Medicago to work with U.S. Army on biofuel study

TORONTO Oct 8 (Reuters) - Medicago Inc MDG.V, a small Canadian biotech company, said on Thursday it will work with the U.S. Army to study ways of creating fuels from plants, sending its shares up more than 20 percent.

The Quebec City-based company, known for its work with tobacco leaves, will work with the army's research arm to investigate production of industrial enzymes in the field of biofuels. Industrial enzymes are produced by living cells and speed up chemical reactions.

The value of the contract was not disclosed, and Medicago was not immediately available for further comment. However, in a release the company said the growing world enzyme market is currently worth about $4 billion and is projected to increase by about 6 percent annually.

"The high cost of enzymes is a major hurdle in the production of biofuels using biomass. We believe our manufacturing platform could be suitable for the production of affordable enzymes as plants are uniquely capable of efficient protein expression at high yields and low costs," Louis Vezina, Medicago's chief scientific officer, said in a release.

Medicago, which makes protein-based vaccines from the genetic engineering of plants including tobacco, got a shot in the arm last year when tobacco giant Philip Morris (PM.N) invested C$16 million in the company.

Since then it has been active in developing a vaccine for the H1N1 swine flu and H5N1 avian influenzas.

Last month it signed an agreement with Tabuk Pharmaceuticals of Saudi Arabia for the commercial development of an influenza vaccine in Saudi Arabia and other Middle Eastern countries. The company's shares rose 12.8 percent at 53 Canadian cents on Canada's TSX Venture Exchange, after touching a high of 59 Canadian cents earlier in the session. ($1=$1.06 Canadian) (Reporting by Scott Anderson; Editing by Frank McGurty)