are often high in trans and saturated fats), substitute for unstable oils in frying or baking applications, or be used as an ingredient in dressings and sauces. It was singled out because it “delivers superior performance and healthful attributes for a wide variety of foods without compromising on critical taste metrics. It has the lowest level of polyunsaturated fatty acids compared to any oil on the market and provides excellent stability with zero transfats. Additionally, it is rich in healthy omega-9 fatty acids, low in saturated fats, and high in monounsaturated fats.”

The company is currently producing only small quantities of its oils for a limited number of clients, but we should see big things over the next year or two as it increases capacity and ramps production at its new Moema facility in Brazil and transitions from a development-stage company to an operating company. Sounds rather compelling, doesn’t it?

But it doesn’t stop there. As with palm oil, the spot price of butter has been surging, up 71% this year to about $2.50 per pound by late July and hitting $2.96 this past Monday. Again, it’s still pretty early stage, but Solazyme has a possible “fix” here too.

In addition to optimizing the composition of oils, it has also developed new ways of preparing powdered forms of triglyceride oils for the food industry. The company’s Whole Algal Flour is rich in healthy lipids with a profile similar to olive oil and can be used to replace or reduce milk, cream, butter, or eggs in ice cream, soups, and baking applications like breads.

The Whole Algal Flour product is vegan, gluten-free, trans-fat free, free of known allergens, and low in saturated fat and cholesterol. If it’s that good for you, it must taste like crap, right? Apparently not. I haven’t gotten my hands on the stuff yet, but the author of an article in Scientific American, David Biello, said that on its own it “tastes like pancake mix, minus the salt and baking soda but with the addition of olive oil.” He also confirmed that cooking with it yielded ice cream and caramels that were “delicious” and that bread made from the stuff was outstanding.

A comparison between the nutritional stats of chocolate ice cream and chocolate frozen dessert with Solazyme’s ingredient revealed that the Solazyme product appeared to be a much healthier alternative, with 38% fewer calories, 70% less saturated fat, 90% less cholesterol, and two additional grams of dietary fiber per half-cup serving.

From what we’ve seen so far, industrial biotechnology in general could have far-reaching implications for global food markets; and Solazyme in particular looks well positioned to capitalize on this multibillion-dollar opportunity. But what remains to be seen is how consumers will respond. Such products probably carry a significant risk of consumer rejection, especially early the game.

Even so, companies in this space still look compelling from an investor’s standpoint. As a kicker, consider that not only is everything Solazyme does highly regulated, its products are technically not genetically modified organisms. The GMO label is not applied to fermented ingredients, since the organisms used to make them are not present in the final products. At least that’s the distinction for now. And carrying a “non-GMO” tag could be a big plus for the company’s products going forward.

The ability to produce valuable oils for numerous end markets from algae and sugarcane augurs a bright future for cutting-edge companies in the field, like Solazyme. But it’s only one among many new technologies that are changing our world on a daily basis. At Casey Extraordinary Technology, we follow all the latest developments and winnow them to find the best investment opportunities. Set yourself up to profit from their visionary work and our due diligence by starting a 90-day risk-free trial subscription today.