Donaldson, best known as an industrial filters maker, has made a big bet on life sciences to diversify the company. In turn, some of its new projects are very different than before — for example the development of bio-engineered salmon.
Bloomington-based Donaldson part of project developing lab-grown salmon
The company is seeking to diversify the company by growing its position in the life sciences market.
December 21, 2022 at 4:28PM
A year ago, Bloomington-based Donaldson acquired Solaris Biotechnology, a 30-employee Italian company that makes bioprocessing equipment from benchtop testing devices to large-scale systems used for production in the food and beverage, biotechnology and life sciences markets.
Now Solaris which has an office in Berkeley, Calif. has partnered with Wildtype — a San Francisco-based company that is developing a new source of sustainable seafood that can meet a growing global demand for seafood.
Earlier this year, Wildtype raised $100 million in venture funding to help get closer to production. Investors included celebrities such as Leonardo DiCaprio, Robert Downey Jr., Bezos Expeditions and Minnetonka-based Cargill.
They are all betting consumers would be willing to switch to an end product that looks like a filet of salmon. Grown in a bioreactor, the cells contain genetic material from wild fish. The plus, advocates say, is that the products are free of parasites, mercury, microplastics, antibiotics and other pollutants.
While some wild fisheries are being sustainably managed, wild fish stocks in general are being increasingly depleted to meet the world's growing hunger for seafood. Wildtype says that world seafood consumption is expected to increase 23 million tons annually by 2030.
Remaining wild fish are also at risk from the growing amount of microplastics and pollutants in the oceans. Farm-raised salmon and other species can meet some of the increasing demand but aquaculture can come with its own set of problems caused by overcrowded conditions.
"This is the first step to use Solaris' position in the food and beverage industry to expand into a growing market of alternative proteins," wrote Brian Drab, an analyst with William Blair who covers Donaldson.
Wildtype will "grow" salmon stem cells in bioreactors supplied by Solaris, then transfer to 3-D plant-derived scaffolds to recreate the texture of natural fish. The desired result, the company says, is sushi-quality salmon.
"Solaris is probably the only player in the market who can design and produce bioreactors from a very small scale 120 milliliters up to 100,000 liters," said Matteo Brognoli, founder of Solaris.
Donaldson has targeted life sciences as an area of growth. Since November 2021, it bought both Solaris and Purilogics, based in Greenville, S.C., for a combined value of about $75 million.
"The integration process [of Solaris] is still ongoing," said Sarika Dhadwal, Donaldson's director of investor relations. "We're confident that we will see it scale with more deals similar to this one."
Solaris is also benefiting from being part of a larger organization, Brognoli said. Since being acquired, it expanded its product portfolio and has expanded its market.
"Some years ago an agreement that we recently signed with Wildtype wouldn't be possible for financial limitations," Brognoli said.
Earlier this month, when Donaldson released its first-quarter earnings, it also announced changes to its reporting segments to become more end-customer focused. Its Engine Products and Industrial Products segments make air and liquid filtration products for construction, mining, agriculture and transportation equipment as well as dust, fume and mist collectors for industrial markets.
Segments going forward will be Mobile Solutions, Industrial Solutions and the new Life Sciences segment, signaling Donaldson's commitment to its new area of business. Life Sciences will include Solaris and Purilogics but also some of Donaldson's existing products including special venting devices used in hearing aids and ostomy bags.
"For 107 years, we've been leveraging our filtration technology to move into different spaces," Dhadwal said. "We spend a lot of R&D assuring that this business grows in the future."
Donaldson has already made investments aimed at making advances in the area. A $15 million Materials Research Center that Donaldson built in 2019 has been testing and developing new media and materials — primarily polymer-based chemistries and membranes for the life sciences space.
At an investors day event earlier this month, Donaldson Chief Executive Tod Carpenter said life sciences can grow faster — and at higher profit margins — than historical company averages.
"You'll see us really make sure that life sciences is getting everything it needs to be able to accelerate its growth as quickly as possible," Carpenter told analysts.
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