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Biotech firm StemBioSys set to undertake private offering
May 11, 2012

Dr. Steven Davis, CEO of StemBioSys, (center) oversees work by two of the company's research scientists as they prepare stem cells using the company's patented process. Photo by Erik Reyna, San Antonio Business Journal

By Mike W. Thomas, San Antonio Business Journal

Local biotech company StemBioSys LLC plans to initiate a private equity offering next month to raise about $2.5 million.

The funds would be used to support research and development for the company, which recently secured a patent for a new platform to grow stem cells for use in medical therapy. Stem cells are basic cell structures which, under the right conditions, can develop into any one of the body's more than 200 cell types.

Stem cells were initially found in tissues from discarded embryos that had either been miscarried or aborted. More recently, scientists have been trying to develop ways to re-engineer adult cells and turn them into stem cells. However, that process has proven to be both time consuming and expensive.

But now StemBioSys has come up with a platform for developing stem cells using human umbilical cord blood.

Cord blood, aside from not inflaming the same moral and ethical issues, is cheaper and more accessible than embryo tissue, says Dr. Steven A. Davis, CEO of StemBioSys and a clinical professor of medicine/dermatology at the University of Texas Health Science Center at San Antonio.

This "third way" of making stem cells has attracted the attention of investors and researchers alike, Davis says. The technology, which is licensed through the Health Science Center, was developed by Dr. Xiao-Dong Chen, an associate professor of medicine at the Health Science Center who serves as chief science officer for StemBioSys.

"Our platform allows us to grow stem cells at a speed and quality that is unsurpassed in the industry," Davis says. "It provides an environmental micro-niche where the cells can grow while staying immature (undeveloped)."

Davis says if the new platform can be proven to be successful and consistently reliable, then the market for its potential use would be stratospheric - tens of billions, if not hundreds of billions of dollars, he says.

"But first we have to validate it," Davis adds. "We haven't published all the data yet and that is the next stage where we are going with the company."

During the next 18 months, Davis says StemBioSys plans to use the funds raised from the equity offering to establish collaborative research projects to validate the potency and applicability of the stem cells that will be produced using the company's patented process.

Sy Griffey, formerly the senior director for strategy and applied research at San Antonio-based Kinetic Concepts Inc., was recently brought on by StemBioSys to be the chief technical officer. He says the company's technology has already cleared several major hurdles.

"We see this as enabling technology for stem cell development," Griffey says. "It has a lot of promise and we expect to see big results in the next five to 10 years."

Community support
StemBioSys was one of the first companies to receive a $100,000 grant from The Texas Technology Development Center, or T3DC, which seeks to identify promising tech startups and provide them with early-stage seed funding. In addition, T3DC has provided StemBioSys with office and lab space in the University Office Park at 12500 Network Blvd. Randy Goldsmith, president of T3DC, says StemBioSys is one of the most promising bio-tech companies in San Antonio.

The support the company has received from T3DC has been a big help, Davis says. "It's nice to have your landlord working with you," he says.

Davis says he expects the company will continue operating out of the space provided by T3DC for at least the next year, but eventually will need to move to another location.

"This is an incubator," he says of T3DC. "It was never intended to be more than a transition space."

StemBioSys has also received strong support from the local investment community, Davis says, noting that the company has been able to do a lot with just its early stage seed funding. Including the funds from T3DC, the company has raised just under $500,000 going into its first private placement round. To date, the company has no revenue and is in the research and development stage.

"San Antonio has a pretty solid foundation in biomedical research from which we have been able to build our team," Davis says. "I think we are in good shape for the next stage of our development."

China connection
Ann Stevens, president of BioMed SA, was instrumental in bringing Davis and Chen together two years ago during a trip to the World Expo in Shanghai, China. BioMed SA was one of the sponsors of the trip that had been organized by former Mayor Henry Cisneros and City Councilwoman Elisa Chan.

Stevens says she was looking for someone to go on the trip who was familiar with China and came across Dr. Chen, who is originally from Shanghai. While they were at the Expo, Stevens introduced Chen to Davis and the two hit it off right away.

"Dr. Chen talked about his dream of starting a regenerative medicine company with links to China and when we got back they formed StemBioSys," Stevens says. "I think it is a beautiful story the way China brought us all together and led to the formation of this company. It is very exciting."

China is one of the key markets where StemBioSys will be doing much of its research, Davis says. The company is looking to collaborate with research facilities in China that Dr. Chen has connections with.

"A lot of the work will be contracted out," Davis says. "But a lot of that work will stay in San Antonio, at the Health Science Center, Southwest Research Institute . ... We have a lot of advantages being in San Antonio."


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