SanMelix Laboratories is offering common equity at a $23.8 million valuation. This price is egregiously high for a pre-revenue company that still faces regulatory hurdles before bringing its product to market. Moreover, SanMelix raised a previous equity crowdfunding round that closed just a few months ago and had a valuation of that round was $6.5 million. SanMelix’s price has jumped by almost four times in the space of a few months. It doesn’t appear that the company has achieved any major milestones during that time, so there is little justification for this increase. As a result, SanMelix’s price rating is extremely low.

The US market for wound care was estimated at $3.1 billion in 2020. The market has a low annual growth rate of around 4%. This is a decently sized market, expanding due to a growing elderly population and the rising rates of diabetes and other diseases that cause chronic wounds. 

While SanMelix’s primary product is its buckwheat honey wound dressing, it’s worth noting that the company also offers a skin cream that soothes skin after laser or radiation treatment, sun exposure, and more. Therefore, SanMelix is also addressing a tiny segment of the global skin care products market, which is much larger than wound care at an estimated $134.8 billion as of 2018. 

SanMelix’s products address fairly sized markets with mild growth rates. However, both markets are very competitive and already contain hundreds, if not thousands, of established brands. It will take years for SanMelix to carve out a meaningful slice in these industries. Thus, the company’s market rating is relatively weak.

SanMelix Laboratories was founded by Dr. Kenneth Sabacinski and Diana Sabacinski. Dr. Sabacinski is a board-certified podiatrist. He earned an MD from the Pennsylvania College of Podiatric Medicine and conducted his internship, residency, and fellowship at Beth Israel Deaconess Medical Center. He has since practiced podiatry for more than 30 years, with specific training in treating diabetic foot ulcers. Dr. Sabacinski reports holding a number of wound care patents, including for SanMelix’s BEECure dressing. He serves as SanMelix’s chief medical officer. 

Diana Sabacinski — SanMelix’s CEO — leads the business side of the company. She earned a degree in accounting from Quinnipiac University and has held a variety of executive roles at small businesses. For example, Sabacinski was the CFO of ExecuTrain of Florida for 11 years and the president of LKJ Associates for nine years. Beyond these listings on LinkedIn, Sabacinski’s background experience is fuzzy. 

The SanMelix team also includes a number of “directors,” which appear to be part-time advisors with limited influence over day-to-day operations. Thus, SanMelix is led primarily by the Sabacinskis. Dr. Sabacinski’s experience as a podiatrist treating one of the largest categories of wounds is a strong credential for leading a business in this space, Still, neither he nor Diana Sabacinski offer a great deal of entrepreneurial experience. The team has major gaps in sales, marketing, and supply chain and distribution. As a result, San Melix Laboratories’ team rating is middle-of-the-road.

SanMelix Laboratories makes strong claims about the differentiation of its primary BEECure M wound dressing product. The company believes that its BEECare M dressing is the best wound dressing available that addresses the “three essential components” of skin and wound care: antioxidants, antibacterial properties, and anti-inflammatory and humectant properties. The company argues that buckwheat honey can uniquely address these needs, thanks to its antioxidant properties which are superior to most types of honey.

These basic claims appear to be true. The BEECure M wound dressing seems to leverage a superior natural remedy to better heal wounds than traditional dressings. SanMelix has also secured multiple patents for its dressing, providing defensibility. However, it’s nearly impossible to verify that BEECure M is the only wound dressing among hundreds or thousands of products to meet these “three essential components,” and those three components also appear to be somewhat subjective. 

All in all, the BEECure M wound dressing is certainly differentiated from most dressings and seems to have demonstrated positive results in early testing. However, there is no direct comparison available of the effectiveness of SanMelix’s product against major competitors’. As a result, the company’s differentiation rating is above average but not excellent. 

SanMelix Laboratories was a pre-revenue company through the end of 2020, when financial reporting ends. The company launched its over-the-counter moisturizer product on Amazon in February 2021, so it has brought in at least some meager revenue over the last six months. SanMelix is essentially a pre-revenue company, though, still awaiting FDA approval to begin generating revenue from its primary wound dressing product. Despite these regulatory hurdles, SanMelix’s burn has been relatively low over the last two years, with just over $225,000 in net loss for 2019 and $400,000 in net loss for 2020. The company has also secured nearly $2 million in prior funding.

More importantly, SanMelix appears to be making steady progress toward protecting and launching its marquee BEECure M wound dressing product. SanMelix holds two US patents and one Canadian patent on the BEECure formulation. The company has also completed testing on its wound care product and plans to apply for 510(k) pre-market clearance from the FDA in the third quarter of 2021. This clearance would allow SanMelix to begin marketing its product. In readying for mass production of the BEECure M dressing, the company has secured both a secondary US honey supplier and US manufacturer worldwide formulation rights. These assets reduce SanMelix’s manufacturing costs, which should drive up gross margin when the BEECure M launches. 

SanMelix is functionally pre-revenue, but it appears to be taking all of the correct steps toward launching the product and generating income. As a result, SanMelix’s performance rating is its highest.

An investment in SanMelix Laboratories bears a fair amount of risk. The company is essentially pre-revenue, which always raises questions as to product viability. Investors should be particularly mindful of financial risk, given SanMelix’s lack of income thus far. SanMelix might require a good bit more funding to scale distribution of its product, which would be bad news for investors given the already-high price of this funding round. As with any medical device company, there are also time and market risks associated with SanMelix. Concerns include when the company will launch its product, considering its need for regulatory approval, and whether the market is large enough for SanMelix to earn decent revenue.

SanMelix Laboratories will offer a relatively basic wound dressing product that still faces at least months, maybe years, of regulatory hurdles before it can generate meaningful revenue. Given that reality, a $23.8 valuation seems much too high, even before considering the huge increase in valuation between this and SanMelix’s last funding round. The valuation of the company jumped by almost four times in the last several months alone (SanMelix’s last round closed in April 2021), with no evidence of significant progress between those two rounds. Investors should rightly be asking how SanMelix can justify this extreme valuation increase. 

Moreover, SanMelix Laboratories is led by a team that isn’t particularly impressive. It’s not clear that the Sabacinskis have the proper skills to grow and scale the company. Furthermore, the differentiation between the company’s wound dressing product and the hundreds of other options on the market isn’t immediately apparent. It does seem that buckwheat honey offers healing properties that are somewhat superior to existing options. But it’s not at all clear yet that the BEECure M wound dressing will revolutionize the field of wound care. At this valuation, it practically has to do so to generate a return for investors.

There is third-party evidence that buckwheat honey has antioxidant healing properties that are superior to most wound care and skincare products on the market. At least to the average person without a medical degree, SanMelix’s core pitch is clear. The company claims that buckwheat honey wound dressings are an all-natural wound care option that is potentially more effective than other alternatives. Plus, the benefits of buckwheat honey can also carry over to more traditional skincare products like moisturizers and topicals. 

SanMelix Laboratories has made good progress toward bringing these buckwheat honey products to market. Amazon reviews, though limited, are strong for SanMelix’s over-the-counter moisturizer. The company is months away from applying for clearance from the FDA to begin marketing its wound dressing. When these products are ready to be mass-produced, SanMelix has the honey supplier and formulation rights to begin scaling manufacturing. These are good signals that SanMelix will soon bring beneficial products to market and begin generating revenue.

SanMelix Laboratories manufactures skincare and wound care products made from buckwheat honey, an all-natural and antioxidant-rich alternative to traditional ingredients. The company’s buckwheat honey moisturizer is already live on Amazon, and SanMelix’s primary BEECure M wound dressing will hopefully receive FDA clearance in the near future. These products could heal patients and generate revenue for SanMelix, with the potential for strong margins given the company’s streamlined manufacturing capabilities. 

On the other hand, SanMelix is raising at an extremely high valuation of $23.8 million. This price is almost four times higher than the valuation SanMelix raised at earlier in 2021, with very little justification as to the significant increase. At this price, SanMelix will need to generate meaningful revenue quickly, and it’s just not clear yet whether these moisturizers and wound dressings will achieve product-market fit. Therefore, SanMelix Laboratories has been rated a Neutral Deal. 

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