Aquaculture startup hones business model to focus on medical application product derived from shrimp

A biotech startup that has planned a new facility in South Dakota for years is still planning one – but taking a much different path than originally envisioned.

At one point, the business originally known as trū Shrimp had its eyes on the nation’s consumers, with a product it felt could disrupt the shrimp industry with its quality while raising the shrimp in ideal conditions.

The Minnesota-based company was inspired during the business travel of founders Brian Knochenmus and his late father, Jon, who visited Ecuador – a world leader in shrimp pond aquaculture – on behalf of Ralco Nutrition, a global animal health and nutrition company, in the late 2000s. They found local shrimp farmers were using Ralco products to fight disease in shrimp, with anecdotal evidence they were working.

Ralco acquired licensing rights to technology from Texas A&M University in 2014 to grow shrimp indoors in shallow water. The trū Shrimp division of Ralco was formed the following year and began scaling up a tidal basin to validate the technology in a lab.

A pilot production facility – Balaton Bay Reef – started construction in 2017 in Balaton, Minnesota, and was commissioned in August 2018.

Fast-forward to 2022 and the team behind trū Shrimp had plans to build a $300 million facility in Madison, along with an agreement from Gordon Food Service to buy 1 million pounds a month.

“Twelve million pounds a year rolls up to a 400,000-square-foot building and a $500 million project,” Knochenmus said.

“Institutional capital did not have the courage to do that, and they still do not, and I get it. It is a big jump.”

From the beginning of the project, the team at trū Shrimp knew the value that exists within a shrimp’s shell. Chitosan is a biopolymer extracted from chitin found in the shells of shrimp. Chitosan enables technological advancements across pharmaceutical, medical device, cosmetic and biotech industries.

As the potential market became clear, the company shifted in a big way, rebranding as Iterro Life Sciences, and committing to developing chitosan for the medical application market.

“We have three revenue streams, and without doubt, the biggest opportunity from an application and revenue standpoint is with our trū Chitosan and life sciences, so it’s not just been a little change,” Knochenmus said. “When we realized how valuable the chitosan from the shell material is, we made a strategic decision more than a year ago to direct our work toward chitosan.”

Chitosan “has always had great promise for medical device and pharmaceuticals,” he continued. “The problem has been there hasn’t been a dependable or credible supply of chitosan.”

Iterro Life Sciences, under its trū Chitosan brand, provides a pristine raw material shell to produce chitosan with a clear competitive advantage.

“Everyone else who makes chitosan essentially collects the trash of the industry – shell material from processing that has been mishandled and scooped up with skid loaders from multiple sources with no chain of custody and uncontrollable variance,” Knochenmus said. “We think about it very differently. We are raising shrimp in shallow water and can collect the molts very efficiently as the shrimp molt their exoskeleton. Half our chitosan will be from molted shell tissue, which is incredibly unique.”

Chitosan has wide applications across the medical device and pharmaceutical industries, he added. It could be a bandage laced with chitosan to stop bleeding quickly and effectively or a gel or a spray a surgeon could use to stop bleeding. Chitosan can be used in orally delivered drugs, cancer therapies, dental and ophthalmology.

“There are nearly 2 million papers in journals of medical science researching what chitosan can do,” Knochenmus said.

“It is remarkable the applications that come to us, and we have on the shelf chitosan that meets the requirements for medical application. Today, companies are buying substandard chitosan and having to rework it to medical application standards, and the money it takes to do that is challenging.”

When chitosan and its business model dynamics entered the equation, suddenly the company did not need to produce 12 million pounds of shrimp annually. Chitosan is sold by the gram – a little goes a long way.

“We started with a plan to produce 1,200 kilograms of chitosan and a $82 million project, and we’re making very good progress on that fundraise,” Knochenmus said.

Along the way, the executive team, with its experience in the food industry and animal health, had to build expertise in the medical community.

A science and medical advisory board includes five Ph.D.s and most recently added Dr. Kevin Croston, a trauma surgeon and former CEO of Twin Cities-based North Memorial Health.

“We’re surrounded by qualified experience in chitosan, biotech engineering and biotech startup development from places like Merck Pharmaceuticals and Harvard University, so the remarkable people behind the project should not go unnoticed,” Knochenmus said.

The shift to Iterro Life Sciences appears promising, said Joni Ekstrum, executive director of South Dakota Biotech.

“The potential market for their chitosan is incredibly exciting, assuming the project can continue to move forward, scale up production and continue to see encouraging business development,” she said.

“The convergence between human health and food science that Iterro represents is unlike anything I can remember seeing – a product that both feeds and heals the world.”

The company is more than halfway to its funding goal between debt and equity pledged toward the Madison project.

Iterro is working with California-based DelMorgan & Co. on its capital raise and has been raising operational capital itself. To learn more, email investorrelations@iterro.com.

In addition to pursuing the chitosan market, there’s still value to the trū Shrimp produced by Iterro – so much so that “we’re pretty much sold out,” Knochenmus said. “They all go to Kowalski’s Markets in Minneapolis.”

The non-consumer portions of the shrimp now are used in trū Protein, the company’s third revenue stream, focused on creating pet food foods, treats and toppers.

A freeze-dried shrimp treat has launched through shrimpsnaps.com, with all e-commerce for now and marketing through social media.

“We actually just launched it a few weeks ago, and the initial sales and feedback we have received are amazing,” Knochenmus said. “Dogs and cats love our Shrimp Snaps. We hope to launch Buoy Bites, a functional pet treat brand later this year.”

Given the many updated timelines and approaches, Knochenmus is reluctant to estimate when construction might begin in Madison. However, if financing comes together, the hope is to break ground this year, followed by a 12- to 18-month construction timeline, for an opening in 2026 or 2027.

“It’s a project that’s new to the world,” he said. “And things that are new to the world take a long time and do not always take the route you expect. But we have taken a very scientific, diligent approach and have not taken short cuts and have good people guiding us.”