Deal To Watch: Streamlining the Bioproduct Manufacturing Process Starts with Soil

Summary

At the time of publication, 5/23/19, Pluton Biosciences had raised $51,500
The Pluton Biosciences team has been selected as a “Deal To Watch” by KingsCrowd. This distinction is reserved for deals selected into the top 10-20% of our due diligence funnel. If you have questions regarding our deal diligence and selection methodology please reach out to hello@kingscrowd.com.

Problem

In 2015, the Zika virus became a growing cause for concern throughout the world. Known as a mosquito-borne illness that causes neurologic complications in babies, Zika held the attention of researchers at the World Health Organization who spent their resources searching for a solution.

An age-old threat to our globe is pollution. Humankind is dependant on durable plastics that on a chemical level cannot be broken down due to their strong polymer chains. Instead of deteriorating, they break down into smaller, nearly invisible pieces, and may end up in the ocean or our bodies.

Our society faces many future agricultural challenges as well. Given an increasing global population, a growing demand for food thus follows. We must be ready to address food supply threats such as crop infestations and agriculture diseases in the future.

Although three seemingly disconnected problems, their solution is evidently found in a common place: nature itself. Microbes– microscopic bacteria, fungi, or viruses that are found everywhere– have been proven to be capable of killing mosquitos, breaking down plastics, and protecting crops.

However, difficulty in both scientific research and product development have resulted in stagnation. The research and genome sequencing process for these microbes is simply expensive, takes time, and oftentimes results in dead-ends.

Solution

Pluton Biosciences uses a strong team of researchers, along with an innovative testing process in order to analyze soil samples and discover new microorganisms 100x faster than the industry leaders. 

Today, roughly half the drugs on the market were derived naturally from microorganisms, including the revolutionary penicillin. Other disruptive breakthroughs in crop protection and gene editing came from these organisms, but only a limited number of microbe species have these capabilities. Considering there is roughly 1 trillion species on earth, humankind must look to further research these species for much-needed scientific breakthroughs. Considering a teaspoon of soil contains billions of microorganisms, the Earth is a valid place to look for a solution.

In order to do this, Pluton Biosciences uses a patented process called Micromining, where they essentially obtain a shipped sample of soil, design an assay, and initiate a discovery process.

Through surveying, they extract microbes, select organisms with specific traits, isolate particular microbes, and eventually identify them. Lastly, they license their discovery to manufacturers and collaborate to develop products.

Data collected from micromining is stored in a database, which is enhanced through machine learning algorithms. It will ultimately contain data that describes these microbes, and will ideally predict other microbes useful for future testing.

Pluton Biosciences is currently addressing the aforementioned issue involving the spread of disease through the single deadliest animal: the Aedes Aegypti. This mosquito is a carrier of Zika, Chikungunya, Yellow Fever, and Dengue Fever, leading to over 700K human deaths per year.

Mosquitoes are growing increasingly resistant to current pesticides. In order to address this, the company plans to eradicate these harmful species during the beginning of their life cycle– larva. Pluton’s research had effectively discovered and patented two new strains of bacteria with larvicidal capabilities, named PLU1 and PLU2. Considering there are only two other discovered forms of larvicidal bacteria, and researchers have been limited to them for the past 30 years, this is a considerable breakthrough.

The Business Plan

The current industry standard research process takes about 6 to 12 months to effectively “mine” 3,000 microbes, costing companies $130 to $250 per microbe, taking into account the pay for employees over that time period.

The Pluton Micromining process allows 50,000 microbes to be mined in 2-4 months, and limiting the costs to $1.35 to $2.35 per microbe per full-time working hour.

At the moment, it costs Pluton roughly $100K to operate their business annually (as of 2017 and 2018), though this is far from at scale expected cost. In talking with management, they have stressed their focus on being lean until future capital raising and licensing deals are signed. They’ve received a total of $375K of funding since their founding date in Q1 of 2017.

Pluton plans to profit by patenting their microbe research. Their target consumer base is primarily manufacturers of “bioproduct solutions” (e.g., pesticides, pharmaceuticals). Discoveries are licensed to these companies so they can test them and evaluate them for use in their product. Pluton generates revenue through not only their license fees, but also “milestone” fees. When a company develops a biosolution, and submits their product for regulatory approval, registers the product, and sells it, Pluton will make money. Further, Pluton will receive royalties on future sales for a specified period of time.

Customers can also pay Pluton in advance in order to direct their research and discovery process towards a common objective (in addition to the milestone fees). These joint-development agreements are predicted to be Pluton’s primary client.

An efficient process allows Pluton to quickly build a portfolio of licenses for their customers, as compared to slower in-house research labs at larger companies.

Biotech Research and Development

Their overall industry can be classified as an early stage research platform in Biotech R&D. As a whole, the market is projected to be worth $727B by 2025.

Pluton is currently working with the Aerosol and Air Quality lab at Washington University to help create a nano-propellent larvicide. In addition, they are establishing a licence for a biopesticide manufacturer to test their non-toxin bacteria against 3 types of agricultural pests. This means they are more specifically (and currently) players in both the Vector Control Market ($20B) and the Agricultural Pest Control Market ($27B).

In respect to competition, there are a handful of key players in the agriculture and pharmaceutical industries to watch out for include AgBiome in the agriculture industry and Ginkgo Bioworks in pharmaceuticals, both heavily capitalized businesses, though with somewhat different focuses. 

AgBiome has acquired $136.5M in funding, so it is more significant in scale compared to Pluton. Yet, they’ve also been around since 2012. AgBiome also claims that their process of sequencing microbe genomes from samples is the fastest on the market. They focus their efforts to finding solutions for killing insects, fungus, and weeds.

Ginkgo Bioworks, founded in 2009, has been acquired once and received nearly $430M in total funding over 5 rounds. The company is backed by Bill Gates and Y Combinator (the top of US seed accelerators). They focus on using genetic engineering to create bacteria with industrial applications.

Pluton’s focus on licensing the microbes they identify is the key differentiator from these better-capitalized startups. Additionally, Pluton is less focused on one market such as agriculture, which AgBiome is focused on. Being essentially a contract manufacturer to enable larger pharma and chemical companies to compete with products developed and sold by the likes of Ginkgo Bioworks provides Pluton space in the market.  

Regardless, they will need to raise significantly more capital to become an interesting player in this market.

The Pluton Team

CEO Charlie Walch has nearly 30 years of entrepreneurial experience. He was the president and co-founder of First Choice Courier and Distribution, Inc., which started from a merger in 1996, and grew revenue from $2M to $4M. He sold the company to CD&L, where he worked as a Branch manager, where he further learned about the delivery business.  

He bought the Missouri division of his company back later, and ran it himself. He expanded revenues from $12M to $30M as CEO, and eventually transferred the business to new ownership as it grew to over $60M in revenues.

Glen Schuster, the current CTO, had also previously been the CTO of a separate healthcare company, the Centene Corporation. He has experience in business strategy, entrepreneurship, and working with data, considering he is the founder of Skrymir Data Strategies of St. Louis. The company cultivates data to drive innovation in healthcare. 

Scientist Ann Guggisberg, Ph.D. is Pluton Bioscience’s Director of Research. Dr. Guggisberg has experience working with Monsanto, and acting as a Scientific Editor for her graduate school– Washington University in St. Louis. With a doctorate in molecular genetics and genomics, as well as experience with etymology, she is able to effectively design experiments for characterizing microbes.

Why We Like it

• Market Flexibility: Since the structure of Pluton Biosciences is a research laboratory, and the soil microbiome contains organisms that could be useful to multiple different markets, the company will have a diverse customer base. This potentially means more licenses, more sales, and more solutions to the world’s issues
  
• CSR at the Forefront: The company’s goals to prevent the spread of disease, sustain crops, and seek environmental solutions through natural methods ultimately support the idea that businesses can generate profit, while striving to benefit mankind by following principles of corporate social responsibility.
  
• A Diverse Team: Pluton Biosciences has many strong players working towards their success. Overall, they have minds in the fields of microbiology, molecular biology, biochemistry, genetics, genomics, assay development, and the microbiome, all working together. All the while, an advisory board of engineers, bankers, and software developers contribute to the process.
  
• Making Moves: Pluton is currently partnered with Terramera, a company aimed at using their patented discoveries to develop an affordable pesticide solutions for ensuring the growth of clean and safe food. In addition, Pluton has 5 potential companies interested in their services, including Bayer, Syngenta, and INDIGO.

Rating

Pluton Biosciences is a Deal To Watch. In terms of the deal itself, the minimum investment is $1000. Pluton Biosciences is offering a maximum of $150K in convertible notes through this deal. Should you choose to invest, the capital will be put towards future wages for workers, new equipment, marketing, and general working capital.

A concern for Pluton Biosciences is their dependence on supplies for testing. Shortages of research targets can slow down the Micromining process, and thus the discovery of new leads.

Moreover, the company’s revenue stream is dependant on government regulation. A client who purchases their license may have difficulty getting approved by the EPA or FDA, and thus halting future payments to Pluton Biosciences. There exists a significant amount of uncertainty in biotechnology research.

Despite the issues, the company has a strong team, is part of an opportune market, and has a patented unique research approach. There is real promise for the business from an economic and social impact perspective and they are meeting a market gap in terms of research amongst many of the largest pharma and chemical companies.

For these reasons, we think Pluton Biosciences is a Deal to Watch.