Campaigners say $500,000 grant was made to AquaBounty despite evidence that the firm could soon run out of cash

The Obama administration awarded a coveted research grant to a financially strapped company working to put genetically modified (GM) salmon on American dinner tables, overlooking disclosures that the firm could run out of cash in early 2012, it has emerged.

Campaigners say the $500,000 grant to AquaBounty amounts to a bail-out for the firm's main investor, the business tycoon and former economics minister of Georgia, Kakha Bendukidze. They are also comparing it to the Solyndra controversy, which saw a solar company go bankrupt after receiving government loan guarantees.

"Certainly this does have shades of Solyndra. We have seen this company's stock plummeting for months and months – years actually – and what does the US Department of Agriculture (USDA) do but give this company money?", said Colin O'Neil, a policy analyst at the Centre for Food Safety, which opposes GM salmon.

"This is research that any public university or independent institution could be doing, so why is the USDA funding this interested company to do it?" he said. The grant, awarded last month, comes at a critical juncture for AquaBounty.

After $67m and 16 years' waiting, the Food and Drug Administration could pronounce GM salmon fit for human consumption within weeks, the company's chief executive, Ronald Stotish, said.

"Based on what we are seeing we believe we will have an approval by end of this year but we plan for all contingencies," he said.

He said the company had prospective fish farmers lined up for the GM salmon in South Dakota, West Virginia, Wisconsin and Ohio. "We have people in the United States who are interested in growing these fish right now."

If approved, the salmon would be the first modified animal to make its way into the food chain, clearing the way for an entire menagerie of redesigns, from fast-growing trout and tilapia to the "enviro-pig", genetically altered to produce less polluting poo.

The USDA said it had followed the proper procedures in making the grant from the National Institute of Food and Agriculture (NIFA) – including a review of AquaBounty's financial information.

"On this particular grant, our procedures did call for the company to submit two years of financial information, including annual reports, tax forms, and other miscellaneous information. AquaBounty has provided this information for the grant they were awarded this year and are in compliance with all NIFA requirements for funding," the USDA spokeswoman wrote in an email.

She said NIFA reviewed 58 biotech research proposals before announcing the grants to AquaBounty and other companies.

GM salmon, originally devised by researchers at Newfoundland's Memorial University, combine a growth hormone gene from the Chinook salmon, the largest variety in the Pacific, with a strip of DNA from the ocean pout, an eel-like animal that lives in extremely cold water.

Normally, the gene ensures the pout does not freeze to death. In the case of GM salmon, it ensures the growth hormone gene is switched on continuously for a non-stop growth spurt. The GM salmon grow up to six times as fast as the conventional variety.

The company plans to grow the modified salmon eggs at a lab in Prince Edward Island, and then fly them to Panama where they will be raised an inland fish farms. They would then be shipped back for sale in the US.

The use of inland fish farms is designed to prevent the salmon for escaping into the wild. The company says 98% of the fish are sterile.

However, the Canadian government has admitted it can not fully protect wild fish stocks in Canada from GM salmon, according to documents this week obtained by the Vancouver Sun. And in Alaska, senators introduced bills on Monday to ban the sale and shipment in the US of GM salmon, citing risks to salmon in the wild.

The grant to AquaBounty, though just a fraction of the $500m loan guarantee to the bankrupt solar company, comes at a time when the Obama administration is on the defensive when it comes to its handling of energy and environmental projects.

Emails released by the White House suggest that Obama fundraisers influenced the decision to fund Solyndra.

Another set of emails obtained by environmental organisations suggest the State Department had an overly friendly relationship with lobbyists for the Keystone XL project, intended to pipe crude from the Alberta tar sands to Texas.

In the case of AquaBounty, campaigners argue there is a conflict of interest in funding research on GM animals by companies designing those animals.

As with other biotech companies, government grants have been crucial for AquaBounty's survival. Over the years, it has received some $3m from the US government and some $6m in funds from Canadian government.

"My sense is that they have been waiting years and years for something they could actually sell," said Patty Lovera, assistant director of Food and Water Watch which opposes GM salmon.

Stotish acknowledged the importance of government support. "It is true that we don't have unlimited funds," he said. "We are a small company so these grants are important to us."

The company's interim financial report, issued on 23 September, just five days before the grant announcement, records a net operating loss of $2.8m for the first six months of this year, $500,000 more than the previous year. "Current balances are sufficient to take the company into Q2 2012," the report says.

It adds: "The board is conscious however that the company's cash resources will need to be supplemented early in 2012."

The company's last round of fundraising in late 2010 saw Bendukidze take about 48% ownership with an investment of about $5m made through his investment firm Linnaeus Capital. The next largest owner is the Chilean investor, Alejandro Weinstein.

Stotish said the firm was looking to raise money again to take it beyond the first quarter of 2012. Even if the Food and Drug Administration (FDA) does sign off on AquaBounty, the company will still have to wait for approvals from the Canadian government to grow the fish eggs on a commercial basis, and from the Panamanian government.

There are no guarantees the FDA will approve GM salmon in the immediate future. A year ago, AquaBounty thought it was finally entering the end game after the FDA said the fish was safe for human consumption and did not pose a threat to the environment – but then the process unaccountably stalled.

"They are still not in the home stretch even if there is FDA approval," O'Neil said.

(By Suzanne Goldenberg, The Guardian, 18/10/2011)