August 15, 2023
Welcome to Perspectives, Leerink Partners’ signature podcast, where we share our insights and interview leaders across the industry to get their perspective on how they’re driving innovation. We’ll also be digging into the backstory to learn more about what has most influenced their success. Be sure to check out all episodes by Leerink Partners.
Thad Davis: So, my name’s Thad Davis, I lead here many of these series on what we call Perspectives, where we try to help listeners understand more about the leaders that we work with here at the investment bank. And frankly, we focus a lot on the early formative experiences that shaped who they are and how they tackle challenges in their business today. So, it’s my distinct pleasure to be joined today by Juan, who’s the CEO of STgenetics and the co-founder as well. Somebody I’ve known for several years. In a company that, I’ll try to do it justice on my intro, so STgenetics focuses on basically genetics around protein and dairy production predominantly, focusing on two core technologies and the whole surrounding ecosystem around that. One, STgenetics is the leading sexing technology that allows basically the termination of sex, male, female from sperm. And then also that is combined with what I would say is a rather unique genetic repository of basically model animals, et cetera, that it can be combined with the sexing to improve the production life cycle and output of protein and other mammalian production. And it matters to the end clients of ST, who are cattle and dairy producers predominantly, and also pork and other types of producers that rely on this technology to improve their yield and throughput around their production. Did I get that about right Juan?
Juan Moreno: It’s fairly close. It’s fairly close. I mean, we were fortunate to have access to a technology that, that was developed as a proof of concept, originally USDA, that was basically able to measure the difference in DNA content between the X and the Y chromosome. And by utilizing that difference in the DNA content, we’re able to make sure, separate the cells into either female or male population sperm cells that are, in this case, are utilized in livestock genetics, both on the beef side or the dairy side, as well as the pork side, which we can determine the sex of the resulting offspring to create greater efficiencies in the system. It’s been a journey of 20 years to take a technology from the point of proof of concept to a point of commercial reality. And that, during that journey, we made quite a few improvements in the technology. Plus we had the fortune of also having access to all the technologies that lead us into different aspects of the company, including genomic testing and whole genome sequencing, which we got a lab, a subsidiary lab of ST that does that and does create being able to do genomic predictions to drive down generation interval, create faster genetic progress, and essentially, be able to increase productions and efficiencies in the production of livestock protein. And then we also were able to expand into bioinformatics and bioelectronics. And so, with a combination of different technologies, now we’re able to deliver a complete answer that fits both the producer as well as the consumer. And we got some really cool, cool things in the pipeline that we’re doing today’s everyday life. That will make a bridge of common communication between the end users and the producers.
Thad Davis: Yeah, a concrete example for our audience who’s not steeped in the sector would be at the most basic level. You have a dairy farmer who’s looking to increase their production of female cows to obviously produce milk. And thus, the technology, you help them basically ensure that when they’re inseminating cows to produce more cows that they get female cows at a higher percentage of the time. It turns out that you guys are actually really, really good at that. And then secondarily, if that farmer is like, “well, perhaps I want a different type of cow for some type of characteristic of the cow, say, it produces more yield, less methane, more feed, et cetera.” There’s sort of a tweak that you can do around a cocktail of those genetics. You can also provide them access to that genetic profile as well to both not only produce a female cow but produce a specific breed of female cow in this case.
Juan Moreno: It’s always fun to be able to go back in history, right? So artificial insemination. At the end of the day, the originator of all this stuff is the technology that was invented over a hundred years ago. And it’s used across species widely, right, from all livestock species. With artificial insemination, you’re essentially, you’re able to place inside literally a straw, a sample of sperm cells. And then somebody else figure out, obviously, also about 50 or 60 years ago, how to be able to freeze those sperm cells, thaw them out, be able to put him inside a female, and generate a pregnancy.
Thad Davis: That’s a global supply chain point that I haven’t really fully appreciated until recently with you that people can move this around the planet. When you can freeze and store sperm cells, you can do a lot globally with moving genetic content around the global supply chain, effectively.
Juan Moreno: Correct. And so, it’s a very widespread industry that I tell the story that I was born in Colombia, South America. And I was taught how to artificially inseminate a cow when I was eight years old. And the man who taught me how to do it, didn’t know how to read and write. So, it’s a very simple technique to apply that can be used all over the world. And it’s been used for decades. The very exciting part about it is now we’re moving into a new era. In which those cells, the sperm cells that are inside that straw, not only are we able to determine the gender, whether it’s a male or female, but we’re also able to determine the genetic value of those cells, and how much genetic progress that can cause, or genetic improvement. And so, we, we’re literally able to alter the future. We live in a world today where we’re heading to a population of 10 billion people and the amount of productive land that we have is finite. We can’t add any more land to this planet earth. We might be able to move it around from one location to another one, but we cannot add any more dirt, right? Except when a volcano erupts, but that’s an exception. But that’s a separate subject.
Thad Davis: Things we don’t want to have happen.
Juan Moreno: Yeah, we don’t want that case. So, we’re faced with a growing population with a limited amount of arable land, usable land, to produce food. Whether it’s plant food or animal food, it doesn’t make a difference. It’s a limited supply of land. So, we’re going to have to become more efficient to feed the 10 million people we’re going to have on this planet Earth. And because the per capita income of those 10 million people is going to be higher, they’re going to eat better and more. We’re going to need to produce twice as much food as we produce today within the next 25, 30 years. And that’s, that’s a basic statistic. And we’re going to have to do it in the same amount of arable land that we have today. So, the only way to do that is by improving genetics, both on the plant side and the animal side. And the beautiful part about genetics is, a genetic improvement is forever. And it’s additive. You can add more and more and more and make it better and better and better and better every day. There’s really not a limitation to genetic improvement.
Thad Davis: The precision of how you guys get that done is, is off the charts in terms of being able to guide to the right, basically guide to the right characteristic type on a breeding outcome.
Juan Moreno: Yeah, we don’t use any kind of genetic modifications, genetic deletions, or bringing different genes from different species. We don’t do that. We essentially use all the bioinformatics and technologies that we have access today to create a genetic improvement if you so call it in a natural way, the way that nature intends to do genetic translocations or mutations or differences. We use the technologies to do it more accurately, more efficiently, quicker, and faster so we can drive genetic progress in a more precise manner to the point where we can take traits for which nobody’s ever selected for previously and actively select for it. I’ll give you an example. We embark eight years ago already on a program to measure feed conversion and feed efficiency in both dairy cattle and beef cattle. Well, we found out through that process that if we were able to make an animal, that ate less to produce more. That animal also produces less methane. And depending on how, how much we want to push the genetic improvement, we can cause reduction in methane emissions by ruminants, somewhere between 8 and 20 percent in one generation. We’ve been working at it for 8 years, but we can do it now, today. And then we can also not just do it by selecting the genetics, we can also choose the genetics that make more milk or more butter fat or, you know, to make more butter or more protein for protein drinks, right? The same genetics that is able to feed the world can also reduce methane emissions. We can also select the genetics so that animal welfare is high in the totem pole. Animals that their immune systems are more resilient, so they need less treatment. So that one, I’m not going to say that they won’t need antibiotics because somebody can get sick, and they need treatment and the humane thing to do is to treat them properly. We’ll have genetics that need less antibiotics as well. So, what we’re doing is essentially being able to combine multiple technologies. And we’re fortunate at the moment in time that we live in, because if we didn’t have the computer power that exists today, we wouldn’t be able to do what we do today, right? We have technologies today in house to be able to monitor animal welfare 24 hours a day. We literally can take the temperature of an animal 24 hours a day and send it through the airwaves and monitor the well-being of the animal. We know when that animal may start getting a fever so we can go treat it right away. Make sure it doesn’t get sick or it gets properly treated if need be. We are in a unique point in time where we can combine multiple technologies to be able to deliver an end result that will make for happy people, like I said earlier in the conversation, be the bridge between the producer and the consumer.
Thad Davis: This genetic bridge that you’ve created allows the consumer demand, like producers want to just maximize yields, sell and produce basically into a market that they’re facing sort of global forces and other commodity style forces, but consumers are asking for very specialized things they want, not only just high quality product, but they want reduced methane emissions and things like that, that the genetic bridge allows you to actually deliver both, like you can go to the farmer and say, “You do not need to defeat your output and your goals to achieve what the consumers want. And more importantly, that’ll allow you to create a product that consumers want.” So, it’s actually the, it’s sort of the glue that’s bringing together, I think probably an increasingly sophisticated consumer demand with the actual resource production itself.
Juan Moreno: Yeah. I mean, the consumer, you know, we all go to the supermarket. That’s my favorite past time, to be honest with you. I tell people my wife won’t go to the supermarket with me because for me, that’s a five hour expedition. I look at every box and everything. I read,
Thad Davis: Curse of the scientist.
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Thad Davis: So now let’s take a little bit of a different track. So, coming back to an example that you just gave, and I’m going to burrow into a little bit about you. Juan is eight years old in Colombia. And you come from a dairy family, correct?
Juan Moreno: Correct.
Thad Davis: Brown Swiss dairy family. And so, tell me a little bit about early Juan.
Juan Moreno: No, we had a small dairy at the time. My dad was milking maybe 60 cows. Today the family still milks about 60 cows. And we’ve had the dairy herd for 75 years. So, I grew up between dairy cows and some beef cows and a few horses here and there. Once in a while, a goat will jump off some roof somewhere out in the farmland. Oh, and obviously when you have livestock, you’re also in agriculture because you got to produce the food for the cows to eat, right? So, I just grew up in that environment and then came to school at Ohio State and studied dairy science and then came to A&M to study reproductive physiology. I got fascinated with in vitro fertilization. Did a lot of research work and one thing led to another one. Here we are.
Thad Davis: Also, you went from basically a farm to, I mean, deep genetic science through a train around the Ag Econ and the basically the Ag School at Ohio State. I mean, how did you end up at Ohio State? Why Ohio State?
Juan Moreno: Actually, my brother took me there. My brother is 12 years older than I am and there was a professor at Ohio State that went one time to judge dairy cows in Colombia and met my father. And my brother ended up at Ohio State that way, and my sister did as well. And I followed the family tradition, I guess you want to call it that way, right? Chasing the cows in one way or another. I spent five years at Ohio State, and so it was not a four-year college degree, it was a five year college degree. I wasn’t the brightest of students, but more than anything else, I was always fascinated to take in every class that I could take. I’m not an ag economist by any mean, but I enjoyed taking ag econ classes, and I’m not a nutritionist, but I enjoyed taking nutrition classes, and my main training really afterwards was when I went to A&M to do my graduate work in Reproductive Physiology, and I came to A&M at a time where I was very fortunate that it was the early days of in vitro fertilization, and I was very fortunate to end up in a lab that was doing it.
Thad Davis: So during the innovation time in IVF, you are basically at a laboratory level with researchers trying to implement and improve IVF, hence, um, through that work, and as I’ve known, you’re incredibly, you consume an incredible amount of content, that’s when you ran into the technology here that was the formation level of the ST company, basically the sexing technology.
Juan Moreno: Yeah, so when I was at A&M doing my graduate work, which, by the way, I dropped out. I never finished. I was at A&M doing graduate work for four years or five years and I did a lot of research and really, really enjoyed in vitro fertilization in cattle. I had my first IVF calf produced out of that lab 32 years ago. I always dreamt of being able to do in vitro fertilization on a commercial basis. And at the time there were a lot of challenges with that technology. And when sex semen became available as a proof of concept by USDA, I was fascinated by the technology because I thought that it would answer a lot of the problems that in vitro fertilization had at the time for being able to be a commercial application. So, it started chasing the technology and it was a chase that lasted about three years or so. And finally, was able to get a, the technology was licensed to a company was created in Colorado called XY. I was able to get a license from XY and when we’re negotiating the license with XY, I went and chased every friend and family, and I had a partner that has been a part of mine, Maurice, for 30 years. One of the most incredible human beings you’ll ever meet. And he believed in me, and we went out and convinced a bunch of people, friends and family. I mean, if you had, if you had a dime in your pocket, you better have your hand in your pocket because I was going to get that dime.
Thad Davis: You’re like, “I’m raising money for something.” You’re like, “and I’m not taking no as an answer.”
Juan Moreno: That’s correct. That was basically what it was. And we raised the money and we started this journey.
Thad Davis: The original tech was like, I mean, effectively you were buying a license out of a laboratory. That was hardly commercialized technology at the time.
Juan Moreno: Yeah, it was pretty much a proof of concept at that point in time. It was so much of a proof of concept that all the big players in the industry passed on it, right? They thought it was not efficient enough, too expensive. I had a lot of work ahead of it, and we saw a possibility.
Thad Davis: Yeah, would you consider yourself as a scientist or an engineer?
Juan Moreno: My math wasn’t good enough to be an engineer, trust me. I do love biology, and everything that is related to biology fascinates me. And then, because of the work that I did at Texas A&M in graduate school, If I didn’t know the answer, I knew what I had to go look for and read and evaluate and I knew where to go find the people to ask the questions to be able to have a thorough reasoning process and that’s what how we evolve.
Thad Davis: Yeah, because that’s been like through my exposure to you the management of incremental science improvement in R&D has been just a fundamental because effectively you looked at it post, initial concept and you said, “I can take this initial concept through R and D it through R and D and some commercialization. And I understand that there’s a commercial application at the end of this effort, and we pretty much can pull everything together. We think, but we’re going to need to take risks to do that”, but that’s been the hallmark of ST the entire time. I mean, anytime that you guys have run into, like, you’re constantly looking for it, an improvement to the tech, and then you buy it, research it, acquire it, develop it yourself. However, and then it’s kind of created, taking that initial technology to where you are today, which is an extremely high-tech company that has multiple avenues and multiple capabilities. I mean, how do you think about management of R and D in science? What’s the secret?
Juan Moreno: Even though I’m passionate about science, I’m only married to my wife and not to science. So, one of the things that I’ve always been able to do was not take to heart a failure. Always think of a failure in science as a learning experience to improve something else. And as we were progressing through the different technologies, every time we had a failure, I just went back and looked at scientific journals and figured out, who are the folks that know about that? And I would start searching for those folks and then I would purposely go listen to them and read their articles and go watch them at a conference and I will make a list of people. I keep a book with a list of people that I’ve run across through the years and it can be 10 years later. I run into something that we haven’t been able to solve, I go look at my book and say, I know who can help me. And I’ll go call him and I’ll get on a plane. I’ll set up a conversation. If I feel they can help them. I’ll bring them in. Of our top people on the management side, I recruited every single one of them this way. I only ever hired an outside recruiter one time in the life of this company in upper management or science level to hire anybody. And that was for a CFO position and that’s been our hallmark, right? And we’re blessed. I’m very, very fortunate to have been able to have the teammates that we have working with us every day, because it’s about the love for what we do and the passion of what we do. Every day wanting to do better than the previous day.
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Thad Davis: The company’s been built around a very specific core technology that’s increased massively in revenue and volume over the years. But you’ve also been able to trim out things not to do. How much have you said like, “no, that’s very interesting. We’re not spending time there. We’re only going to spend time over here.”
Juan Moreno: It’s a very difficult discipline to have, right? Because there are a lot of very, very capable, smart individuals and some really cool technologies out there in which temptation is the mother of all evils, right? And obviously we see them, and we presented with a lot of them and sometimes being able to walk away from them is really hard and really, really difficult, but however, we’ve been able to concentrate not only in the core technology that has started is the ST, Thad, itself, but really on four main groups that are able to deliver a solution. Right? And the solution is very simple that we’re looking to be part of. And the drive and dedication is “How do we produce twice as much food with less land so we can feed the world in the next 30 years?” One of the most fascinating stories that I ever read; it was the one about the Green Revolution. If the Green Revolution hadn’t happened, okay, we would be hungry today. The world would be very, very, very, very hungry. And it is one of the most fascinating things to read. And if anybody can go read the history and the life of Norman Borlaug, which is the man responsible for the Green Revolution. I would encourage everybody to read it.
Thad Davis: He won a Nobel Prize around this, if I recall quickly, because the amount of people around cultivation and basically crossbreeding, attempting to find a more durable, high yield grain output, I think it was wheat, probably in a most realistic way. People have basically said a single person basically cut off the starvation of millions, potentially billions of people with this substantial increase in production that he pursued.
Juan Moreno: And the man did it without a computer and with a pencil and paper, which is the most incredible thing, right? And before genomics ever existed. Before any of the tools that we have access to today, the man did it. It’s unbelievable. He deserves so much respect that to me, he’s one of the true heroes that exist in life. But having said that, so, and there are a lot of people in a lot of groups that are working and striving to do something for the world, right? So, in our own little way, we want to contribute a small contribution. Can we do as a company, something to deliver a solution to feed the world 50 years? How are we going to be able to produce more food in less arable land? Right? Because cities are getting bigger. There’s more people. There’s going to be less land to produce that food. In order to accomplish that goal, we concentrated basically on four core technologies that we stick to like a glue or four, not core technologies themselves, but four elements. One is genetic improvement. The other one is bioelectronics and bioinformatics. The third is sex semen because, or artificial insemination because it’s a delivery method. Right? We’re able to deliver what the other two elements provide. And then the third part of it is the actual genetics that go inside the straw. Right? So, you’ve got to have the genetics, but to have the genetics, you’ve got to be able to analyze and process those genetics. So therefore, you need genomics and whole genome sequences and those technologies, but to be able to determine the traits you’re going to select from and collect the phenotypes, you need bioelectronics and bioinformatics, and then we’ve got to deliver a method in artificial insemination and sex semen. So as long as there are technologies that are related to those four core elements that allow us to go into one final answer, which is delivering more food in the way that is sustainable for both the producer and the consumer. That’s what we drive for. Now, like we’re talking earlier, there have been some technologies that I mean, I just, it’s a dream come true. I love to be involved in, but they’re outside those four elements, so.
Thad Davis: Just in recruiting, like with the people that you bring to the company, especially in others, you have a quite an affiliation of PhDs at the company. How do you bring on these types of folks?
Juan Moreno: So as a young man, I learned a lesson from Maurice Rosenstein, who’s been my partner for 30 years that I mentioned earlier. Maurice taught me something in life that has been unique. In his own way, he called it an open-door policy. And what it means in this company is that it doesn’t matter what your position is or who your supervisor or who your manager is, everybody in this company has an open-door policy and we all can talk to one another without any fear of talking to one another. If you got a thought, if you got an opinion, if you have an idea, anybody can walk in my office, sit with me and explain it to me, we’re going to discuss it. And nobody here needs to think that anybody’s smarter than anybody. We do have, like I said, 60 PhDs and I got 52 engineers, some incredibly capable, smart people. Sometimes I wake up and I’m like, wow, it’s almost like a mini university, I guess. In a sense, folks that study all their lives, and they know their subjects better than anybody else. But it’s always about the human being. And as a result, we all help one another, we all work with one another. We all strive to get better and better every day. And in the process, it’s really a lot of fun. It really is a lot of fun.
Thad Davis: How much time do you spend out in the field with the customers? I mean, you spend a tremendous amount of time in the field with the end cattle co-ops, dairy co-ops, other people like this that are effectively your customers, talking to these people every day. How important is it to take that science and also unify it with the commercial side, staying close to the customer?
Juan Moreno: Well, I don’t call them customers. I call them friends. We go back with many of them for, for decades. And it takes all of us working together to be able to accomplish that task. That’s not for one group to do by themselves. We couldn’t do it without them. So, to me, they’re friends, first and foremost, I do spend a lot more time than I spend the supermarket, you know, and I enjoy it. I really, really enjoy it. I love being able to go out there and sit with them and listen to them and analyze what would help them in their business and their endeavors, what’s important to their customers. I’ve just spent a day, I flew up to Buffalo, New York last week to a dairy, it’s called OCD. They had a cattle sale going on and I went the day before and I walked the dairy with the owner of the dairy, and I absolutely loved it. To me, it was just a fun afternoon going through the barns and looking at the cows and listening to him talk about his animals and the work he was doing. And just hearing what is actually happening in the real world and day to day. To me, that’s just a joy to do that. I wish I could do it, I really, really truly wish I could do it more often.
Thad Davis: Yeah, that’s, that’s, that’s the thing. I’ve had the fortune of being able to work with you, but I have all sorts of companies I meet and I’m like, “Oh, I’ll never have anything to like specifically do with them, but I could just sit there and listen to the company all day.” I’m like, “This is incredibly fascinating. What are you doing? How is it working?” Things like that. It is actually do enjoy, much like you, I enjoy it.
Juan Moreno: I was thinking about it as you’re talking in a sense, this different than doing basic science significantly, right? So, we’re a lot more closer to reality. And what I call reality is how you influence the production of food and the cost of the production of that food. So, it’s affordable to the end consumer. And while accomplishing that we’re working with science, which is totally different than what other folks work with science, right? If you’re working in basic science and you’re trying to invent this drug to cure cancer, well, you’re not going to go out and visit all the customers, right?
Thad Davis: Yeah, you’re, you’re working, you’re working a fundamental problem versus an applied issue.
Juan Moreno: Right. You’re sitting inside a lab working 24 hours a day to find a solution. That’s why I say what we do is just absolutely fun.
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Thad Davis: So I have one question as we’re wrapping up here. This is the off the run question. So, I have not been to your restaurant, but you have a restaurant and I’ve been down many times, and I still have not made the restaurant. How did you end up with a restaurant? Speaking of all the unscientific matters here.
Juan Moreno: Oh, God, that’s it. That’s interesting. So many, many years ago, about 30 years ago. I went to Mexico, to Villahermosa Tabasco, Mexico, to a cattle show. And obviously I left Houston, I traveled all day long, I didn’t have breakfast, I didn’t have lunch. That plane landed at 4 or 5 o’clock in the afternoon. And I was hungry, and the gentleman who picked us up said, “You guys hungry?” I said, “Yes.” He said, “Well, there’s only one place to eat. And its really good food”, and he took us to a Brazilian Rodizio. It was a steakhouse, and this is literally 25 years ago. They served us the food. The food was really good. And it was fascinating to me, the process of that type of restaurant. To me, it was just absolutely fascinating how they could bring 20 different cuts of beef, and how every cut, you know, was cooked different for everybody on the table. Somebody wanted it well done, medium.
Thad Davis: Yeah, they have, because it’s like, it’s like a kitchen process for these things. It’s like, yeah, you’re like, “How do you run this?” You’re like, “Well, in Brazil, we know what to do.”
Juan Moreno: So it was fascinating to me. So, so I came back, and I told Maurice, I say, “Hey, we need to have a restaurant like this one day.” So, about a year later, I actually took him to one and years later, decades later, it came to be that Maurice was going to retire from the company because he had reached a certain age. But this man is the energizer bunny on steroids. Okay. He’s got more energy than any teenager you’ll ever meet. And I thought, “My God, if I don’t find something for Maurice to do, he’s going to drive me nuts.” So, his wife is Brazilian. I thought, Maurice, I got the perfect recipe. Let’s build a Brazilian Rodizio steakhouse. And I don’t know why he took me on that one. So, he, without never having a restaurant, I mean, in this part, I just contributed money and the idea, nothing else. He got it on his own and he built this thing. He built a beautiful place, but it wasn’t just the place that he built, it’s the people he hired. The same culture that we got at ST, right? The quality of the food. You know, all this steak is prime beef, aged more than 30 days.
Thad Davis: Yeah, that’s why I bring it up. I’ve heard great things, and I’m like, I’m taking a trip down just to go to the restaurant.
Juan Moreno: This is not your average steakhouse or Brazilian Rodizio. And the service is just incredible. You know, if somebody ever visits me, if they require a stop, I’ll be glad to take you over there and invite you to lunch or dinner.
Thad Davis: Next time I’m down, I’ll definitely do that. Well, thank you for, thank you for taking the time here, sharing your thoughts and everything. This is a terrific discussion and look forward to spending more time with you. And hopefully the audience gets a chance to look into STgenetics and, and all the innovative things that you guys are doing in the industry. So, thanks again, Juan.
Juan Moreno: Thank you. Appreciate it very much. Have a good day.
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