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UChicago food allergy startup raises $3.5 million

Bunning Food Allergy Professor Cathy Nagler had been researching the physiological origins of food allergy and potential treatments for over 30 years without ever considering the possibility of translating that research into a business. But today, just 15 months after considering that possibility and beginning her entrepreneurial career, she is the founder of a promising, emerging venture poised to make a real impact on the world.

Nagler’s new venture, ClostraBio, has made  diligent use of a variety of programs and resources offered by the University of Chicago’s Polsky Center for Entrepreneurship and Innovation, and University partners such as the Institute for Translational Medicine and the Institute for Molecular Engineering. And most recently, the company, headed by Nagler, co-founder Jeffrey Hubbell, the Eugene Bell Professor in Tissue Engineering, and John Colson, PhD, closed on a $3.5 million seed financing round.

ClostraBio aims to develop drugs that that will enable patients living with food allergies to eat without fear of an allergic reaction by harnessing protective bacteria and the substances they produce in the complex microbiome of the gut. These keep the gut’s lining healthy and create a barrier that stops allergens from entering the bloodstream and inducing an allergic response.

John Flavin, associate vice president for entrepreneurship and innovation at the University of Chicago and head of the Polsky Center, saw the promise in Nagler’s research early on and connected her to the Polsky Center’s innovation pipeline.

“Between Cathy’s scientific discoveries and Jeff’s applied research, ClostraBio had all the makings of a successful commercial enterprise from the beginning,” said Flavin. “The Polsky Center has been there every step of the way to guide the ClostraBio team from an initial discovery in a lab to a fully operational startup now with venture funding needed to prepare for clinical trials.”

ClostraBio’s first experience with the Polsky Center was through the Innovation Fund, though not through an investment – but that would come later. The Innovation Fund is managed by the Polsky Center and provides critical early capital to groundbreaking UChicago ventures and technologies that have the greatest promise. In addition to supporting scientific ventures through investment, the Innovation Fund also has a robust associates program.

Innovation Fund associates serve as venture capital associates – performing due diligence on projects that the fund might invest in. The program is interdisciplinary – bringing together students and postdocs from across the university, which is how John Colson, an Institute for Molecular Engineering (IME) postdoc at the time, got his start with ClostraBio.

Jason Pariso, director of the Innovation Fund, connected Nagler with Colson – who had come to the University of Chicago looking to get involved with an entrepreneurial venture. Colson joined ClostraBio as a project manager while finishing his postdoctoral work with the IME, and now serves as the company’s director of operations.

Before ClostraBio could continue building their business – Nagler had to navigate a series of complex rules and regulations regarding conflict of interest when commercializing research from a university laboratory.

“It was very important that we establish clear boundaries between my NIH-funded academic research and the commercialization efforts undertaken by ClostraBio so that we not inadvertently misuse university facilities and grants,” said Nagler. “We worked with University Research Administration and the Polsky Center to create a conflict of interest management plan that fully addressed this situation.”

As the Polsky Center supports the university’s efforts to foster a culture of innovation and encourage researchers like Nagler to join the innovation pipeline, the Polsky Center is taking steps to remove hurdles like that Nagler faced The recently-announced Polsky Center innovation complex will offer space, separate from the university research facilities, to  researchers for their commercial ventures.

“The new Polsky Center complex would enable us to physically separate the work that we do academically from the more commercially-focused work,” said Nagler. “We’re looking forward to having the expertise and resources for commercialization available at the Polsky Center right next door to our research labs.”

In the fall of 2016, ClostraBio was accepted into a cohort of the Polsky Center’s I-Corps program. Supported with funding from the National Science Foundation and run by the Polsky Center, I-Corps is a seven-week program that allows UChicago scientists, researchers, and students to test the commercial potential of their research and ideas.

That same fall, ClostraBio participated in the Polsky Center’s annual Collaboratorium networking event, which resulted in their recruiting two Chicago Booth MBA students to their team – allowing ClostraBio to prepare for their next stop on the Polsky Center’s innovation pipeline, applying to the nationally-ranked Edward L. Kaplan, ’71, New Venture Challenge.

Launched in 1996, the Edward L. Kaplan, ’71, New Venture Challenge is recognized as a top university accelerator program in the nation. The program has graduated more than 180 start-up companies still in operation today and created thousands of jobs for the economy. NVC companies have achieved more than $5 billion in mergers and exits. Today, the NVC is a top-ranked business launch program designed to help student teams turn their ideas into viable businesses. ClostraBio was accepted into Phase II of the NVC in February, where they embarked on a rigorous classroom portion – complete with mentoring, critical feedback from outside judges and investors, and business plan development.

Happening in tandem this past spring, ClostraBio was chosen as a finalist for the spring cohort of the Innovation Fund. While participating in the NVC class and honing their business model, the ClostraBio team was also preparing to present at the Innovation Fund Spring Finals – which happened the day prior to the New Venture Challenge finals, a consequential event they would be presenting at as one of the top 11 teams chosen.

ClostraBio found success with their back-to-back presentations – receiving up to $200,000 from the Innovation Fund, and 4th place and $40,000 in the New Venture Challenge. Beyond the critically important funding, these programs went a long way in setting up ClostraBio for future success.

“The New Venture Challenge and the Innovation Fund both challenge you to think critically about the business and directly address potential challenges, and they do this in complementary ways,” said John Colson. “The Innovation Fund has a great deal of expertise in biotech as well as a team of student associates doing diligence in real time, so you are able to get market feedback independently, then use that data to fine tune story and strategy. The New Venture Challenge challenges you to communicate your business in new ways and you get feedback not only on strategy and your business plan, but also on how you tell your story. It’s pretty amazing to go from the first in-class pitch where it’s a struggle to communicate the concept and the judges can’t follow, to having a second in-class pitch that gets them excited and sitting in the front of their chairs eager to hear more, not just because the business plan is compelling, but because the story rings true.”

Since competing in these programs, ClostraBio has continued to work out of the Polsky Exchange as part of the Polsky Incubator, and recently became the newest signee of a UCGo! Startup License. Created in 2015, the UCGo! Startup License is an optional, standardized license agreement to increase entrepreneurship at the University.

ClostraBio’s growth has attracted the attention of other investors. Joe Mansueto, University of Chicago trustee and the founder of Chicago-based investment research company Morningstar, and Daniel and Angela Oakey, a Virginia-based couple whose children suffer from severe food allergies, have joined with previous investors and the previous funds from the University of Chicago to complete ClostraBio’s $3.5 million seed round.

The company plans to use this first round of outside capital to take the drug through additional animal testing, before commencing human trials.

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