KALAMAZOO — When Anna Rath signed on as CEO of Vestaron Corp. 15 months ago, the company was preparing to transition from a focus on R&D to commercializing a line of new environmentally friendly insecticides.
Since then, the Kalamazoo-based Vestaron put in place a senior management team led by Rath, built up internal capabilities, brought its first products to market, formed its first distribution relationships, moved contract production from Europe to the Midwest, and secured $40 million in financing “from a really top-shelf group of investors.”
Fourteen years after its creation, Vestaron now sits “at a really exciting pivot point in its life,” Rath told MiBiz in an exclusive interview.
“The foundation is laid,” she said. “The company has in place all of the key things that it needs to be successful and now it’s off to the races. Now we get to really start building the market for this first family of products as well as aggressively moving forward the pipeline of additional product families.”
Vestaron developed a new biopesticide based on spider venom that holds promise to create an entirely new field in the $18 billion global insecticide market. Many experts predict the effect could be similar to what the development and emergence of biologic drugs have done for the pharmaceutical industry.
Rath describes the science and technology behind Vestaron’s new Spear-branded products as “our own little revolution” in agricultural chemistry that’s going from an “industry based predominantly on small molecule synthetics to one where biologic molecules with proven modes of action as well as great safety and environmental attributes will play a major role.”
Vestaron’s role in that transformation drew the interest of investors, who put $40 million into a Series B capital round that closed in June.
Novo A/S, a Denmark-based holding company of pharmaceutical giant Novo Nordisk A/S and biotech Novo Zymes, a producer on industrial enzymes, led the capital round. Other investors include Boston-based Anterra Capital; Chicago-based Cultivian Sandbox Ventures, which has an office in Grand Rapids; Effingham, Ill.-based Open Prairie Ventures; and Vancouver, British Columbia-based Pangaea Ventures Ltd.
The deal was the first time Novo invested in a company involved in agricultural technology. Novo entered the deal with a deep understanding of the science behind Vestaron’s peptide and the production process.
“They knew that it was a space they wanted to get into. Because of the parallels they could see in Vestaron to some of the things that happened in pharma a few decades ago, this opportunity made sense to them,” Rath said. “The most important thing is that, in general, now we have a syndicate of investors that believes that Vestaron can have a significant impact on the world of ag chem.”
In a public announcement last month on the company’s Series B round, Anders Spohr, senior director at Novo Holdings, said Vestaron’s platform “has the potential to make a positive and meaningful impact on agriculture, the environment and society.”
“We have deep conviction about Vestaron’s prospects and look forward to supporting the company and its team going forward,” Spohr said.
Vestaron plans to use the new capital to expand commercialization and accelerate the development of an additional line of eco-friendly insecticides, as well as a fungicide, anti-bacterial and a “much broader array of crop protection products,” Rath said.
After moving production to a contract manufacturer in the Midwest, the company recently hired Ash Patel as its chief operating officer. A veteran operations director, Patel has 23 years of experience in managing manufacturing, engineering, capital projects, supply chain and I.T./automation systems.
Vestaron sells its products through a network of distributors and this month announced a deal with BFG Supply in Burton, Ohio, a supplier to professional growers.
The company began generating revenue this year as it works to develop a broader national distribution network for 2020, Rath said. The company’s Spear-T product is used in greenhouses. Spear-Lep is used in fields to protect fruits, vegetables and high-value field crops.
Rath expects to have contracts in place with national distributors by the first quarter of next year.
“Now that we’re in a position to be able to really supply the market, we are in discussions with a couple of the major national distributors about significant national distribution agreements with them,” she said. “What we have this year is lots and lots of demonstrations out with key opinion leader growers and with these distribution partners to really lay the groundwork for next year, which we think will be our first year where we really have really significant sales into the market.”
Interest in Vestaron’s product “is extremely strong,” Rath said, helped along by a designation from what’s known as the Insect Resistance Action Committee, which is a technical group for the global industry trade association CropLife International, based in Brussels, Belgium. Both Spear products were assigned a novel code that indicates they target nerve and muscular receptors in insects that combined account for about 30 percent of the global insecticide market.
That’s a market “in dire need of a new solution” because of resistance issues, Rath said.
“Being a novel mode of action targeting that critically important receptor means that we are getting a lot more attention from distributors and from growers than a small biologics company with one product ordinarily would,” she said.
Looking to the future, Vestaron must make a number of strategic decisions in the coming months, including “how we want to handle our international expansion,” Rath said.
That decision will come down to whether Vestaron wants to bear the full costs of registration in foreign countries, or sell international rights to fund further development in the U.S. The answers may vary from country to country, Rath said.
Vestaron has initiated trials to submit registrations for Spear peptide-based products in Canada and Mexico, and “we are starting to think more broadly beyond that as well,” she said.
The company also needs to decide how rapidly to develop a pipeline of additional peptides that have been identified and can be brought to market, she added.
Ultimately, as Vestaron grows and reaches its potential, owners will need to decide how best to unlock the value the company has created, either through an exit and sale to a strategic acquirer, or a possible initial public stock offering.
“Within a few years, or three to five, we will have really delivered on the promise of the company, including achieving substantial sales of the Spear products, including international expansion, including bringing additional pipeline peptides to market, and really showing that these biologics can have the same revolutionary impact in ag that they did in pharma,” Rath said. “At which point, we would have built something that is pretty compelling to some of the major ag chem companies.
“But given that there are those established distribution networks that are straightforward for a company like ours to tap into in ag, it is also entirely possible that we could remain independent and choose to do an IPO.”
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