Pharm is raising a convertible note on an $8 million valuation with a 20% discount, though the first $500,000 worth of investment will be made at a valuation of $5 million. The valuation is reasonable, and the discount is also attractive. Thus, Pharm Robotics’ price score is slightly above average.

Dairy has been hit hard by the pandemic. Though pre-pandemic estimates were more rosy, revised estimates placed the global dairy product market at a size of $458.1 billion. The industry is expected to grow at a 3.6% CAGR over the next several years to reach a size of $587.5 billion by 2027. 

Shot administration is a tiny fraction of the dairy production process. However, given that Pharm is the first-to-market shot-administering solution, it could capture a sizable portion of revenue. If the 41 non-binding LOIs were translated to product sales, the company projects it would take in $12.3 million in revenue.

Pharm also believes that, while its current focus is on dairy farms, it might expand its product offerings to beef farms in the future, as well as for livestock other than cattle. These markets are quite large and growing significantly — the global beef market, for instance, expected to reach $383.5 billion by 2025. However, there is no guarantee that Pharm will be able to pivot into these adjacent markets. Due to the niche nature of shot administration within the larger dairy market, Pharm Robotics’ market score is below average.

Pharm’s team is largely drawn specifically from the agriculture industry. CEO and co-founder Marinus Dijkstra is originally from the Netherlands, and currently works in several agricultural companies. He manages Cottonwood Dairy — an operation with more than 3,000 cows — and is a partner at Cottonwood Compost, producing certified organic compost. Pharm’s other co-founder and CFO, Alexander Chuck, worked with Dijkstra at Cottonwood Compost for a number of years, forming a valuable pre-established partnership. Chuck also works as a Valuation Associate for CBRE, and as a self-employed quality control consultant since leaving his quality control consulting role with Cottonwood. Chuck holds the distinction of being a 2021 Forbes 30 under 30 Honoree.

Overall, CEO Dijkstra’s expertise in agriculture and his prior working with CFO Chuck carries a lot of weight on the relevant experience front. Pharm Robotics’ high team score reflects the strengths of this well-established co-founding pair.

Pharm’s robotic shot-administrator holds the distinction of being the first of its kind. The technology is protected by a non-Provisional Utility Patent, and the product would provide recurring revenue, in estimates of $11,000 per unit per year.

As a first-to-market solution, Pharm’s Sureshot has no direct competitor. Its closest competition is the various automated milking machinery commonly employed by dairy farms. Pharm sees this existing automation infrastructure as a plus for their business prospects, as many dairy farms have already employed automation and have seen what it can do for their bottom line.

That said, Pharm is technically competing with already-existing manual infrastructure for shot administration. The company believes it can save businesses $285 per cow through its system. That said, it remains to be seen if infrastructure costs required for the installation and support of the Sureshot system — especially for larger operations — will wipe out these savings. On a more consumer-centric note, the Sureshot will provide trace-ability for dairy products, enabling consumers to understand exactly what has gone into the milk they are drinking. This could be an enormous and unique boon for dairy farmers marketing to health-conscious grocers. With patented technology and first mover advantage, Pharm Robotics earns an above average differentiators score.

Pharm Robotics is in a pre-revenue stage, having not even developed a prototype for the Sureshot. Indeed, the company saw $30,330 in net losses in 2019. That said, it has secured a $125,000 investment from Siemens — a massive German automation company — which it intends to use to pay down the cost of its several-hundred-thousand dollar robotic arm and prototype unit as well as to provide marketing. The 41 LOIs, while nonbinding, speak to the strength of Pharm’s outreach to its potential customer base.

Due to a lack of revenue and the product not being fully developed, Pharm Robotics’ performance score is its lowest across all five metrics.

It’s a challenging time to try and break into the dairy farming industry, which has been struggling in the U.S. for decades and is in an ongoing crisis. With their ever-shrinking product margins on the line, dairy farmers might be tempted to stick with what they’ve always done or to support existing blue-collar jobs for economic reasons. It’s important to remember that the company’s LOIs have no actual value — farms that might issue one as a gesture to a potential innovator are not obligated to follow through.

With a product in a pre-prototype stage, it is a risk for investors to support a concept that could end up providing less in business savings than Pharm hopes. Automation has a reputation for cost-reduction, but experimental and sophisticated automation of this kind may struggle to reach such savings targets. While it seems likely that a functional Sureshot will lead to some level sales, the company will need to prove the product is a significant cost-saver to make enough sales to support their business. Either way, regular production is likely a number of years down the road — years that will likely elicit high burn rates.

In a way, it’s a wrong time to try and reshape the dairy industry. In another way, it’s exactly the right time. Dairy farmers have been fighting for years to turn actual profits given the expense of milk production, relying on government subsidies as they fight to stay alive. The Sureshot could be just what modern dairy farms need — a reliable, safe, time-saving mechanism that increases the health of their farms and the strength of their product. If these predictions bear out, dairy farms across the nation and the world will be clamoring for installation of systems. If that happened, Pharm Robotics would see significant and recurring returns on a mass scale.

The existing automation of dairy could also bolster the willingness of dairy farms to invest in the Sureshot, to further streamline the process and lower the burden of employment for farms. If Pharm gets development of the Sureshot right, it could lead the industry in a whole new dimension of automation.

To aid a struggling dairy industry, Pharm Robotics is developing Sureshot — a robotic injection arm designed to administer vaccines and inseminations to dairy cows. Developed by a long-time dairy farmer, the product is in pre-development. Pharm plans to develop a prototype using the funds from this raise.

The product would automatically recognize cattle and administer shots safely and precisely, while recording injection times and quantities. These processes are intended to cut costs for dairy farms, while maintaining full compliance with injection standards and promoting transparency for consumers. Although the company is still in an extremely early stage, Pharm has obtained 41 non-binding LOIs from dairy farms, which speaks to a need in the market and bodes well for its future sales prospects. Therefore, Pharm Robotics is a Neutral Deal.

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Analysis written by Benjamin Potts.