The Biotech Start-Up Making Vaccines for Bees and Shrimp

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1:25EasyCater, your business tool for food. To learn more, visit easycater.com slash podcast. Hello, All Thoughts listeners. So you are about to listen to an episode that we recorded back in April when there was a lot of news around trade and tariffs. So you might hear us reference that quite heavily. It's a very interesting episode, and I think you'll enjoy it. Take a listen. Bloomberg Audio Studios. Podcasts. Radio. News.

2:08Hello and welcome to another episode of the Odd Thoughts Podcast. I'm Tracey Alloway. And I'm Joe Weisenthal. Joe, do you remember when you were a kid? Presumably you went on road trips. like across America. I did. Do you remember how filthy cars used to get on road trips because of like hitting millions and thousands of insects? Do you remember this? I thought you were going to say how filthy cars get inside. Because of kids. And I was like, my car is filthy inside. It's disgusting. But I do remember that. And, you know, there are like weird things like people like, you know, like insects and like people have talked about how like this is like one of those mysteries.

2:46It's kind of like chemtrails. Why don't car windshields get filthy anymore? As buggy as they used to. Yeah. I didn't know this was ever going to become an odd lots topic, so I'm pleasantly surprised. Well, I have a lot of thoughts on this. So one, the buggiest place I ever used to visit was in Arkansas with my grandma in the summer. And I remember like the car just being like disgusting. Not only because of insects, but because there are also a lot of armadillos there. And armadillos, I don't know if you know this, but when they're frightened, they jump up. So they tend to get caught in like truck grills.

3:17Anyway, this is probably too much information. But I also I tried to read a book on insects once and the lack thereof in today's natural world, I guess. And it was called The Insect Crisis. And it's one of the few books that I had to stop reading after like three chapters because I just found it too depressing. By the way, I just want to say, A, I like that whenever this episode is getting released, we're recording this April 24th. I appreciate a break from like, oh, we're not talking about tariffs every second. Two, you mentioned armadillos. It reminds me of the famous sort of left-wing Texas populist Jim Hightower wrote a book, There's Nothing in the Middle of the Road But Yellow Stripes and Dead Armadillos, a work of political subversion.

4:00So thank you for reminding me of that book. I need to read that. I don't remember the other thing I was going to say, so keep going. Okay. Well, anyway, you know, I'm starting on a depressing topic, which is there has been this notable decline in insects over the past couple of decades. And if you talk to old people like us, Joe and me, we will say that there is a notable lack of insects just when you're out and about and, you know, driving on highways or whatever. But all of that said, this isn't a doom and gloom episode because we're actually going to be talking about some interesting efforts to kind of arrest that decline.

4:35And, you know, Joe and I, we've taken an interest in biotechnology That's right. Recently, especially in the context of the U.S. versus China. But human biotech is not the only thing out there. There is a pretty big industry around animal and insect biotech. And I know nothing about it pretty much. And I find it very interesting. And we should talk about it. We should. And also, look, pets and animals are a huge industry. And so for when it comes to biotech, non-human animals are huge. And of course, the other context besides the U.S. versus China in biotech is, of course, the cutting or the gutting, some would say, of sort of core research from the federal government level.

5:15So this intersects with industrial and political trends. And so even though it's not a tariff episode, I'm looking forward to it. Well, not just that. So, you know, one of the foremost examples of insect species that has been in decline is honeybees, of course. And those are constantly in the news, the lack of honeybees. And we all know if we don't have as many honeybees, well, then we don't have as much honey. But we also don't have as much other types of foods because they are very important pollinators. You know, I just one last thing for me. When I was in college, I lived in a vegan, a vegan co-op at the University of Texas.

5:48Did you have a beehive? No, but I had this business idea. Oh, we should have hand pollinated produce and sell it to grocery stores as saying this is the only true vegan produce you can have because we don't even use bees in the process. I never did it, but I thought that'd be a good business. Oh, my God. Have you ever hand pollinated something? No. It's fun. Oh, so you can do it. Yeah. I mean, you got like a little like feather, a little rag, and you sort of spread the pollen around while doing your best like impression. You have to be in the mindset of a bee. If I were back at, you know, 22 years old, I'd make a big radical stand about only eating hand pollinated produce.

6:22Don't make the bees work. Yeah, that's right. It's cruel. OK. All right. Clearly, we could talk about bees and insects and armadillos for probably another hour or so. But why don't we get straight to our guest? We have the perfect guest. We're going to be speaking with Annette Kleiser. She is the CEO over at Dallin Animal Health, which has been doing some really, really interesting things in the field of animal biotech. So, Annette, thank you so much for coming on All Thoughts. Thank you so much for having me. It's a pleasure to be here. I'm very excited to talk about something other than the tariffs for a start.

6:52And I do like talking about the natural world. But like, first off, why don't we just kind of add some context to where we are? Why is animal biotech an important field to be investing in? Well, a lot of what we depend on in food and agriculture, you talked about pets. Of course, they are, you know, companions. They're very, very important to us. But a lot of what we eat depends on animals. So not just the typical production animals that we think about, which, you know, like cows or chickens, but also, you know, fish or shrimp. And then one of the most important workhorses probably that we have is the honeybee, because our most nutritious foods wouldn't grow, wouldn't exist if it wasn't for these little animals that buzz around and pollinate them.

7:50So apples and it's actually the most nutritious foods that we have wouldn't exist whether it's almonds or pumpkins or onions. So they're extremely important and we need to protect all of these animals, not just our companion animals, but also these really important production animals, livestock, everything that falls in it. And so biotech has a big role to play, not just on the human side, but also on the animal side. What do you tell us what Dallin Animal Health does and your role there and give us some background about your work specifically? Yeah, happy to do so. So Darnan Animal Health focuses on these animals.

8:32So we're a biotech company. We're about six and a half years old, so we're relatively young still. But we focus on what we call underserved animals, which are primarily insects, invertebrates. And we developed the world's first vaccine for honeybees to protect them from diseases. they get diseases they get sick just like any other animals just like we do they get viral infections they get bacterial infections and despite the fact that they are so important for our survival and so not just food production but biodiversity you had mentioned that the whole insect declines are extremely extremely important in a bigger picture there is nothing or there was nothing out there to really help them fend off diseases.

9:24And so we decided to set out and change that and decide, you know, these animals, they need the protection, they need our care, and we can't just complain about the insects. We also need to protect them. And so that's what we do. I have so many questions already, but perhaps my biggest one is how does a honeybee vaccination actually work? Because I imagine you're not all going out there with tiny little syringes and inoculating millions of bees, which would kind of defeat the purpose of having all these pollinators do our work for us. How does it work? Yeah, we want to be kind to them. We want to be, you know, careful.

10:06And you had, you know, some of us are older. And when I was a child, I remember the nurse came to school and gave us a sugar cube with the polio vaccine on it. And this is very similar. The queen gets a sugar paste to eat in her early stages before she gets introduced into the new colony. And we just mix the vaccine. It's an oral vaccine. It's a liquid. We mix it into that sugar paste and she takes it up by eating in a nutshell. And then she spreads it, I guess, to her offspring. Right. So insects have this interesting phenomenon that the maternal animal passes on information about a disease that is in the environment to the next generation.

10:58And the queen does this via the eggs. So there's a disease in the hive. There are pathogens in the hive. She can't get sick. A lot of these diseases are infant diseases. They're larval diseases. So they threaten the brood just when they emerge from the egg. And so the queen takes these pathogens up and passes little pieces of it to her ovaries. And the developing larvae will see this piece of a pathogen and say, oh, there's something out there. The immune system gets upregulated before they hatch, and they are protected when they hatch. And this is a mechanism that is widely seen in insects and invertebrates and actually also in chickens and other animals.

11:47And so what we do is just use that naturally occurring phenomenon. and where we only have to vaccinate the queen or expose the queen to a dead bacteria that can't infect anything. And the next generation is protected. It's pretty clever. It's a little, you know, magic wand that you, you know, put over the hive. So within the field of animal biotech, or even more specifically, rare animal biotech, or even more specifically, bee vaccine biotech, I can imagine multiple different areas of what you'd call business or value-add creation. So there's the raw science of like, what does the molecular structure of a B vaccine look like?

12:31Then I would imagine there is the challenge of turning raw science into something productized that can be distributed and sold at a profit. And then there's the actual sort of distribution of it. So going out to the actual customers, here's a product that exists. Where does your company sit specifically? How much is it at the raw science level and how much is it the productization of raw science? All of it. I'm laughing. You don't see me laughing, but I'm laughing because that was actually what we were faced with when we decided to do this company. This was very early academic research at the University of Helsinki when I by accident stumbled across it.

13:20The university had brought me in to look at their life science portfolio to see if there's a company that could be spun out, if technology, a patent that could be licensed to an existing company. And typically when you do this, you know, you see a lot of really interesting research. I mean, universities are full with just amazing, amazing research. But, you know, often if there are incremental small, you know, improvements that are really important to move us forward, but they're rarely these completely out of the box ideas. Right, right. Put it this way. And so I stumbled, the researcher happened to be in the office at the university when I was there and the director called her in and said, you know, Dahlia, why don't you tell these folks about your idea for a B vaccine?

14:08And I just got really intrigued because, you know, somebody needed to do something, I told myself. And, you know. This is your CSO, founding CSO. I'm looking at your website, Dahlia Freitag. Dahlia Freitag, right. And so she's a professor at the University of Graz. She was at Helsinki and now she's in Graz. And so this was really early research, very early data showing that this might be possible. The company then had to start completely from scratch to find a strain, to go out and, you know, in infected hives, build a strain collection, you know, go to the regulator. that there was no regulatory pass, there was no development pass, how do you conduct clinical trials?

14:52Nobody had ever done this before. So there was the whole development of the product that could then go out into the market. And then there was no model of how there were no channels. I mean, if you develop a new shoe, you go to a shoe store and that's where you sell the shoe. For a bee vaccine, they didn't exist. So there was no distribution. There's no bee clinics out there. There's no retailer on Fifth Avenue where you get your insect vaccines. There's no channel. Yeah. If your beehive is sick, you're not going to call a veterinarian and say, well, carry the hive into the veterinary clinic. Can you look at my queen?

15:36You call your neighbor. you call, you know, your father or your grandfather that had bees. So it's a complete, even these large beekeepers, and in the U.S., when we're talking large beekeepers, they have 70, 100 ,000, 120 ,000 colonies. Wow. These are massive operations that are pollinating our crop during this, our apples, you know, the beautiful apples that you get, you know, a bit Whole Foods. And it's like they need these big beekeepers, these big producers. But still, there is no veterinarian that comes by. There is no, you know, so it didn't exist. So we are creating everything done, basically is writing the playbook on how do they develop these products?

16:31How do you get them licensed? How do you commercialize them? How do you roll it out. How do you work with the industry and not just with the industry, with state veterinarians, with it's much bigger. And these are global problems. I was talking to one state government veterinarian in Europe who was then asking me, well, we don't really know what to do here. What's the opinion of the World Health Organization? And I say, you must be kidding me. Let me call them, you know, let me pick up my phone and figure out what they have to say about this. So really what we had to do is the whole front bench to customer.

17:17And it's exciting when you have an opportunity to do that and to figure it out.

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19:44Chase for Business. Make more of what's yours. Accounts subject to credit approval. Restrictions and limitations apply. Cards are issued by JPMorgan Chase Bank and a member FDIC. I have so many questions about this, not just the regulatory portion of this and the commercialization, but specifically to begin with on the funding side. So you're doing something relatively new. And I imagine if you go to a traditional venture capitalist or a traditional investor in biotech and you say, I have a B vaccine, I'm sure some of them are very excited because it's novel and it sounds kind of cool. But on the other hand, it is this kind of brand new thing.

20:23And I could see some people being a little bit surprised. What are those conversations like when you're first trying to raise funding? Right. So it has changed a lot over the last six years, thankfully. But in the beginning, when I set out, it was really clear we did not fit any investment themes. So we're not animal health, because even though bees are classified as livestock. They are not, you know, it's the pets, it's the companion animals, which the biggest, but then the traditional ones, the cows and the chickens, but not bees. That just falls outside animal health investment. On the agriculture side, most architect investors will look at microbiomes of trees, drones, surveillance, more precision, agriculture, technology-driven AI, those themes.

21:24And then you have the food tech investors, which are further upstream, right? They look at the honey, but they don't look where the honey came from. So we fell into this complete no-man's land. There was, in food tech, there were a couple of investors that at the time, a lot of money was going into alternative protein production to lower, you know, to be more sustainable, lower CO2 impact and meat. Oh yeah, the fig meats. Right, the mere worms and grasshoppers for animal feed and human food production. They were really interested in this because they said, well, we had a complete blind spot that these animals could get sick too.

22:06But vaccines was not in their target. So they couldn't invest in it. So there was literally nobody that, so it was, in the beginning, it was heavily angel funded because angels, yes, they want to make money. These are rich individuals that want to make, you know, money with their investments, but they also, they're driven by, they want to do, you know, good in the world with their wealth. So the return expectations and the time frame is a little bit different. And so they really backed this. So we were entirely, entirely angel funded and a lot globally. So very few U.S. actually, European, Canadian growers that came from the agricultural space, from the animal health space, but not VCs.

23:01And it was in 2022. I don't, you might remember when the market went down. It was a horrible time for everyone, especially startups was in a few weeks. All the discussions that I had and fundraising, you know, people were jumping off left and right. And somebody asked me to speak at a climate and space conference. And I said climate and space. But when you're raising money, you take every opportunity you can to spread the word. So I went and there were these amazing talks about, you know, refueling stations in space and hotels and, you know, whatever you have and these batteries and everything.

23:45And then I came with my B vaccine and telling the audience that this is great that, you know, because of climate change, we have to go to other planets and we have to be prepared for this. But in the meantime, we really need to solve this problem because we're never going to be able to solve it here on this planet or any other planet if we don't protect insects. We may not like them, but they are incredibly important for human survival, plant survival. All living organisms need these little, you know, we can do wetland restoration. It doesn't matter if we don't have insects to live in them. And sure enough, at the end of the night, I was approached by several climate investors, VCs, sustainability and climate that understood the importance of what we were doing and had, you know, more flexible investment themes and a longer term horizon.

24:48And I was able to get funding. And so now a lot of the investors that we're talking to come from that space. I think this is so fascinating because something that's come up in the podcast before in various context is this idea that like, you know, we think of like this wall of capital out there that exists and it's seeking return. But whether it's banks, whether it's VCs, whether it's private credit firms, et cetera, there is specialization and there are categories of things. And we talk a lot about this, particularly more often in the context of certain energy techs. Sometimes they call it the missing middle.

25:28This idea that there are theoretically profitable investments out there, But it's just not in anyone's specific wheelhouse. And no one is in charge of the B vaccine investment, right? Yeah, so it's like not something that someone is specialized in. So even the theoretically profitable on some time horizon investment doesn't happen because there isn't that, I guess, domain knowledge or very specific domain knowledge. Where are you today in terms of both funding, but also in productization and distribution? Right. And I think there is one really important aspect to it. I believe one of the reasons why there is, you know, you have the specialization and you have these investments.

26:12I mean, investors are willing to take risks. Banks are willing to take risks. But there is still going to be an assessment of return. An assessment of return you can only do if you know the market. if you have understanding of how the market works, how the go-to-market strategy is, who is going to pay for it, if you are developing a product that the world hasn't seen before, how are you going to price it? It's a total crystal ball that's in front of you, and investors are managing other people's money. Right. You know, it's like they can't you know, it's a it's a huge hurdle to to make the argument.

26:57We believe that, you know, somebody is going to pay X for this novel product, because, you know, if you go out and do market research and we've done that and ask if there was a B vaccine, how much would you pay? Right. An investor expects you to do that. And but people have no concept. This is like if you go out, you know, would you pay$1 ,000 for an iPhone? And you've never seen it. Yeah, yeah. And so you have to really get push hard as quickly as possible, get the product out. You know, most biotech products take 10, 15 years and millions of dollars. We had to do this in rapid time to get there with total focus and show that the market, that there is a need that we're solving a problem that actually exists and that people are willing to buy it because the problem is so large.

27:56So we completed our first year of commercialization, first full season. These animals are seasonal animals. They hibernate over the winter and then the almond pollination kicks off the new season, which just happened in California. So we had a lot of beekeepers interested in it. We had initial sales. We did a lot of, you know, this is high touch. You have to know these people. They have to learn. We weren't, you know, an unknown little company. And the first product, who are these people? So we had to overcome this. And so now the second year, the season just barely started. And we already have like five times as many purchase orders than we had the same time last year.

28:51Many more customers. I think there was another five to six time increase in customer that come to us. Now people are coming to us. They've heard about it. And so there's a lot of, you know, in agriculture, you know, if your likelihood depends on it, you won't just purchase a new product and apply it in your entire operation. Right. You will take it out in, you know, one percent, you know, in a couple of hives, maybe a hundred hives. Then the next year you'll say, OK, OK, this is fine. I'm going to test it in 20 percent of my operation. And then at some point, once you see that it really turns the corner for you, then it's when you place, when you adopt it 100%.