Tru Shrimp Cos., an indoor shrimp farm startup on the Minnesota prairie, is looking beyond grocery stores with a new byproduct it's marketing to the medical, pharmaceutical and cosmetic industries.
The Balaton, Minn.-based company will soon try selling chitosan — a biopolymer extracted from shrimp shells — that has a variety of potential uses. It can purportedly protect crops against pests, deliver drugs more efficiently to the human body and treat wastewater.
"Chitosan is extremely valuable and will be a big part of our business going forward," said Michael Ziebell, CEO of Tru Shrimp.
In the medical space, where Tru Shrimp is setting its sights, chitosan holds potential for a wide range of applications. It is nontoxic, biodegradable and has antioxidant, anti-inflammatory and anti-fungal properties. In 2019, the global chitosan market was estimated at about $6.8 billion, with a projected 24.7% compound annual growth rate through 2027, according to a report from Grand View Research.
The move to diversify the company's revenue streams comes as it seeks to raise more money to scale up shrimp production in the Midwest.
Tru Shrimp is best known for its multiyear efforts to build a large-scale, indoor aquaponic shrimp farming operation in the state. The company ditched Luverne, Minn. — where it originally planned to build its production facility — for South Dakota in early 2019 over Minnesota's water regulations.
At the time, the company aimed to build its shrimp harbor that year and said it couldn't spend time clearing Minnesota's hurdles. Three years later, Tru Shrimp has yet to break ground on commercial production facility in Madison, S.D.
Ziebell said the company now hopes to begin construction in 2023 and is working to assemble financing for the $95 million project.
Chitosan can be used in wound care and as an excipient — an ingredient that aids delivery and absorption of a drug in the body.
Montreal-based ChitogenX Inc. is one company looking to the medical-grade chitosan market.
ChitogenX has formulated a "proprietary form of chitosan" by mixing it with a couple of other excipients, said Philippe Deschamps, the company's CEO. Its target market will be large pharmaceutical companies and it hopes to begin generating revenue in 2024.
Deschamps says chitosan is a "safe and effective delivery system for regenerative medicine." ChitogenX plans to buy the polymer from a Toronto-based chitosan supplier and manufacturer.
Chitosan is a derivative of chitin, which can be found in crustacean shells, insects, algae and fungi. The biopolymer can be used as a hemostatic for wound and skin care, for bone regeneration and creating scaffolding within the body. It also has uses for water treatment and in agriculture as a pesticide.
Deschamps said that medical chitosan is "dozens of times more expensive" than agricultural chitosan. He estimated that medical-grade chitosan is approximately 10% of the global market.
But Ziebell expects at least 80% of Tru Shrimp's chitosan sales will go to medical device and pharmaceutical uses.
Medtech giant Medtronic has chitosan in two products: the Novapak sinus packing and nasal stent and Chitogel sinus packing gel.
A report last year from Ontario-based Precedence Research identified North America as the fastest-growing market. The report said that growth in the skincare segment of the cosmetics industry could fuel demand for chitosan, which can be used in skin products to help lock in moisture.
The majority of the world's chitosan is now produced in Southeast Asia, which ranks as the top supplier of shrimp, Ziebell said.
Tru Shrimp, he said, has a letter of intent from a customer that will buy 20% of the chitosan produced at the South Dakota facility — once it's up and running.
In the meantime, the company is growing and harvesting the shrimp tissue at its pilot facility in Balaton and sending it to its contract manufacturer, Parimer Scientific in South Carolina, where chitosan is produced.
Shrimp waste is the company's third business line. Waste from the farmed crustaceans can be processed into high-protein ingredient pet food and treats.
"It has a one-word ingredient statement: shrimp," said Ziebell of the pet food additive. "We don't waste one morsel of the shrimp."
The company's core business — shrimp for human consumption — has landed a local buyer. Its shrimp is currently sold in Kowalski's Markets throughout the Twin Cities.
Earlier this year, the company filed an IPO prospectus with the U.S. Securities and Exchange Commission, but one month later, adverse market conditions forced it to withdraw its plans to go public. "The market collapsed," Ziebell said of the decision.
In its January prospectus, Tru Shrimp said it had incurred "significant net losses and negative cash flows," and did not have sufficient capital to operate beyond the third quarter of this year.
Despite mothballing its IPO plans — which would've shored up its finances — Ziebell said that the company is not on the brink of shutting down.
"We've raised additional capital," Ziebell said, who declined to offer details of the financing other than to say it was equity capital.
Tru Shrimp began in 2014 as a unit within Marshall-based agriculture firm Ralco before being spun off in 2017. Schwan's Co., also based in Marshall, owns a 9% stake in the company. Ralco, an animal feed company, remains the majority owner of Tru Shrimp.
