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Divergence, Inc.
Enabling Innovation Through Entrepreneurship –
Divergence, Inc. and Start-ups in St. Louis
James McCarter...
Divergence, Inc.
• Accelerated innovation is needed to meet massive global
challenges in health, food & environment.
• Ent...
Divergence, Inc.
Colleagues
Divergence: Derek Rapp, Jeremy Williams, Michelle Insco
Monsanto: Robb Fraley, Tom Adams, John...
Divergence, Inc.
Divergence – an “Overnight Success”
that was a Decade in the Making
• St. Louis biotech acquired
by Monsa...
Divergence, Inc.
Trichinella
Whipworm
Plant Parasites
C. elegans
Hookworm
Ascaris
Filarial Worms
Heartworm
Pinworm
Livesto...
Divergence, Inc.
Soybeans damaged
by SCN
U.S. SCN distribution
Uptake of plant proteins
into the SCN intestine
(B. Gao & M...
Divergence, Inc.
Divergence – Genomics led to Superior Diagnostic Products that
Can Replace Microscopy in Veterinary & Hum...
Divergence, Inc.Lee and Jez, Structure 21:1778-87, 2013.
• PEAMT: Divergence discovered a unique and essential enzymatic
p...
Divergence, Inc.
2005 - The Pivot: Divergence Leveraged its Strengths in
Informatics to Create a New Computational Chemist...
Divergence, Inc.
2009 - Jason Bond – Southern Illinois Univ.,
Carmi IL, SCN Seed Treatment
Cysts Per Root at 5 weeks
0
10
...
Divergence, Inc.
Divergence Nematicide - Outstanding Mammalian Safety
and Environmental Safety Profile
Compound
Rat Oral L...
Divergence, Inc.
Be ready for everything to take longer than you expect.
Just because others aren’t doing it doesn’t mean ...
Forward-Looking Statements
Certain statements contained in this presentation are "forward-looking statements," such as sta...
SOYBEAN CYST NEMATODE
MONSANTO RESEARCH, SUMMER 2011
New Generation of Nematicide Could Provide
Novel Formulations with Ex...
Our Vision: Sustainable Agriculture
A Strong Vision That Guides All We Do
• Producing More
– We are committed to increasin...
Headquarters: St. Louis, MO
Total employees: ~22,000
Global locations: >500
Net Sales (FY13) $14.9 billion
United States
L...
Genetically Modified Crops
Produce Food That is as Safe and Nutritious as Conventional
USED FOR GMO CROPS SINCE 1996
ACRES...
Agriculture is at the Center of Global Changes
1990 20121980 2050TODAY
4.4B
7.1B
9.6B+
1ACRE
perpersonin
1961
lessthan
1/3...
Innovation
BIOLOGICALS
INTEGRATED FARMING
SYSTEMSSM
CROP PROTECTION
AGRONOMIC PRACTICES
Monsanto’s R&D Pipeline Builds
on ...
Growth Ventures Creates Transformative Business
and Technology Opportunities for Monsanto
Venture Capital - Gaining Earlie...
Venture Capital - Gaining Earlier Access to External Innovation
• Investment builds a portfolio of early-stage assets with...
Doubling Yields with 1/3 Less Inputs by 2030 vs. 2000 –
Farming in the Future Will Be Increasingly Information-Driven
General Farm Planning
Weed Control Program
Row Spacing
Variety/Hybrid
Selection
Refuge Options
Plant Population
Seed Treat...
San Francisco Bay Area Dominants U.S. Venture Capital
Investments Followed by Boston
SFO
STL
BOS
Innovation is concentrate...
St. Louis now has
>$2B in
Venture Capital
Under Management
the non-profit Venture Arm of BioSTL has…
• Created & funded 46 start-ups
• Invested $7.6 million, leveraged 20:1 with
ove...
• Launched in 2012, Arch Grants is a non-profit creating a game-changing
entrepreneurial culture and infrastructure to cre...
Biotech Has Been Joined By a Thriving IT Start-up Scene That
Boosted St. Louis Capital Raised in 2013 to $380 Million
Transform a 200-acre midtown industrial neighborhood into a
vibrant, 24-7, live-work-play-learn innovation community
Transform a 200-acre midtown industrial neighborhood into a
vibrant, 24-7, live-work-play-learn innovation community
• $2 ...
• Launched in 2010
• Consulting for Bioscience Companies
• 200 Student Participants
• 73 Consulting Projects for 37 client...
Divergence, Inc.
• Accelerated innovation is needed to meet massive global
challenges in health, food & environment.
• Ent...
• Innovation requires a scientifically literate public & talented young scientists from
diverse backgrounds
• YSP was laun...
Thank you to Monsanto for support of St. Louis innovation & science education.
What makes a city a hub of entrepreneurship?  Successes and reinvestment.
What makes a city a hub of entrepreneurship?  Successes and reinvestment.
What makes a city a hub of entrepreneurship?  Successes and reinvestment.
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What makes a city a hub of entrepreneurship? Successes and reinvestment.

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When Jim McCarter founded Divergence, Inc. in 1998, St. Louis was far from a start-up hub. The Company's successful acquisition by Monsanto is now but one indicator of a burgeoning entrepreneurial tech scene in St. Louis. Here's a tour from the science behind Divergence, to Monsanto Growth Ventures, to BioGenerator and other innovation engines of the region.

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What makes a city a hub of entrepreneurship? Successes and reinvestment.

  1. 1. Divergence, Inc. Enabling Innovation Through Entrepreneurship – Divergence, Inc. and Start-ups in St. Louis James McCarter, M.D., Ph.D. Entrepreneur in Residence, Monsanto Growth Ventures & BioGenerator Adjunct Professor of Genetics, Washington University (Former President & CSO, Divergence, Inc.) Washington University School of Medicine Reunions, April 25, 2014, St. Louis MO
  2. 2. Divergence, Inc. • Accelerated innovation is needed to meet massive global challenges in health, food & environment. • Entrepreneurship is uniquely positioned to drive innovation through creation of multidisciplinary teams with singular focus. • The capital formation landscape is rapidly changing with the rise of angel investors, crowd sourcing & corporate venture. • After a decade of capacity building, St. Louis’ entrepreneurial ecosystem is nearing critical mass. • The mission & culture of WashU must expand from leading in knowledge creation to embrace innovation for societal impact. • Join in enabling WashU & St. Louis entrepreneurship by identifying clinical needs, mentoring, giving, & investing. Key Messages for Innovation & Entrepreneurship
  3. 3. Divergence, Inc. Colleagues Divergence: Derek Rapp, Jeremy Williams, Michelle Insco Monsanto: Robb Fraley, Tom Adams, John Hamer BioGenerator: Eric Gulve, Dan Broderick Washington University: Jeff Milbrandt, Evan Kharasch Slides Cortex Innovation District: Dennis Lower St. Louis Regional Chamber: Jay DeLong Balsa and Idea Labs: Yinzi Liu, Avik Som Thank You Financial Disclosures: Monsanto, Cultivation Capital, Neurolutions, Mobius Therapeutics
  4. 4. Divergence, Inc. Divergence – an “Overnight Success” that was a Decade in the Making • St. Louis biotech acquired by Monsanto in 2011 • 3 products in agriculture & veterinary medicine • Team of 25 scientists, world-class SAB including a Nobel laureate & 4 HHMI Investigators • Reputation for scientific- excellence with 80 patents & publications and leadership in RNA interference • Venture & angel financing of $21M, Revenue of $22M from contracts & 33 grants 4
  5. 5. Divergence, Inc. Trichinella Whipworm Plant Parasites C. elegans Hookworm Ascaris Filarial Worms Heartworm Pinworm Livestock Strongylids • Apply the public knowledge created by WashU’s world- leading effort in nematode genomics (McCarter & Waterston, Mitreva & Wilson) Divergence Mission: Develop Safe & Effective Products for the Control of Parasitic Nematodes in Humans, Animals, & Plants Nematodes (roundworms) - • Most abundant animals • Infect 2 billion people • Cause >$80 billion in crop damage annually Root-knot Cyst Lesion Reniform
  6. 6. Divergence, Inc. Soybeans damaged by SCN U.S. SCN distribution Uptake of plant proteins into the SCN intestine (B. Gao & M. Hresko, Divergence) Soybean Cyst Nematode (SCN) is the Most Important Disease of U.S. Soybeans • Over $1 billion in lost yield annually in U.S. alone • Yield losses of 30% without above ground symptoms • Neurotoxic pesticides out of favor with growers & regulators • Rapid breaking of genetic resistance in the field
  7. 7. Divergence, Inc. Divergence – Genomics led to Superior Diagnostic Products that Can Replace Microscopy in Veterinary & Human Medicine Plate ELISA for detection of hookworm, toxocara & whipworm in dogs IDEXX whipworm test, launched in 2014, detects infection a month ahead of microscopy Divergence achieved proof-of-concept for human Ascaris detection in Brazil (M. Crawford, Divergence)
  8. 8. Divergence, Inc.Lee and Jez, Structure 21:1778-87, 2013. • PEAMT: Divergence discovered a unique and essential enzymatic pathway for nematode phosphocholine biosynthesis • Partnered with Dr. Joe Jez at Danforth & WashU to characterize enzyme structure and function 2005 - The Pivot: Genomics led to “Divergent” Molecular Targets But Not Yet Pharmaceutical & Agrochemical Products
  9. 9. Divergence, Inc. 2005 - The Pivot: Divergence Leveraged its Strengths in Informatics to Create a New Computational Chemistry Platform The Harvest Chemical Discovery Platform • Broad R&D platform for rapid and cost-effective agrochemical discovery • Developed in collaboration with UK-based Cresset Biomolecular Discovery • Able to search chemical structure space based on electron distributions rather than 2D structures • Resulted in discovery of a molecular series with novel mode of action, high potency, and safety far superior to commercial nematicide standards Jeremy Williams, PhD Vice President, Discovery Research Matt Dimmic, PhD Senior Director, Computational Discovery Research
  10. 10. Divergence, Inc. 2009 - Jason Bond – Southern Illinois Univ., Carmi IL, SCN Seed Treatment Cysts Per Root at 5 weeks 0 10 20 30 40 DA-I DA-II oxamyl NT 1 mg/seed 2009 - Greg Tylka – Iowa State, Nevada IA, SCN Seed Treatment Hg Reproductive Factor 0 5 10 15 20 25 DA-I DA-II oxamyl NT 1 mg/seed Divergence Nematicide – SCN Reproduction Reduced at All Three Sites in Illinois and Iowa SCN Performance at 1 mg/seed comparable to the carbamate oxamyl. (B. Shortt, Divergence)
  11. 11. Divergence, Inc. Divergence Nematicide - Outstanding Mammalian Safety and Environmental Safety Profile Compound Rat Oral LD50 (mg/kg) Rat Dermal LD50 (mg/kg) Rabbit Dermal Irritant Rabbit Eye Irritant DA-I >5000 >5000 None Mild DA-II >5000 >5000 Slight Mild Abamectin 11 >330 Slight Mild Terbufos 1.3 1.1 Lethal Lethal Compound Quail LD50 (mg/kg) Bee LD50 (µg/bee) Daphnia EC50 (µg/L) Earthworm LD50 (mg/kg soil) DA-I >500 >25 >100 >100 DA-II >500 >25 >100 >100 Abamectin >2000 0.002 0.37 33 Terbufos 29 4.1 0.31 4
  12. 12. Divergence, Inc. Be ready for everything to take longer than you expect. Just because others aren’t doing it doesn’t mean it’s not worth doing. Position yourself for exposure to smart experienced people. Build a multidisciplinary and versatile team. The best situation is being valued for products and platform. Communicate fully with your team for a shared vision. Create incentives for your team including ownership. Things change when you accept investors’ money. Make every decision with an eye toward the liquidity event. Do not obsess about valuation. Find non-dilutive sources of funding. Leading a start-up company is an intensely personal experience. (Start-ups are risky but not starting is risky too.) Paraphrasing a Dozen Start-up Lessons from Divergence CEO Derek Rapp
  13. 13. Forward-Looking Statements Certain statements contained in this presentation are "forward-looking statements," such as statements concerning the company's anticipated financial results, current and future product performance, regulatory approvals, business and financial plans and other non-historical facts. These statements are based on current expectations and currently available information. However, since these statements are based on factors that involve risks and uncertainties, the company's actual performance and results may differ materially from those described or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, among others: continued competition in seeds, traits and agricultural chemicals; the company's exposure to various contingencies, including those related to intellectual property protection, regulatory compliance and the speed with which approvals are received, and public acceptance of biotechnology products; the success of the company's research and development activities; the outcomes of major lawsuits and the previously announced SEC investigation; developments related to foreign currencies and economies; successful operation of recent acquisitions; fluctuations in commodity prices; compliance with regulations affecting our manufacturing; the accuracy of the company's estimates related to distribution inventory levels; the company's ability to fund its short-term financing needs and to obtain payment for the products that it sells; the effect of weather conditions, natural disasters and accidents on the agriculture business or the company's facilities; and other risks and factors detailed in the company's most recent periodic report to the SEC. Undue reliance should not be placed on these forward-looking statements, which are current only as of the date of this presentation. The company disclaims any current intention or obligation to update any forward-looking statements or any of the factors that may affect actual results. Trademarks Trademarks owned by Monsanto Company and its wholly-owned subsidiaries are italicized in this presentation. All other trademarks are the property of their respective owners. © 2014 Monsanto Company
  14. 14. SOYBEAN CYST NEMATODE MONSANTO RESEARCH, SUMMER 2011 New Generation of Nematicide Could Provide Novel Formulations with Excellent Control • Through the acquisition of Divergence, Monsanto has added a new nematicide to its pipeline • Efficacy of new nematicide equal to competitive standards against multiple nematode species • A variety of crops showing good results including corn, soy and cotton • Regulatory submissions on track EXPLORATORY NEMATICIDE CHEMISTRY UNTREATED CONTROL Phase 3 Advanced Product Development
  15. 15. Our Vision: Sustainable Agriculture A Strong Vision That Guides All We Do • Producing More – We are committed to increasing yields to meet the growing demand for food, fiber & fuel • Conserving More – We are committed to reducing the amount of land, water and energy needed to grow our crops • Improving Lives – We are committed to improving lives around the world Monsanto’s Goal: Double Yields with 1/3 Less Inputs by 2030 versus the year 2000
  16. 16. Headquarters: St. Louis, MO Total employees: ~22,000 Global locations: >500 Net Sales (FY13) $14.9 billion United States Latin America North Brazil Argentina EU 27 India Australia Corn Soybeans Cotton Vegetables Roundup® Primary Markets Monsanto Company is a leading global provider of technology-based tools and agricultural products that improve farm productivity and food quality. Monsanto is 100% Focused on Agriculture “We succeed when farmers succeed.” -Hugh Grant, Monsanto CEO
  17. 17. Genetically Modified Crops Produce Food That is as Safe and Nutritious as Conventional USED FOR GMO CROPS SINCE 1996 ACRES OF FARMLAND3.95 Billion SUPPORT THAT GMO CROPS ARE JUST AS SAFE AS THOSE DEVELOPED THROUGH TRADITIONAL BREEDING ACADEMIC STUDIES1000+ THAT GMO CROPS HAVE BEEN RESEARCHED AND DEVELOPED YEARS30 ON AVERAGE TO DEVELOP AND TEST GM SEEDS BEFORE THEY’RE GROWN COMMERCIALLY IN THE U.S. YEARS13 WHERE GM CROPS HAVE BEEN APPROVED FOR CULTIVATION OR IMPORT COUNTRIES63 www.gmoanswers.com
  18. 18. Agriculture is at the Center of Global Changes 1990 20121980 2050TODAY 4.4B 7.1B 9.6B+ 1ACRE perpersonin 1961 lessthan 1/3ACREperpersonin 2050 DIETARYPERCENTAGEOFMEAT 9% in 1965 14% in 2030 CHANGING CHANGINGRISING DECLINING Challenges Source: The World Bank, Food and Agriculture Organization of the United Nations (FAO-STAT), Monsanto Internal Calculations
  19. 19. Innovation BIOLOGICALS INTEGRATED FARMING SYSTEMSSM CROP PROTECTION AGRONOMIC PRACTICES Monsanto’s R&D Pipeline Builds on a History of Innovation in Agriculture 2000s1990s1980s BIOTECHNOLOGY BREEDING
  20. 20. Growth Ventures Creates Transformative Business and Technology Opportunities for Monsanto Venture Capital - Gaining Earlier Access to External Innovation • Sourcing from venture capital & entrepreneurial networks provides strategic insights to areas of disruptive innovation • Entrepreneurs bring ideas from other industries and syndication leverages new capital to solve challenges in agriculture SFO STL BOS Innovation is concentrated in entrepreneurial ecosystems with leading research centers, VCs, angel investors, incubators, accelerators, etc.
  21. 21. Venture Capital - Gaining Earlier Access to External Innovation • Investment builds a portfolio of early-stage assets with opportunities for partnering, licensing, talent, and M&A • Monsanto Growth Ventures VC team has sourced investments and additional deals (licenses, etc.) from hundreds of leads Growth Ventures Creates Transformative Business and Technology Opportunities for Monsanto
  22. 22. Doubling Yields with 1/3 Less Inputs by 2030 vs. 2000 – Farming in the Future Will Be Increasingly Information-Driven
  23. 23. General Farm Planning Weed Control Program Row Spacing Variety/Hybrid Selection Refuge Options Plant Population Seed Treatment Soil Insecticides Pre-Plant Irrigation Fertility Program pH Management Burn-Down Program Tillage Level Primary Tillage Program Seed Depth Planting Speed Through the Field Other Planting Operation Decisions Plant Population Starter Fertilizer Herbicide Application Soil Insecticides Fungicide Application – In-Furrow Variety/Hybrid Selection In-Field Keep Stand or Re-Plant Post-Emergent Herbicide Application Foliar Insect Control Fertility Program Foliar Disease Control Irrigation Application In-Season Equipment Timing Storage Post-Harvest Assessment PLANTING IN-SEASONPRE-PLANTING HARVESTPLANNING Grower Decisions Over the Year – Farming in the Future Will Be Increasingly Information-Driven
  24. 24. San Francisco Bay Area Dominants U.S. Venture Capital Investments Followed by Boston SFO STL BOS Innovation is concentrated in entrepreneurial ecosystems with leading research centers, VCs, angel investors, incubators, accelerators, etc. PWC Moneytree Venture Capital Report, 2013.
  25. 25. St. Louis now has >$2B in Venture Capital Under Management
  26. 26. the non-profit Venture Arm of BioSTL has… • Created & funded 46 start-ups • Invested $7.6 million, leveraged 20:1 with over $156 million in additional investment & revenue • Funded WashU start-ups Cardialen, Neurolutions & PixelEXX • BioGenerator Accelerator Lab; 18,000 square feet of office & lab space, free for start-ups • Entrepreneur in Residence Program; 16 experienced EIRs mentoring over 100 companies
  27. 27. • Launched in 2012, Arch Grants is a non-profit creating a game-changing entrepreneurial culture and infrastructure to create jobs & attract talent to St. Louis • Arch Grants funded companies are winners of an international start-up competition that has attracted 1,600 applications from 40 states and 20 countries • 35 starts-up have been awarded $50K each in non-dilutive financing to launch in St. Louis • With $1.9M in grant funding, companies have generated $15M in revenue and follow-on capital, 34 remain viable and St. Louis-based
  28. 28. Biotech Has Been Joined By a Thriving IT Start-up Scene That Boosted St. Louis Capital Raised in 2013 to $380 Million
  29. 29. Transform a 200-acre midtown industrial neighborhood into a vibrant, 24-7, live-work-play-learn innovation community
  30. 30. Transform a 200-acre midtown industrial neighborhood into a vibrant, 24-7, live-work-play-learn innovation community • $2 billion development • 3.7 million square feet • 13,000 permanent jobs • 5 Innovation Centers • Green space & transit
  31. 31. • Launched in 2010 • Consulting for Bioscience Companies • 200 Student Participants • 73 Consulting Projects for 37 clients • 28 WashU OTM Technologies • e.g. Business plans for start-ups • Launched in 2013 • Biomedical Engineering Innovations • 100 Student Participants • 14 Teams with inventions based on clinician-identified challenges • e.g. Cursor control for locked-in patients Student Groups Are Creating a Culture of Entrepreneurship at Washington University
  32. 32. Divergence, Inc. • Accelerated innovation is needed to meet massive global challenges in health, food & environment. • Entrepreneurship is uniquely positioned to drive innovation through creation of multidisciplinary teams with singular focus. • The capital formation landscape is rapidly changing with the rise of angel investors, crowd sourcing & corporate venture. • After a decade of capacity building, St. Louis’ entrepreneurial ecosystem is nearing critical mass. • The mission & culture of WashU must expand from leading in knowledge creation to embrace innovation for societal impact. • Join in enabling WashU & St. Louis entrepreneurship by identifying clinical needs, mentoring, giving, & investing. Key Messages for Innovation & Entrepreneurship NEEDS: Successful exits for repeat investments & serial entrepreneurs. NEEDS: Leadership for an entrepreneurial culture including alumni.
  33. 33. • Innovation requires a scientifically literate public & talented young scientists from diverse backgrounds • YSP was launched in 1991 to promote science literacy and attract high school students from disadvantaged backgrounds into scientific careers through hands-on research and contact with active scientists • Each year more than 100 graduate student volunteers reach 1000 students in local public schools • More than 250 high school juniors have completed research internships at WashU – the majority major in science in college and 1/3rd complete a graduate degree • YSP is supported by the Endowment for Science Literacy at WashU And One Last Message … The Importance of Science Literacy
  34. 34. Thank you to Monsanto for support of St. Louis innovation & science education.

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