StemBioSys

StemBioSys

Closed: Sep. 2024

About this raise

StemBioSys, with a valuation of $42.05 million, is raising funds on StartEngine. It is a biomedical company that uses advanced cell technologies to test drugs more efficiently and accurately without using animal models. StemBioSys is innovating drug testing with patented lab tools and allows the testing of new products with cultured human cells and not from embryos or animal models. The pioneering products of StemBioSys include CELLvo Atrial Cardiomyocytes and Matrix Plus, and are used in biopharmaceutical, academic, and government markets. Robert Allen Hutchens founded StemBioSys in June 2012. The current crowdfunding campaign has a minimum target of $15,000 and a maximum target of $3 million. The campaign proceeds will be used for marketing, research and development, manufacturing capabilities, and working capital.

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Investment Overview

Invested this round: $71,834

Deal Terms

Total Commitments ($USD)

Platform
StartEngine
Start Date
06/05/2024
Close Date
09/03/2024
Min. Goal
$15,000
Max Goal
$3,000,000
Min. Investment

$300

Security Type

Equity - Preferred

Series

Seed

SEC Filing Type

RegCF    Open SEC Filing

Price Per Share

$3.00

Pre-Money Valuation

$42,053,985

Company & Team

Company

Year Founded
2012
Industry
Healthcare & Pharmaceuticals
Tech Sector
Biotech
Distribution Model
B2B
Margin
High
Capital Intensity
High
Location
San Antonio, Texas
Business Type
Growth
Company Website
Visit Website

Team

Employees
4
Prior Founder Exits?
No
Founder Name
Steven Davis
Title
Chief Medical Officer
Founder Name
Xiao-Dong Chen
Title
Chief Scientific Officer

Financials

as of Fiscal Year 2023
 Revenue +50% YoY
$550,450
 Monthly Burn
$90,000
 Runway
0.5 months

Summary Profit and Loss Statement

FY 2023 FY 2022

Revenue

$550,450

$367,734

COGS

$0

$0

Tax

$0

$0

 

 

Net Income

$-1,537,261

$616,327

Summary Balance Sheet

FY 2023 FY 2022

Cash

$111,047

$50,372

Accounts Receivable

$21,212

$33,429

Total Assets

$2,938,750

$3,543,332

Short-Term Debt

$1,586,281

$277,410

Long-Term Debt

$405,497

$819,118

Total Liabilities

$1,991,778

$1,096,528

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Synopsis

StemBioSys is a biomedical company focused on developing advanced cell technologies for drug testing. The company aims to improve the efficiency and accuracy of drug testing processes by using cultured human cells instead of animal models. StemBioSys offers a range of products, including CELLvo Atrial Cardiomyocytes and Matrix Plus, which are used in biopharmaceutical, academic, and government markets.

The primary customers of StemBioSys are organizations involved in drug development and testing, including biopharmaceutical companies, academic research institutions, and government agencies. These customers benefit from the company's cell-based tools that enhance the reliability of drug testing outcomes.

The problem StemBioSys addresses is the inefficiency and inaccuracy of traditional drug testing methods that rely on animal models. These conventional methods often fail to predict human responses accurately, leading to costly and time-consuming drug development processes. Additionally, there is a growing ethical concern regarding the use of animals in scientific research.

StemBioSys provides a solution to this problem through its patented lab tools that utilize cultured human cells. By offering products such as CELLvo Atrial Cardiomyocytes and Matrix Plus, the company enables more precise and reliable drug testing without the need for animal models. This approach not only aligns with ethical standards but also enhances the predictability of drug efficacy and safety in humans.

Relating this to everyday experiences, consider the process of developing a new medication. Traditionally, researchers might test the drug on animals to observe its effects before proceeding to human trials. However, animal models do not always accurately reflect human biology, leading to potential failures in later stages of development. StemBioSys' products allow researchers to bypass this step, testing drugs directly on human cells in a controlled laboratory environment. This can lead to faster, more reliable results, ultimately accelerating the availability of new treatments for patients.

Next Section: Price

Price

StemBioSys is offering Preferred Equity in its current fundraising round. The pre-money valuation for this round is set at $42.1 million, with shares priced at $3.00 each. Investors will acquire equity in the company, which provides certain preferential rights compared to common equity, such as priority in receiving dividends and proceeds in the event of a liquidation.

Investing in preferred equity has distinct advantages and disadvantages. On the positive side, preferred equity holders typically receive dividends before common equity holders and have a higher claim on assets if the company is liquidated. This can provide a measure of security and a potential for steady income. However, preferred equity usually does not come with voting rights, limiting investors' influence on company decisions.

Evaluating the exit potential for StemBioSys involves considering similar startups in the healthcare and pharmaceutical sectors. Historically, companies in this space have seen exits through acquisitions or initial public offerings (IPOs). For investors to achieve a 10X return, StemBioSys would need to reach a post-exit valuation of approximately $421 million. This valuation could be driven by significant milestones such as successful commercialization of their products, substantial revenue growth, and potential strategic partnerships or acquisitions.

To provide context, StemBioSys reported annual revenue of $550k with a revenue growth rate of 49.7%. Assuming the company maintains or accelerates this growth trajectory, it would need to achieve substantial revenue multiples to support a 10X return for investors. For instance, if the company reaches $42.1 million in annual revenue and maintains a revenue multiple of 10x, it would align with the required valuation for such a return.

In summary, while the preferred equity offering provides certain advantages, the potential for a significant return will depend on StemBioSys' ability to scale its operations, grow its revenue base, and achieve a successful exit through acquisition or IPO. Investors should weigh these factors carefully when considering participation in this fundraising round.

Next Section: Market

Market

The stem cell market in the United States is a rapidly growing sector, with an addressable market size estimated at $5.1 billion and an annual growth rate of 9.6%. Several key drivers and trends are influencing this market, which could have significant implications for the growth prospects of StemBioSys.

One major driver is the increasing popularity of regenerative therapy. As more people seek non-surgical treatments for conditions such as joint pain, diabetic foot ulcers, and heart disease, the demand for stem cell products is expected to rise. StemBioSys' offerings, which include CELLvo Atrial Cardiomyocytes and Matrix Plus, are well-positioned to cater to this growing segment of the healthcare market.

The prevalence of chronic diseases is another critical factor driving market growth. Conditions such as diabetes, heart disease, and neurodegenerative diseases like Parkinson's and Alzheimer's are becoming more common, creating a need for effective and innovative treatment options. StemBioSys' products targeting these areas could benefit from this trend, provided they offer demonstrable efficacy and safety.

The aging population is also contributing to market expansion. As the demographic shift towards an older population continues, the incidence of age-related diseases is expected to increase. This trend could positively impact StemBioSys, as their cell-based technologies may offer new avenues for treating conditions prevalent in older adults.

Additionally, the number of clinical trials involving stem cell-based therapies is on the rise, driven by research initiatives in the pharmaceutical sector. This trend suggests a growing acceptance and validation of stem cell technologies, which could enhance the market potential for StemBioSys' products.

Government investment in stem cell research is another positive trend. Increased funding and support from governmental bodies can accelerate the development and commercialization of stem cell-based products, benefiting companies like StemBioSys that are active in this space.

However, the market also faces certain challenges. Supportive regulatory environments are essential for market growth, but ethical concerns about the use of embryonic stem cells can act as restraining factors. Additionally, the high cost of research and products can limit adoption, particularly in markets with less established research infrastructures.

StemBioSys targets a niche within the broader stem cell market, focusing on advanced cell technologies for drug testing. While the company's products have applications in biopharmaceutical, academic, and government markets, their specialized nature means they may not appeal to the entire market. Instead, StemBioSys' primary appeal lies in sectors that prioritize precise and ethical drug testing methodologies.

Overall, the stem cell market presents significant opportunities for growth, driven by trends in regenerative therapy, chronic disease prevalence, aging populations, and increased research activity. StemBioSys' ability to capitalize on these trends will depend on its capacity to innovate, validate, and commercialize its products effectively within this competitive landscape.

Next Section: Team

Team

The leadership team at StemBioSys brings a wealth of experience and expertise to the company, positioning it to achieve its strategic objectives in the competitive stem cell market.

Robert Allen Hutchens serves as the President and Chief Executive Officer. With over 20 years of consulting experience at Booz & Co. (now Strategy&) and A.T. Kearney, Hutchens has a strong background in life sciences. His previous work includes managing the CDC's $4 billion Vaccines for Children (VFC) program and collaborating with PEPFAR and the Global Fund. Hutchens joined StemBioSys as President & CEO in 2014 after investing in the company in 2013. His extensive experience in healthcare consulting and program management is crucial for guiding StemBioSys through its growth and development phases.

Mark Douglas Horsey, the Chief Financial Officer, brings significant business and financial expertise to the team. Horsey has supported several startups, including Rapamycin Holdings and Bluegrass Vascular, with business and financial guidance. His previous roles at Genzyme and Dell, combined with his academic background in economics and an MBA from St. Edwards University, provide a solid foundation for managing the company's financial operations. Horsey's part-time commitment, however, could be a potential gap in ensuring full-time financial oversight.

Xiao-Dong Chen, M.D., Ph.D., is the Chief Scientific Officer and a Board Director. A pioneer in stem cell research, Dr. Chen co-founded StemBioSys based on his patented work at UT Health San Antonio. With over 70 peer-reviewed articles and extensive experience in developmental immunology and hematology, Dr. Chen's scientific leadership is instrumental in driving the company's research and development initiatives. His expertise aligns closely with StemBioSys' goal of advancing cell technologies for drug testing.

The company's board includes several other notable members, such as Jean Mary Cheever, a former finance executive with Bristol-Myers Squibb, and Fred Bert Dinger III, who brings over 30 years of medtech experience. Additionally, Robert S. Langer, Sc.D., a highly cited engineer with approximately 1,500 global patents, serves on the board, providing invaluable insights and guidance.

While the team at StemBioSys is highly experienced and well-rounded, there are some gaps that could be critical for achieving future milestones. The part-time status of key team members like the CFO and the need for full-time dedication from founders could impact the company's ability to execute its strategic plans effectively. Addressing these gaps by securing full-time commitments or adding additional experienced professionals could enhance the company's operational efficiency and strategic execution.

Next Section: Differentiation

Differentiation

StemBioSys operates in a competitive landscape with several notable industry competitors, including FATE Therapeutics, StemCell Technologies, and Vericell. These companies also focus on developing advanced cell technologies for various applications, including drug testing and regenerative medicine.

FATE Therapeutics is a larger company with a strong focus on cellular immunotherapies for cancer and immune disorders. The company leverages induced pluripotent stem cell (iPSC) technology to create off-the-shelf cellular therapies. Compared to StemBioSys, FATE Therapeutics has a broader product portfolio and a more extensive market presence, which may translate to higher market penetration and brand recognition. However, StemBioSys differentiates itself by focusing on non-embryonic human cell cultures for drug testing, which can be a more ethical and precise alternative for specific applications.

StemCell Technologies is another significant competitor, known for its comprehensive range of products and services for stem cell research. This company offers high-quality cell culture media, reagents, and instruments, catering to a wide array of research needs. StemCell Technologies' extensive product line and established market position make it a formidable competitor. In comparison, StemBioSys targets a more niche market with its patented CELLvo products, which are designed for specific applications in drug testing and regenerative medicine.

Vericell focuses on autologous cell therapies for the treatment of patients with severe diseases and conditions. The company’s products include cell therapy solutions for cartilage repair and severe burn treatment. Vericell's specialization in therapeutic applications sets it apart from StemBioSys, which is more focused on drug testing and research applications. This distinction allows StemBioSys to carve out a unique position within the broader stem cell market.

The primary customer demographics for StemBioSys include biopharmaceutical companies, academic research institutions, and government agencies. These customers are typically involved in drug development and testing, seeking advanced tools to improve the precision and efficiency of their research. The company's products are particularly appealing to organizations that prioritize ethical considerations and seek to reduce reliance on animal models in drug testing.

StemBioSys holds several patents for its technology, which enhances its competitive edge by protecting its unique methods and products. These patents are crucial in the highly competitive stem cell market, where intellectual property can be a significant differentiator.

Overall, while StemBioSys faces competition from larger and more established companies, its focus on non-embryonic human cell cultures for drug testing, combined with its patented technologies, allows it to address specific market needs and appeal to a targeted customer base.

Next Section: Performance

Performance

StemBioSys has demonstrated notable growth in its recent financial performance. The company reported annual revenue of $550k for the most recent fiscal year, reflecting a year-over-year growth rate of 49.7% from the prior year's revenue of $367.7k. This upward trend indicates increasing market acceptance and traction for its cell-based drug testing products.

However, the company's financial metrics reveal some areas of concern. StemBioSys has a monthly burn rate of approximately $90k, while its most recent cash on hand is $45k. Given these figures, the company faces a limited runway, necessitating either additional funding or significant revenue increases to sustain operations in the near term.

The company has also expanded its product lineup, currently offering 15 products, including two launched within the last 12 months. These new products, CELLvo Human Atrial Cardiomyocytes and CELLvo NeuroMatrix, target specific applications in heart drug testing and neurological disease research, respectively. This product diversification could potentially drive further revenue growth, provided the new offerings gain traction in their respective markets.

Overall, while StemBioSys has shown promising revenue growth and product expansion, the company's financial performance indicates a need for careful management of its burn rate and cash reserves to sustain its growth trajectory and achieve long-term success.

Next Section: Risk

Risk

Investing in StemBioSys presents several specific risks that potential investors should consider. These risks are unique to the company's business model, market position, and current financial situation.

One prominent risk is the company's high revenue multiple, currently standing at 76.4x. This indicates that StemBioSys is valued at over 76 times its annual revenue, which is quite high for a company in its early stages. Such a high multiple suggests that investors are paying a premium based on future growth expectations, which may not materialize as anticipated.

The presence of part-time founders also adds a layer of risk. Key members of the founding team, including the Chief Medical Officer and the Chief Scientific Officer, are not fully dedicated to the company. This could impact the company's ability to execute its strategic plans effectively and respond swiftly to market changes or operational challenges.

Furthermore, StemBioSys faces the inherent risks associated with the healthcare and pharmaceuticals industry, including stringent regulatory requirements and the need for extensive clinical validation. The company's products must gain market acceptance amidst competition from established players, which can be a lengthy and capital-intensive process.

In summary, while StemBioSys has promising technology and a defined market opportunity, potential investors should carefully weigh these specific risks when considering an investment in the company.

Next Section: Bullish Outlook

Bullish Outlook

Several factors contribute to a bullish outlook for StemBioSys, reflecting strong market opportunities, unique competitive advantages, and potential growth drivers that could position the company for success.

The stem cell market in the United States presents a substantial opportunity, with an addressable market size of $5.1 billion and an annual growth rate of 9.6%. StemBioSys is well-positioned to capitalize on this expanding market, particularly in areas like regenerative therapy and drug testing, which are experiencing increasing demand. The company's focus on non-embryonic human cell cultures aligns well with the trend towards more ethical and precise testing methods.

One of StemBioSys' key strengths lies in its unique product offerings, such as CELLvo Atrial Cardiomyocytes and Matrix Plus. These products cater to specific needs in drug testing and regenerative medicine, providing more accurate and reliable alternatives to traditional animal models. The company's patented technologies offer a competitive edge, protecting its innovations and enhancing its market position.

The leadership team at StemBioSys brings extensive experience and expertise in healthcare and life sciences, which is crucial for navigating the complexities of the biotech industry. Robert Allen Hutchens, the President and CEO, has over 20 years of consulting experience in life sciences, and Xiao-Dong Chen, the Chief Scientific Officer, is a pioneer in stem cell research with over 70 peer-reviewed articles. This strong leadership can drive the company's strategic initiatives and foster innovation.

Financially, StemBioSys has demonstrated significant revenue growth, with a year-over-year increase of 49.7% to $550k in the most recent fiscal year. This growth indicates increasing market acceptance and traction for the company's products. Additionally, the company's diverse product portfolio, including the recent launches of CELLvo Human Atrial Cardiomyocytes and CELLvo NeuroMatrix, offers opportunities for further revenue expansion.

StemBioSys also benefits from several positive market trends. The growing popularity of regenerative therapy, the increasing prevalence of chronic diseases, and the aging population are all drivers that can fuel demand for the company's products. The rise in clinical trials involving stem cell-based therapies further validates the market potential for StemBioSys' technologies.

In terms of growth drivers, StemBioSys is leveraging emerging trends in ethical drug testing and regenerative medicine. The company's plans for product expansion and targeting new markets, such as neurological disease research with CELLvo NeuroMatrix, can open up additional revenue streams and enhance its market presence. Continued innovation in cell-based technologies will be crucial for maintaining a competitive edge and driving long-term growth.

In summary, the bullish outlook for StemBioSys is supported by strong market opportunities, unique product offerings, experienced leadership, and positive revenue growth. These factors collectively indicate significant potential for the company to achieve sustainable growth and deliver value to investors.

Next Section: Bearish Outlook

Bearish Outlook

Several factors contribute to a bearish outlook for StemBioSys, reflecting market challenges, competitive disadvantages, and financial concerns that could hinder the company's growth prospects.

One significant concern is the company's high revenue multiple of 76.4x, which suggests that the current valuation is based on optimistic future growth projections. This high multiple is risky, especially for a company in the early stages of development within a competitive industry. Investors may find this valuation unappealing compared to industry benchmarks, which generally have lower multiples.

Financially, StemBioSys faces substantial challenges related to its cash flow and funding. The company has a monthly burn rate of $90k but only $45k in cash on hand, indicating a runway of less than one month. This precarious financial position could force the company to seek additional funding under potentially unfavorable terms, diluting existing shareholders and adding financial strain.

The presence of part-time founders, including the Chief Financial Officer and Chief Scientific Officer, raises concerns about the team's commitment and ability to drive the company forward. Full-time dedication from key leadership is often crucial for navigating the complexities of scaling a biotech firm, and the part-time status of key members may impede strategic execution and responsiveness to market changes.

In the competitive landscape, StemBioSys faces formidable competitors like FATE Therapeutics, StemCell Technologies, and Vericell. These companies are larger, with more extensive product portfolios and established market presence. StemBioSys may struggle to compete effectively, particularly if it cannot demonstrate significant advantages in terms of product efficacy, pricing, or ethical considerations. Moreover, the company’s niche focus on non-embryonic human cell cultures might limit its appeal compared to competitors with broader applications.

Technological and regulatory hurdles also pose significant growth inhibitors. The healthcare and pharmaceutical industry is heavily regulated, requiring extensive clinical validation and approvals. Any delays or failures in achieving regulatory milestones could impede product commercialization and revenue generation. Additionally, maintaining a pipeline of innovative products is essential in this sector, and any lack of continuous innovation could result in outdated offerings, further challenging the company's market position.

In summary, the bearish outlook for StemBioSys is driven by its high valuation, financial instability, part-time leadership, competitive pressures, and regulatory challenges. These factors collectively present significant risks that could hinder the company’s ability to achieve sustainable growth and deliver expected returns to investors.

Next Section: Executive Summary

Executive Summary

StemBioSys is a biomedical company that focuses on developing advanced cell technologies for drug testing, targeting biopharmaceutical companies, academic research institutions, and government agencies. The company offers products like CELLvo Atrial Cardiomyocytes and Matrix Plus, which aim to improve the precision and efficiency of drug testing by using cultured human cells instead of animal models.

In its current fundraising round, StemBioSys is offering Preferred Equity at a pre-money valuation of $42.1 million, with shares priced at $3.00 each. This valuation is relatively high, with a revenue multiple of 76.4x, indicating that investors are paying a premium based on future growth expectations.

The stem cell market in the United States, with an addressable size of $5.1 billion and an annual growth rate of 9.6%, presents significant opportunities for StemBioSys. Key market drivers include the increasing popularity of regenerative therapy, the prevalence of chronic diseases, the aging population, and rising clinical trials involving stem cell-based therapies. However, ethical concerns and high research costs could pose challenges.

StemBioSys has demonstrated notable growth, with annual revenue increasing by 49.7% to $550k in the most recent fiscal year. However, the company's financial health shows some concerns, with a monthly burn rate of $90k and cash on hand of $45k, indicating a limited runway.

In terms of differentiation, StemBioSys competes with companies like FATE Therapeutics, StemCell Technologies, and Vericell. While these competitors have broader product portfolios and more established market positions, StemBioSys differentiates itself by focusing on non-embryonic human cell cultures for drug testing, appealing to customers who prioritize ethical considerations.

Unique risks associated with investing in StemBioSys include the high revenue multiple, limited cash reserves, part-time founders, and the need for continued innovation in a competitive market. These factors could affect the company's ability to achieve its growth targets and secure additional funding.

On the bullish side, the company's focus on ethical and precise drug testing technologies, combined with its strong intellectual property portfolio, positions it well to capitalize on market trends. The growing demand for regenerative therapies and advanced drug testing methods could drive future growth.

Conversely, the bearish outlook highlights the high valuation, limited financial runway, and competitive landscape as potential inhibitors to growth. The company's ability to navigate these challenges will be critical to its success.

In conclusion, StemBioSys presents both opportunities and risks for potential investors. The company's innovative approach to drug testing and strong market drivers offer promising growth potential. However, the high valuation, financial constraints, and competitive pressures require careful consideration. Investors should weigh these factors to determine if StemBioSys aligns with their investment strategy and risk tolerance.

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Company Funding & Growth

Funding history

Total Prior Capital Raised
$2,340,351
VC Backed?
No
Close Date Platform Valuation Total Raised Security Type Status Reg Type
09/03/2024 StartEngine $42,053,985 $71,834 Equity - Preferred Funded RegCF
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StemBioSys on StartEngine 2024
Platform: StartEngine
Security Type: Equity - Preferred
Valuation: $42,053,985
Price per Share: $3.00

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