Nidus Center Articles and Press Releases

Biotech startup receives $1.4 million from backers; Derek Rapp, ex-Monsanto executive, joins as CEO
By Rick Desloge

Divergence, which is developing technology to neutralize harmful parasites, has raised $1.4 million in its initial round of fund raising.

The local biotech startup company attracted investments from St. Louisans familiar with its research and from several former top executives at life science firms elsewhere, said Chief Executive Derek Rapp.

"Very little of our money came from St. Louis," said Rapp, a former Monsanto Co. executive who led that company's $2.5 billion acquisition of Dekalb Genetics in 1998.

Among the investors are Roy Vagelos and Wilbur "Bill" Gantz, he said. Vagelos was chairman and chief executive of Merck & Co. until he retired in 1994. He has funded molecular science research at his alma mater, the University of Pennsylvania. Gantz is a former chief operating officer of Baxter Laboratories Inc. in Chicago.

Dr. James McCarter, a group leader of Parasitic Nematode Sequencing at the Genome Sequencing Center at Washington University, founded Divergence in 1998. His father, John McCarter, chairman of the Field Museum in Chicago and a former consultant to life science firms, is chairman of the company.

The McCarters, Rapp and Ernest Jaworski, a retired director of plant biotechnology at Monsanto, are the board of directors.

Rapp, 38, joined the business when it completed the initial fund raising in February. He declined to disclose other investors or how much more capital the small business -- eight full-time and three part-time employees -- still expects to raise.

However, he said Divergence is among the 20 companies selected to make presentations to venture capitalists May 15-16 at the InvestMidwest forum in Kansas City.

Divergence likely won't deliver its first product before 2008, Rapp said. "We've already filed for patents. It's highly unlikely Divergence is going to commercialize an end product," he said. "We would develop a licensing or royalty agreement, or sell the technology outright" to a life-science giant, such as Monsanto, Dow or DuPont.

The business plan calls for using recent genome research to develop ecologically sound methods to control some parasitic nematodes. The microscopic worms cause an estimated $80 billion damage to crops such as soybeans, cotton and bananas. Other nematodes, such as hookworms and heartworms, live in animals, and some forms are prevalent among humans in developing nations.

"Nematodes are a huge problem for the herbicide industry because all of the present pesticides (used against them) are carcinogenic and have to be phased out by 2005," said Bob Calcaterra, president and chief executive of the Nidus Center for Scientific Enterprise.

Divergence, now at 660 S. Euclid Ave., is negotiating a lease that would make it the fifth early-stage biotech firm at Nidus, Calcaterra said.

Tom Melzer, managing director of RiverVest Venture Partners, a local venture fund specializing in biotechnology, said $1.4 million in new capital during an initial round of financing "represents a significant step for an early-stage company...Life science venture companies didn't get overextended the way others in the Internet (field) did."

Kirk Walden, national director of the PWC/VentureOne MoneyTree survey, said the bio-pharmaceutical field is the only venture area that saw an increase every quarter of 2000. Bio-pharmaceutical investments reached $2.65 billion last year nationwide, up from $1.3 billion in 1999.

Rapp predicted that Divergence will face other competitors in the field of nematode research, but it is broad enough for several to succeed.

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