NXW Nutrition from Water deepens PhycoFerm partnership with strategic strain investment

NXW Nutrition from Water has agreed to take an equity stake in Portuguese biotechnology company PhycoFerm, opting for ownership rather than licensing as it looks to strengthen what it believes will become one of the industry’s most valuable competitive assets: proprietary microalgae strains.

• NXW Nutrition from Water has agreed to take an equity stake in PhycoFerm, formalizing a long-term R&D partnership to develop next-generation microalgae strains while securing ownership of its biological assets.

• The partnership will combine expertise in strain development and R&D to improve productivity, protein quality and production economics using classical mutagenesis and adaptive laboratory evolution, while supporting future commercialization efforts.

• Over the next 12 to 24 months, the partnership will focus on Generation II strain development, validation, scale-up and commercial readiness, supporting NXW Nutrition from Water's strategy to accelerate industrial-scale microalgae ingredients.

The investment formalizes the two companies' existing collaboration, creating a structured research and development partnership focused on Generation I and Generation II strain development for protein and functional ingredient production. According to NXW Nutrition from Water, the investment secures ownership of the strains being developed through the partnership, combining strategic investment with collaborative R&D to strengthen the foundation of its platform.

“It is important for us to own our biological assets,” Federico Duarte, CEO of NXW Nutrition from Water, told Protein Production Technology International in an interview before the official announcement. “Investing ensures that we own the strains rather than simply licensing them.”

The move reflects a broader view of how the company intends to grow. Rather than building every part of the value chain itself, NXW Nutrition from Water is assembling a network of specialist partners spanning strain development, manufacturing, packaging and commercialization. The investment in Phycoferm strengthens the R&D foundation of that ecosystem, complementing manufacturing partner Japan Strategic Capital Partners (JSPC), packaging specialist SIG, and joint development agreement partners including Nissei Kyoeki.

“As NXW Nutrition from Water we want to have a firmer grip over the two ends of the value chain,” Duarte explained. “At the start of the value chain is strain development and at the end is commercialization. These are the two key pillars of the business that will allow us to build a strong category while remaining CapEx light.”

That philosophy also explains why the company sees value in taking an equity stake beyond intellectual property considerations. By becoming a shareholder in Phycoferm, NXW Nutrition from Watersays it has created a more structurally connected relationship at the strain development stage, replacing what might otherwise have remained a conventional commercial partnership.

The PhycoFerm investment is the latest step in a value chain strategy that NXW Nutrition from Waterhas been assembling over the past 18 months. In March 2025, the company introduced Marine Whey Gold, a microalgae-derived protein ingredient developed for bakery dairy and condiment applications, before signing Joint Development Agreements to support its launch in Japan and Europe. Later that year, it partnered with packaging specialist SIG to combine Marine Whey and Marine Whey Gold with aseptic packaging technology, targeting affordable, shelf-stable nutrition in markets where refrigeration infrastructure remains limited.

Earlier this year, NXW Nutrition from Water addressed another part of the value chain through a partnership with Jiangsu Jiangshan Pharmaceutical (JSPC), gaining access to large-scale fermentation infrastructure and bringing forward its projected route to profitable scale. Rather than building manufacturing capacity itself, the company chose to work with an established industrial fermentation partner while concentrating its own resources on biology, product development and commercialization.

The PhycoFerm investment adds another layer to that strategy. Alongside manufacturing support through JSPC and commercial partnerships already in place, NXW Nutrition from Water is strengthening the biological foundation of its platform through proprietary strain development as it continues to expand its network of strategic partners.

“This partnership reflects the core thesis in our playbook: to build a new category at scale and with a cost advantage, we need the right partners structurally connected across the value chain,” Duarte added. “We see success coming from a coordinated cohort of allies doing what each one of them does best.”

The investment forms part of what NXW Nutrition from Water describes as its biological asset strategy, which is built around two generations of production strains.

The first generation comprises Chlorella strains developed through classical random mutagenesis, a well-established breeding approach that creates useful genetic variation without genetic engineering. These strains are intended to establish the company's commercial foundation because they can be deployed with minimal regulatory hurdles.

“Our strategy is to use Generation I strains to build the category,” Duarte said. “Once the category is built, we will introduce Generation II strains to build a stronger moat.”

Those second-generation strains will combine naturally occurring strains identified through bioprospecting with further optimization carried out in collaboration with PhycoFerm. The objective is to increase productivity, improve protein content and quality, and develop strains capable of performing more reliably under industrial production conditions.

For Duarte, improving strains is not a one-off scientific exercise but an ongoing process that evolves alongside manufacturing.

“The interplay between strain and process is critical to achieve scale economics,” he said. “We’ve realized that we need to go through a cycle of ongoing strain improvement informed by the performance of the strain in the scaled process.”

That means laboratory work is being guided by data gathered during commercial-scale production.

“We run the strain at scale and identify what might be traits that are interesting to improve to improve the economics,” Duarte said. “We then go back to the lab to improve the strain in service of those goals. This is how we stay ahead of competition and continuously improve our economics.”

The approach highlights one of the biggest technical challenges facing the microalgae sector.

Developing commercially successful strains requires scientists to balance multiple biological characteristics simultaneously. Improving one attribute can reduce performance elsewhere, while strains that perform exceptionally well in laboratory conditions frequently behave differently once transferred into industrial production systems.

NXW Nutrition from Water believes that continuous feedback between biology and manufacturing is essential if microalgae-derived ingredients are to become cost competitive with conventional protein sources.

Although the company is not disclosing specific performance targets, Duarte said improvements at the strain level ultimately translate into stronger production economics and better-performing ingredients.

“Better strains mean better production economics and ingredient performance,” he said. “Our focus is on delivering commercially meaningful improvements that strengthen both cost competitiveness and product quality.”

While artificial intelligence and genetic engineering are attracting growing attention across industrial biotechnology, NXW Nutrition from Water has deliberately focused its development program on adaptive laboratory evolution and classical mutagenesis.

The company says both techniques have been widely used across industrial biotechnology for many years and offer proven improvements in productivity and robustness while benefiting from broad regulatory acceptance and familiarity within the food industry.

Its collaboration with PhycoFerm brings expertise in both approaches, together with high-throughput screening technologies used to identify strains with enhanced productivity, robustness and desirable metabolic characteristics.

Benjamin Schmid, COO of PhycoFerm, said the partnership enables both companies to focus on their respective strengths while working toward the same commercial objective.

“We are excited about the partnership because it allows us to stay focused on our core strengths while contributing to the transition of microalgae-based ingredients into scalable, commercially viable platforms for next-generation ingredients.”

He believes microalgae remain one of the strongest platforms available for future ingredient production.

“We believe microalgae are the most efficient and nutritionally complete production organisms available to us today. They have the potential to reshape how the world makes protein and functional ingredients.”

Beyond the science, the partnership also reflects the growing role of Portugal's Algarve region as a center for blue biotechnology.

Both companies have established operations there, benefiting from years of investment in research infrastructure, university programs and institutional support for the blue economy.

“The region has the science, the coastline, and now the companies to become a genuine hub for Europe’s blue bioeconomy,” said Hugo Barros, Head of the Entrepreneurship & Technology Transfer Division (CRIA) at the University of Algarve. “The partnership between PhycoFerm and NXW Nutrition from Water is exactly the kind of collaboration that reflects this momentum, bringing next-generation strain development to commercial scale in southern Portugal.”

Duarte believes the region’s development has been deliberate rather than accidental, supported by local research organizations, government backing, a growing talent pipeline and proximity to European food manufacturers.

Looking ahead, the partners expect to spend the next 12 to 24 months advancing their Generation I strains through development, validation, scale-up and commercial readiness. At the same time, they will continue building a longer-term innovation pipeline, with Generation II strains forming the next stage of development alongside future improvements to production performance.

For NXW Nutrition from Water, the investment reflects the importance of the partnership itself. By combining strategic investment with collaborative strain development, the company aims to secure and continuously improve the biological foundation of its platform as microalgae ingredients move closer to mainstream food production.