Inside the fierce, messy fight over “healthy” sugar tech

Inside the fierce, messy fight over “healthy” sugar tech thumbnail

In a former insurance office building on the outskirts of Charlottesville, Virginia, a new kind of sugar factory is taking shape. The 48,000-square-foot facility is being developed by a startup called Bonumose, funded in part by Hershey. It uses maltodextrin, a corn product that is often found in junk food. Maltodextrin, which is calorically very similar to high-fructose corn sugar (sucrose), can cause worse blood sugar spikes than sucrose.

But for Bonumose maltodextrin doesn’t count as an ingredient. It’s a raw matter. It will become a “rare sugar” when it is poured into the company’s sparkling bioreactors later in the year. It is found naturally in small amounts in fruits, grains, and milk. It is almost as sweet as sucrose, but has only half the calories. Because of its metabolism, tagatose can improve digestion and insulin levels.

Although long recognized as a safe food ingredient by the FDA, tagatose has proved expensive and difficult to isolate–until now. Hershey claims that Bonumose’s technology to convert maltodextrin to tagatose at commercial scales is crucial to its efforts to create next-generation “better for you” candy. “If we can sell anywhere close to the volume of high fructose corn syrup, then that’s tens or billions of dollars per year [in] revenue,” said Ed Rogers, Bonumose CEO. “And the effect on public health could save arguably trillions in health-care costs.”

Bonumose’s multi-enzyme conversion process originated in a company spun out of the Virginia Tech lab of Yi-Heng “Percival” Zhang. Zhang was born in China and is a bioengineer with numerous inventions and awards. In 2006, Esquire magazine singled him out as one of America’s “best and brightest” for his work on converting sugar from farm waste into cheap ethanol. His lab created companies to produce sugar-powered batteries for smartphones, medicinal compounds, and investigate using sugar to make hydrogen for fuel-cell vehicles. Zhang once declared that sugar would be the new oil in an email signature at Virginia Tech.

But Zhang isn’t proudly leading Bonumose’s research division or formulating healthy chocolate or racing a sugar-powered vehicle. In January, MIT Technology Review spoke to Zhang in Tianjin, China. He had just completed a two-year sentence in Virginia for conspiracy, making false statements and obstruction of justice. His interactions with Rogers, his former business partner, and the US government still seem to be a puzzle. Zhang says that he was guilty only of poor judgment and ignorance of rules. He sees himself as a man who has been trampled. “They cheated me with technology.” He says that they robbed me of all my technology.

Turn a ear to Bonumose. It’s about the triumphant of American entrepreneurship over China’s Communist government. Rogers stated to MIT Technology Review that he and his team did not cheat anyone. “Even though it was a bitter battle with Zhang, we don’t wish him any harm at this time.”

Maybe he wants to blame someone other than himself, but he should look in the mirror.”

Whichever version hews closest to the truth, one thing seems clear. The global fight to control sugar is already underway.

Most humans love sugar for its gloriously sweet taste and ability to give blood sugar a turbo-boost, but Zhang is more interested in the energy it packs. Zhang’s parents were physicists from Wuhan, China. He grew up eagerly to imitate scientific heroes like Pasteur, Edison, and Curie. After studying biochemical engineering in Shanghai, he came to the US in 1997 for a PhD at Dartmouth College, where he also met his wife.

His first enthusiasm was for biofuels, a growing research topic in the early 2000s. At Dartmouth, Zhang validated a process for accelerating the conversion of agricultural waste like corn leaves and rice straw into sugars, and thence into ethanol for fuel–the “sugar-powered car” that got Esquire so excited.

In 2005, Zhang joined Virginia Tech as a tenure-track professor in the biological systems engineering department. Joe Rollin was one of his first graduate students. He was a young, idealistic chemical engineer straight from the US Army. Rollin says, “I was looking for a way to combine my experience with helping to mitigate geopolitical conflicts.” “Biofuels was the obvious choice. And from my very first meeting with Percival, entrepreneurship came up.”

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In 2010, Zhang, Rollin, and another graduate student, Xiao-Zhou Zhang (no relation), founded Gate Fuels to commercialize their discoveries. A second spinout, Cell-Free Bioinnovations (CFB), followed in 2012. Zhang was the president of the companies, and Rollin was their CEO.

The companies relied heavily upon grants from the National Science Foundation. Two awards were made for a strain bacterium that can produce fuels and precursors from soil bacteria. Others went to the development of sugar-powered enzymatic fuel cells, a “bio-battery” with an energy density potentially 20 times that of lithium-ion batteries. Future users may be able to charge their phones with Coca-Cola instead of plugging them in to recharge.

“My vision was that we would prove out the technologies, then license them to industrial partners to scale up,” Rollin says. Percival was fine with this strategy, but his passion was always to change the world. I think he was very frustrated with how slow things seemed to be.”

In late November 2014, Zhang–by now a naturalized US citizen–could wait no longer. He wrote an open letter, threatening President Obama, the secretaries for energy and agriculture, as well as Congress, to warn that the US could miss out on the “megatrend” in next-generation biomanufacturing and renewable energy. He asked them to create a special consortium of industrial companies and research institutes. He wrote, “China is the biggest industrial biotechnology nation.” If the USA failed to take action now, the USA might [lose] this important game forever.”

He never heard back.

Shortly after, Zhang left on a three-week trip to China. Zhang was beginning a part-time job at the Tianjin Institute of Industrial Biotechnology, a research center of the Chinese Academy of Sciences. Zhang said that they were working on projects that were very exciting. They said, “We know that you have many good projects. Why not start a lab? You can hire several people and work on projects that you’re not doing in the US.’ For academics, this is common and a good idea.”

Zhang did not hide his involvement with TIB. He paid US taxes on his Chinese income (about $30,000 a year) and diligently notified Virginia Tech of his work abroad, which he says was never questioned.

Zhang’s second spinoff, CFB, meanwhile, appeared to be doing well. Zhiguang Zhu was one of Zhang’s Chinese graduate student and chief technology officer at CFB. He was applying for more NSF grants. The company applied to one for an improved production of the sugar inositol. Inositol can be used as a substitute for cocaine in film or TV, and in supplements. The team won an award for research into the cheap production of sugar phosphates–components in the manufacture of drugs used to treat cardiac diseases, cancers and degenerative diseases. And NSF green-lighted a $750,000 proposal–CFB’s largest NSF award–to continue work on sugar-powered enzymatic bio-batteries.

D-Tagatose
Tagatose, a “rare sugar”, is nearly as sweet as table sugar but has around half the calories.

PUBCHEM

Around this time, Joe Rollin secured a position at the Department of Energy’s ARPA-E research agency. He recommended Ed Rogers to replace him. Rogers is an entrepreneur and lawyer. Rogers had cofounded a company in 2003 to make edible (rather than plastic) fishing lures. Rogers later managed a clean energy research center in southern Virginia that used grants from tobacco settlements to promote LED lighting, biofuels, and energy efficiency. Rollin says that Ed brought startup commercialization and legal expertise to the team and made things easy for Percival. “To me he was an easy hire.”

In January 2015, Zhang signed Rogers on a one-year contract as interim CEO. He would be responsible for performing due diligence checks on the company’s governance and policies. His primary goal would be to raise public and private funds for CFB. CFB needed steady income to keep up with Zhang’s imagination.

By then Zhang’s enthusiasm was shifted to tagatose which he saw as a possible sugar substitute. “We need a better low-calorie sugar,” he later explained. “Tagatose has the best taste. It’s a great tasting product. CFB filed a provisional patent request on the new process. It cited Wichelecki and Zhang as inventors.

Rogers hit the ground running. By the end of 2015, he claimed to Zhang to have contacted dozens of potential licensees for CFB’s rare sugars. He claimed he had established working relationships with many and had “good bidders lined-up

. Sure enough, after attending a demonstration in a laboratory, Tate & Lyle expressed interest in inositol, Rogers was eager to move forward. Zhang refused to sign the agreement, claiming that CFB had less intellectual property than Rogers thought.

In an email to Rogers that December–obtained, like most of the others in this story, from court filings–Zhang wrote: “Some projects that you thought were owned by CFB are not owned by CFB.” He explained that both the inositol and the sugar phosphate technologies actually originated in his TIB lab and had been funded by a Chinese agency before CFB began work on them. He explained that CFB could not claim ownership of either project, but would only be able to build on the Chinese work.

Rogers had suggested splitting CFB. This would leave Zhang with his sci-fi bio battery and sugar-tohydrogen concepts while Rogers would market the near-term rare sugars. Zhang rejected the idea and, to everyone’s surprise, did not renew Rogers’s CEO contract. He also mentioned that Rogers had proposed splitting CFB, leaving Zhang his sci-fi bio-battery and sugar-to-hydrogen concepts, while Rogers would commercialize the nearer term rare sugars. At the end of December 2015, he sent CFB an email referencing a “glaring” contradiction between statements the company had made in NSF grant applications while he was interim CEO and statements made by Zhang.

Rogers pointed out that Zhang had told him that the rights to sugar phosphate production were Chinese. However, one application stated that CFB owns the rights and will commercialize the process in the US. Rogers warned that if there is a problem, he would not allow anyone to look the other way. Of course, any whiff of grant fraud will cause potential licensees and potential investors to flee.”

In the email, Rogers reiterated his suggestion that CFB transfer the rights for tagatose and another rare sugar called arabinose, as well as the rights for the sugar phosphates process, to a new startup he was intending to form. Rogers wanted to move quickly, and ideally within one week. He wrote, “If you need more, please let us know. But time is running out in many ways.”

sugar cubes divided into piles

BRUCE PETERSON

Zhang again refused to split the company, and on January 6, 2016, time ran out. Rogers incorporated Bonumose in the state of Virginia and, nine days later, sent an email to the NSF’s Office of Inspector General entitled “Report of possible NSF grant fraud.”

It quoted from some seemingly damning emails between Zhang and Rogers. In one, sent in the summer of 2015, Zhang writes: “About sugar phosphate project, the experiments have been conducted by one of my collaborators and my satellite lab in China. Technology transfer will only take place in China. The [the NSF], project will fund the other project in CFB. This meant that the promising tagatose research had not received any official NSF funding.

Another, regarding a second NSF inositol proposal, took a similar tack: “Nearly all experiments … have been finished. Chun You [CFB’s chief scientist] and I have filed a Chinese patent on behalf of ourselves, no relation to CFB … If it is funded, most of [the NSF money] will be used for CFB to support the other projects.”

Using government funds for a different purpose from the one for which they were awarded is strictly, and explicitly, forbidden. Within weeks, the NSF began an investigation and suspended all payments made to CFB.

Chaos reigned within the company. Zhang had previously asked Dan Wichelecki, his partner at CFB, and his partner, a lab manger, if they would be open to moving to China to work for him. Joe Rollin, who was still a member of CFB’s board, but not involved in the day-to-day operations at CFB, recalls having mixed feelings about this situation. “On the one hand, Ed had concerns about Percival’s grant mismanagement. Percival was a profit-seeker. I didn’t really know who to trust.”

In a letter to Zhang in early February 2016, Rogers pleaded with him to step aside. Rogers wrote that he had helped to start what might have the potential to be a successful business. “Please don’t stand in the way that this potential for success is realized.” Your resignation would begin to fix the problems that you created.”

While Zhu was willing to side with Zhang’s, Wichelecki was divided. “Ed is motivated primarily by personal compensation… but this is business so it’s not surprising that he is. We are all here for money,” he wrote to Zhu in February 2016. “I really just want to try and commercialize tagatose, but I do not see how this is going to be possible.”

Rogers did. He proposed that Bonumose acquire CFB’s tagatose intellectual and he offered to sweeten it by hiring Wichelecki (who CFB couldn’t afford to pay) as a cofounder. CFB would be given a one-third stake in Bonumose, along with a few small payments from the new company. CFB and Zhang would also need to agree to stop working on sugar phosphates and tagatose.

Zhang felt he had no choice but to agree, and in April 2016 he signed an asset sale agreement that would transfer the tagatose IP to Bonumose and require Rogers to help resolve the NSF investigation. In a court filing, Zhang later claimed: “Rogers used the crises he had created for CFB and Zhang to force CFB and Zhang to execute the April 2016 agreement.”

With CFB now effectively shut down, Zhang moved the company into his basement at home, and turned his thoughts to China. In June 2016, he applied to China’s Hundred Talents Program, an effort to boost the country’s scientific expertise by recruiting foreign and expatriate Chinese researchers to Chinese institutions with generous financial, infrastructure, and research packages.

Zhang’s application, seized as part of the NSF case and translated by the FBI, details his plans to transfer “three to four major results” within five years. Despite his promises to Bonumose, and commitments to CFB. These would include producing tagatose, a sugar bio-battery and integrating “various technology” to create the first car to run on hydrogen from sugar. Zhang told MIT Technology Review that the underlying science in this proposal was different from that of Bonumose and CFB.

Zhang’s application notes that his 15-strong research group at TIB would join two other research groups there, run by former CFB employees Zhiguang Zhu and Chun You. Both would return to China during 2016 or 2017.

“[I aim] to accumulate enough dividend from technology monopoly, stock dividend, and option income to build the first Bell Lab-style research and development base in China,” stated his Hundred Talents pitch, before requesting visas, work permits, and health insurance for his family. He also requested a larger office and more lab space. Zhang claims that he applied for jobs at Cornell University and Hong Kong University of Science and Technology.

That summer, Zhang embarked on a seven-week trip to China, during which he received a subpoena from the NSF for time sheets relating to CFB’s awards. Zhang forwarded the request on to Zhu, the principal investigator on the projects. Zhang claims that Zhu and he lost track of the time sheets during the office move. They re-created the sheets to their best knowledge and submitted “make-up” sheets for the NSF.

In January 2017, Zhang visited China again. His itinerary, which was another exhibit in the US government’s case against Zhang, shows a packed fortnight at TIB. Zhang received a fee of 10 million yuan ($1.6 million) for transferring inositol technology into the private sector, and he planned the next phase in that project. Zhang discussed the details of his lab’s plans for tagatose production as well as a sugar battery. The icing on Zhang’s cake was receiving Binhai New District’s “Top-Caliber Innovative and Entrepreneurial Professionals Award.”

There were no awards awaiting Zhang on his return. Zhang was soon in the midst of a civil lawsuit by Bonumose. It accused Zhang, You and CFB of stealing confidential information about tagatose and trade secrets. Ed Rogers had been alerted to a Chinese patent that was, in the words of the lawsuit, “nearly identical to” the provisional patent application that Zhang and Wichelecki had filed back in 2015 and that was now owned by Bonumose. The Chinese patent listed four inventors, two TIB researchers as well as two anonymous individuals. Rogers believed that those two were Zhang and You, an accusation Zhang denied.

Zhang was accepted into the Hundred Talents program in mid-2017, whereupon he resigned from Virginia Tech. With the civil case brewing the government finally took action. On September 20, 2017, agents executed a search warrant at Zhang’s home in Blacksburg. They found three binders containing time sheets in a basement cabinet that were not the same as those sent to NSF. They also found a canceled Chinese passport under Zhang’s name.

A conversation in Mandarin with Zhang’s mother, who was visiting at that time, suggested to FBI that he might flee China. It was enough to make Zhang a flight risk. Zhang was taken into custody and placed in jail in Roanoke. Zhang was held in jail for more than three months. He said that his experience was “terrible” but that he also experienced a religious awakening. Zhang was finally released on Christmas Eve. He started to go by a new name, that of the long-suffering prophet Job.

But his travails were far from over. In the run-up to a bench trial in September 2018, Rogers repeatedly reached out to law enforcement, ultimately providing a spreadsheet listing additional violations he attributed to Zhang, including transporting stolen goods, failing to register as a foreign agent, and committing wire fraud. Zhang called an expert witness to testify that the experiments he had previously conducted at TIB were not the same as those in CFB’s NSF proposals. If they were different, and if the NSF was funding new experiments, that would have been a crime. The judge, however, concluded that “Zhang’s statements in his emails establish the innate falsity of the inositol proposal beyond a reasonable doubt.”

Former Virginia Tech scientist Yi-Heng “Percival” Zhang, right, walks into federal court with attorney Benjamin Rottenborn on September 7, 2018. (Heather Rousseau/The Roanoke Times via AP)

Zhang was found guilty of conspiracy to defraud the United States, making false statements (the made-up time sheets), and obstruction. Zhu, his co-defendant had long since returned from China and was now considered a federal prisoner.

Zhang said that the prosecutor had lied repeatedly to MIT Technology Review. Zhang said that the prosecutor had lied repeatedly to him. Then in court, the translator said she couldn’t remember.”

Early in 2019, Bonumose settled its civil suit. Although the terms were confidential, Rogers and Zhang confirmed that Zhang has no ownership interest in Bonumose. Although TIB paid most of Zhang’s legal fees for the civil case, Zhang says the criminal case cost him approximately $800,000, draining his savings and IRA accounts, and leaving him deeply in debt to friends and family.

In September 2019, after a year spent under house arrest, Zhang finally faced his sentence. The US government called for a $100,000 fine and five years of incarceration. Instead, the judge ordered him to pay just $500 and serve two years of supervised release, during which Zhang would have to stay in western Virginia. “His life is effectively ruined,” said the judge, according to a local news report, noting that Zhang hadn’t profited personally, had lost his career and reputation, and was unlikely to reoffend. The government could only claim that it suffered a monetary loss from the NSF’s time spent processing CFB grant applications. However, the agency was unable to give a dollar amount.

Zhang says there was no money abuse. He is referring to the fact he did not follow through on his suggestion that the NSF money be used for unauthorized projects.

“[Zhang] definitely bent rules from time to time, and he appears to have eventually gone way over the line,” says Joe Rollin. “But as far as what he was actually charged for, I don’t think justice was equally administered.”

Zhang would spend the next two years quietly at home, caring for a daughter with a brain injury and working remotely, part time, for TIB. On November 25 last year, his sentence served and his US passport restored, Zhang flew, alone, to Tianjin.

This time there were no ceremonies or payouts. He didn’t even have any research team to greet him. He says, “Before I had people, but most left to work in other labs.” “And I didn’t get the promised funding through TIB. They say that it was a long time ago. We need to see if your research still works.”

The candy industry would like to know the same thing about rare sugars in general. Professor of food microbiology at University of Illinois, Yong-Su Jin has created his own tagatose production process using engineered yeast. Bonumose’s process should yield high levels of tagatose but it requires complex enzymes that can be costly. He says that although I believe the multiple reactions can be implemented in a small system they are not as robust at large scale.

“Bonumose’s process already is proven at large scale,” Rogers said in reply. “There are no structural impediments to scaling low-cost tagatose production for the global mass market.”

The US FDA and Health Canada have both approved Bonumose’s tagatose production process, although some challenges remain. Bonumose wants the FDA to treat tagatose in the same way it treats allulose, a rare sugar that is not added to the total sugars list on nutrition labels.

There are also concerns about tagatose’s potential side effects if consumed in excess. In a filing with the FDA, Bonumose noted a year-long study by researchers at the University of Maryland involving eight people in which two withdrew after suffering diarrhea, flatulence, and bloating. The FDA estimates that tagatose has a lower calorie count than the FDA. However, there were mild gastrointestinal issues in the remaining subjects. The EU reckons that each gram of tagatose has 60% more calories than the US estimate, which might make it less attractive to dieters.

Hershey Company Corporate sign
Hershey has invested in Bonumose along with ASR Group, the world’s largest cane sugar refiner and marketer.

KRISTOFFER TRIPPLAAR/ SIPA USA VIA AP IMAGES

Nevertheless, Big Sugar is exploring the possibilities of the new sugar technology. ASR Group, the largest cane sugar refiner, marketer and investor in the world, invested in Bonumose along with Hershey. ASR will be the company’s exclusive distributor for tagatose across North America and Western Europe.

“If we sell half a million tons of year of tagatose, that would be one-quarter of 1% of the annual sugar volume sold globally,” says Rogers. “But it would make Bonumose a billion-dollar-a-year company.”

Bonumose’s difficulties with China did not end with the civil case. In 2019, TIB challenged Bonumose’s own tagatose patent in China, dragging out the cost and uncertainty for two more years as TIB lost and then appealed that decision. “The Chinese-government-owned university spent over a million dollars in legal fees trying to kill us as a young company,” says Rogers. “We thought we could focus on growing the technology instead of having to fight this battle against the Communist Chinese government.”

Evidence gathered by the FBI also revealed that Zhang and You were indeed the unnamed co-inventors on TIB’s tagatose patent. Rogers claims that Bonumose’s patent validity has been established. Dan Wichelecki is now the sole inventor.

” “It was a shame that things happened with grant issues, because [Zhang] were brilliant scientists,” Rogers states. “I believe in forgiveness and I’ve forgiven Rogers .”

The NSF certainly believes it landed a large fish. In October’s testimony before the House committee on national security and open research, Allison Lerner, NSF’s inspector general, highlighted Zhang’s case.

Although membership in a foreign government’s talent recruitment program like China’s Hundred Talents is not illegal, the NSF wants to know about researchers’ membership in such programs because it believes that some elicit unethical and “possibly criminal” behaviors. Zhang’s case was the only one she mentioned in her testimony.

“China’s … plans are targeting the best and brightest scientists engaged in research in disciplines that are of intense interest to it all across the world,” her written testimony stated, shortly before it detailed Zhang’s case, under the headline “Grant Fraud Involving Foreign Talent Plan Participant.”

Lerner made it a point to say that race and ethnicity are not relevant in NSF investigations. China is not concerned about race, she stated. “Knowledge and expertise in key areas like quantum computing is.” Race doesn’t matter to us. When deciding whether to open a case, the focus is on the conduct of a researcher: Was he a member at the time he submitted a request for NSF funding?

Did she disclose that membership as part of the proposal process?”

However, Zhang joined China’s Hundred Talents Program only after committing the grant offenses he was later convicted of, and after the NSF had suspended payments to CFB. Zhang’s participation in this program appears to have been the result of the NSF investigation, and not the cause.

Zhang believes that this misframing was deliberate and racially motivated. He claims that this was a political prosecution due to the conflict between China, the US and my race. “No matter how much I do for the US they always think that I am a spy

His experiences predated those of other researchers. In the same year Zhang was convicted, Department of Justice created the China Initiative to counter economic espionage as well as national security threats from China. MIT Technology Review’s reporting found that the program, which targeted a number of researchers and academics, disproportionately affected people of Chinese heritage, who made up 88% of individuals charged. In February, assistant attorney general Matthew Olsen announced that the Justice Department would be ending the initiative, saying, “We helped give rise to a harmful perception that the department applies a lower standard to investigate and prosecute criminal conduct related to [China].”

Zhang, who is still a US citizen, has continued to write papers on enzymes, bioengineering, and rare sugars, some in collaboration with Chun You and Zhiguang Zhu, both of whom run thriving labs at TIB. He has no plans to return to the US.

” “Maybe in future, when I’m retiring, I might return,” he said. “But working? “But working? Doing research is the most dangerous job in the US … My American dream was broken.”

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