San Diego is well-regarded as a hub for biotech companies. That doesn't mean Southern New Mexico's largest city doesn't have just as much — if not more — to offer, according to this growing diagnostic startup.
Jeff and Nolan Bauer, a father-son duo, launched Palladium Diagnostics in late 2021. Jeff Bauer is Palladium's president and CEO and Nolan, his son, is the startup's vice president of research and product development.
They and Kevin Jones, Palladium's chief technology officer, make up the core of the company.
The trio has a long and wide-ranging history in the biosciences. The bulk of that work has surrounded developing and manufacturing rapid diagnostic tests, like pregnancy tests or tests for Covid-19.
Jeff Bauer founded DCN Diagnostics in the early 2000s before moving away from that company in 2008. Then Bauer launched another assay development company, Kestrel BioSciences, which was based primarily out of Thailand.
In 2012, the pair moved from Thailand to San Diego to start up Kestrel's operations in the U.S. Five years later, Planet Innovation, a Melbourne, Australia-based health-tech innovation and manufacturing company, bought Kestrel and rebranded it as Lumos Diagnostics, with Planet Innovation as the parent company.
Lumos combined with another diagnostic company, RPS Diagnostics, in 2019 and in the summer of 2021 went public on the Australian Securities Exchange. A few months later, Jeff and Nolan Bauer left the 200-person conglomerate.
Palladium Diagnostics spawned to capture money "still floating around from Covid," Nolan Bauer told Albuquerque Business First. It initially launched in Florida, where Lumos is based and where the Bauers lived at the time.
But after Jeff Bauer moved back to Thailand — where over a decade prior he had founded Kestrel BioSciences — Nolan decided to pick up and move the just-launched Palladium to San Diego, where he said most of his family lived. The startup had three employees in San Diego at the time, but Nolan and those employees wouldn't stay in the Southern California hub very long.
Behind the move to Las Cruces
Although San Diego may have lots of opportunities for networking and an extensive skilled biotech workforce, it's an expensive place to live and work. Bauer said he was paying around $2,500 per month for a 900-square-foot lab and office space in the city and double that for his own two-bedroom apartment.
And that $2,500 space wasn't technically a lab, either. Bauer said he had to essentially retrofit the office to handle Palladium's lab-based research and development by installing new flooring and putting in a sink, for instance.
So, in September of last year, he and his dad started to consider a move. Bauer had an existing connection with Las Cruces because of his ex-wife, whose father worked as the environmental waste manager at New Mexico State University (NMSU).
"He was always talking about how wonderful the university was and how he really liked working for them," he said. "He'd always say, 'Hey, if you guys ever want to move out here, consider working with the university in some capacity.' "
It wasn't until a few months later in December that the hunt for a place in Southern New Mexico became serious. Bauer began looking for houses, and then his former father-in-law put him in touch with the Mesilla Valley Economic Development Alliance (MVEDA) — an organization that helps facilitate companies relocating to or expanding within the Southern New Mexico "Borderplex" region.
A contact at MVEDA introduced Palladium to Wayne Savage, the executive director of Las Cruces' Arrowhead Park, a large master-planned technology and office development set to be built to the south of NMSU's campus. Bauer said a phone interview with Savage led to the startup flying to Las Cruces to tour spaces at NMSU's Arrowhead Center — an incubator and programming hub run out of the university — in January of this year.
One month later, Palladium's move into the Center was in full swing. The company settled in Las Cruces in March.
"That had been in the back of my mind over the years. I would love to bring biotech to Southern New Mexico, to the Las Cruces area," Bauer said. "I always thought it would be a great industry to bring here. There's not a lot of it here and New Mexico State University has a lot of resources."
Cost of living and lab space, coupled with full access to utilities and other resources, were the main drivers behind Palladium's decision to set up shop in Las Cruces.
Bauer said the startup is renting around 1,100 square feet of lab space in addition to around 400 square feet of office space at the Arrowhead Center. Palladium's paying about $2,100 per month for that space, which he said includes all utilities and resources such as hazardous waste disposal — "all of the stuff I would have had to cover separately outside of my lease in San Diego."
The startup didn't have to retrofit its space to handle any lab work, either, Bauer added. It came ready for the then three-person company to work right away.
"It was the perfect spot for us," he said. "Small company, really cheap lab space, utilities included.
"It's the level of service that we get by being here, and support," Bauer added. "Not only are we paying less for double the space, but there's also a lot of resources at Arrowhead Center that are at our disposal and that we're taking advantage of."
Making connections at Arrowhead Center
Those resources include connections with other companies and organizations in New Mexico that Palladium has used for different types of support. Bauer said Savage connected Palladium with NMBio, an organization set up to accelerate the growth of bioscience companies throughout the state. Palladium is a member of the organization, and Bauer said NMBio could sponsor the startup to attend a trade show in San Diego next year by paying for the cost of a booth.
Palladium has also worked with NM FAST, a program run by the Arrowhead Center that assists companies with federal grant applications. Bauer said the startup plans to have some of the grants it's currently writing reviewed by staff working as part of that program.
"They're great collaborators," Savage told Business First. "They have already worked with other tenants at Arrowhead Center to start up a third company, a new company, and I'm excited for them."
Acadia DNA is the name of that third upstart company. It's a service-based business that provides paternity testing, Bauer said.
He, his father, Jeff, and Dave Witt, who is the CEO of Witt Medical, which also operates out of the Arrowhead Center, make up the company. It got off the ground a few months ago but is still in the process of securing initial funding; Nolan Bauer said the trio started the firm to help generate more consistent revenue between contract cycles.
"And they're builders," Savage said about the Palladium Diagnostics team. "This is the fourth company that they've built successfully and they are now looking to build not only their diagnostics development capabilities here, but they're looking to build the manufacturing side of the business as well."
Plans for manufacturing expansion
Palladium has four full-time staff in Las Cruces currently, including Jeff and Nolan Bauer, and three outside the state. But that number could grow significantly over the next several months as the startup looks to build out its manufacturing capabilities.
Right now the bulk of its work is focused on contract-based research and development done at the Arrowhead Center, Nolan Bauer said.
"But we want to move into manufacturing to create job opportunities here," he said. "We're on the cusp of that."
Bauer said the startup is finalizing the details of a manufacturing contract to produce diagnostic tests. Although he couldn't say the name of the company Palladium is forming the contract with or share more specific details about the contract because of a non-disclosure agreement, he said Palladium could scale to manufacture between one million to two million tests per year. That would increase Palladium's gross revenue by about five times, he said.
That level of manufacturing would require more people and more space. Bauer said the startup could hire between 10 to 15 people once that contract is finalized. Those would be a mix of lab technicians, manufacturing assembly technicians, a manufacturing manager and administrative shipping and receiving.
He said the startup plans to begin advertising for those positions in the next couple of months and start hiring people before the end of the year.
Palladium has also planned to take over an 800-square-foot space next to the company's existing labs and offices within the Arrowhead Center. And if the startup continues growing, Bauer said it may start looking for additional space outside of the Arrowhead Center — although he said it would keep a physical presence at the Center if it chose to expand outside.
An ongoing partnership with NMSU could help Palladium fill positions, especially for more high-skilled quality assurance roles, for instance, Bauer said. The actual manufacturing jobs would be lower-skilled, he added.
"I think if we can take people from NMSU early on, while they're still in their undergraduate or graduate program training, then it really shouldn't be an issue," Bauer said. "That's where the university comes into play. Being here is a huge advantage for us.
"In San Diego it's very easy to find people with experience just because it's a big biotech hub," he continued. "It's more of a risk being here. But I think the university will pick up some of that slack."
