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CytoBioscience: Microcap Play in the $55 Billion Life Science Instrumentation Market

Market expected to grow to over $75 billion by 2022 (Image: CiPA Initiative)

The global life science instrumentation market is projected to grow from $54.5 billion in 2017 to over $75 billion by 2022, according to a September 2017 report from Markets and Markets. The fastest growth is expected to be seen in the research applications segment, driven by evolving global regulatory needs for instrument-based research and analysis, continued growth in genomic research and ongoing integration and automation of laboratory machinery and robotics.

We’ve been following a San Antonio-based company called CytoBioscience, which became public earlier this year through a reverse merger with WestMountain WASM. The company manufacturers medical research instrumentation and related consumables, and provides contract research services to organizations in the pharmaceutical and drug research market. CytoBioscience’s CytoPatch platform was selected by the FDA for use as its key cardiac safety testing instrument in developing new regulations for determining efficacy and effectiveness in drug development. The regulations, known as the CiPA (Comprehensive In-Vitro Proarrhythmia Assay) Initiative, require that all new drugs, regardless of their intended purpose, be tested in a series of assays to determine whether or not they possess pro-arrhythmia potential.

The CytoPatch is a hands-free robotic patch clamping instrument, which uses CytoBiosciences’ proprietary software and microchips to test individual cells for specific ion channel responses. Ion channels are proteins that regulate a spectrum of physiological processes including electrical signaling, fluid, hormone and transmitter secretion and proliferation. Ion channel screening enables accurate and detailed examination of cellular activity in order to conduct drug research and assess drug efficacy and safety, in addition to providing detailed analysis of how different diseases may respond to different treatments. About 13% of all marketed drugs act on ion channels.

The CytoPatch list price is $175,000, on which the company retains a 49% gross margin. CytoBioscience believes it has a highly differentiated product offering with CytoPatch, particularly in comparison with other automated high-throughput machines. The fact that the FDA chose CytoPatch over competing machines from much larger companies is high endorsement. CytoPatch has been demonstrated to:

  • Complete the entire CiPA Initiative panel at 37 degrees Celsius, human body temperature, which is the optimal environment for the testing cells
  • Complete longer and more stable recordings, which provides more accurate data and saves time compared to machines with shorter recording periods
  • Complete stem cell cardiomyocytes and fast ligand gates ion channels (NMDA) which CytoBioscience believes are not able to be tested on alternative systems
  • Complete mechanical stimulation of cells in order to record the effects on the cells when they are moved or sheeted

Source: CytoBioscience

Clearly the company’s primary challenge will be securing sufficient capital in order to operate and grow the business. The Form 10-Q for the quarter ended June 30, 2018, states, “The Company expects to seek business combinations which could provide a platform for raising the necessary operating as well as research and development funds required until such point that revenue for sales and services are sufficient to fund such activities. The Company anticipates raising additional funds through collaborative arrangements, public or private sales of debt or equity securities, or some combination thereof.”

We met CEO James Garvin, PhD, this summer at the National Investment Banking Association (NIBA) conference in New York. The company has been occupied with transition audits since the merger and is working toward a ticker symbol change. Dr. Garvin told the audience during his presentation that the company was seeking up to $5 million in tranched equity financing. The stock is trading at $0.4167 OTC, giving the company a market capitalization of about $23 million. We think having the FDA as its key customer speaks volumes to the quality of the CytoPatch machine and intellectual property portfolio of five active patents and four pending patents in the US, EU and Japan. We’ll be keeping close watch on the company to see if it can successfully raise the capital it needs.

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DISCLOSURE: The author has no positions or any beneficial interest in, and has received no compensation from, the companies mentioned in this article.

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