Chris Marlett, CEO of MDB Capital. Welcome.
All right. Thank you. All right. Thanks everyone for joining today. We'll let everybody else sit down here, and then I'll get going. We've been doing the same. That's good music. Who is that? All right. We've been doing the same thing for 30 years. We've been launching companies that we believe can make a difference, companies that have a moat, generally around IP. We've taken some companies public recently that varied from that strategy a little bit. One of the companies you might have seen here, Buda Juice, was a friend of ours in Dallas that we took public that we think is defining a new category, but not a deep tech company. We think they have a real moat around this whole idea of fresh juice, and so we're very proud of them. They're doing great and it's been a lot of fun.
They've been public for a little less than a year. But we've been doing the same thing for 30 years. We just did our 18th IPO. Some of these companies were companies that we licensed technology from university, put the company together, so we owned big chunks of those companies. So we were really co-founders more than we were an investment bank. Then some companies like Buda, we were an investment bank, but we think a value-added investment bank in helping them to define themselves as a category leader. So that's basically what we've done for a long time. I've been in this business my whole life, so about 40 years doing the same thing. I joke we sell dreams, but we really launch great companies is the way I look at it.
Over those years, in the early 1990s, I wrote a paper that basically described that once companies got to about a $75 million market valuation, they really would take on flight. Institutions would get involved in them, they would start to do very well, and they would get more of an audience to invest in them. That number has gone up quite a bit, and so that's really what we've seen. Really in the last 25 years, we've gone from about 8,000 public companies down to about 4,000 public companies or less now. It's much harder for these small companies to really get noticed. The really tiny ones, sub $100 million market value. So you see here at the conference, a lot of these companies really struggling to get people to pay attention to them.
What we've tried to do is always get these category-defining companies that we believe are really big ideas, and that's why one of our taglines you've seen is "We launch big ideas." We went public a couple of years ago with the idea of we would scale up what we were doing. It was really the wrong time to do that, because what's happened is everything that's sub $100 million market value, which is typically where we take these companies public, has been evacuated, and it's been probably the worst asset class over the last few years. We definitely made a mistake probably going public. We did this being private for so many years, and scaling was probably not the right time. The good news is that it brings a lot of opportunity, and right now, a lot of these companies are-- Nobody cares about them.
One of my quotes is that it's hard to fall off the floor and we might be on the floor. It really has caused us to reassess where we're going, how we're going to do it. We have to pivot and figure out what to do because we can't just sit here and pray that these micro-cap companies are going to get a lot of attention paid to them. We're really focused on leveraging the companies that we have in our portfolio and maximizing the value of them and try to deliver as much shareholder value as we can back to our shareholders. I just ran a little thing with AI this last week where basically the sub $100 million market cap companies this year are on average down about 20% versus what we've seen, obviously, in the rest of the market.
It's not really an excuse, it's just a fact of how we're going to have to run our business and take the realities of what's happened. Again, this is not new news to you, but it really has caused us to say, "Okay, what are we going to do to really return the most value back to our shareholders?" And that's where, again, we might be at the absolute bottom. It always gets like this where no one wants to buy these nano caps, and then all of a sudden something changes. We hope that's going to happen, but we can't bet that that's going to happen. We're taking action to really monetize or to really focus on those companies we've already launched or the companies that are in our portfolio to transform them and generate a lot of value.
We have companies that we think are category-defining companies in our portfolio, and we really believe in these companies, and we're excited about them, and we're working hard to maximize the value of them right now. Those four companies are Public Ventures. Public Ventures was an idea which was all these small broker-dealers have to clear through large companies. These large clearing firms don't really want micro caps or Public Ventures to be a thing. We started a clearing firm and got it up and running, and it took us about five years to do. We're now looking to partner with somebody that wants to be a clearing firm. There's only 100 independent clearing firms in the U.S. today. It's basically like having a bank charter, and we're now in discussions with numerous larger companies that want to go self-clearing.
We're hoping that we can not only monetize that, but also take what we developed with that and leverage it so we can continue to do these offerings when the market comes back for these smaller IPOs. PatentVest was something we've worked on for a long time. We'd originally built a database that helped us to really evaluate new technologies. Because we wanted moats around these technologies, we would always want to make sure that we would own the space that we were in, and we started to build this database. We invested a lot of money over the years, and then we transitioned. We had this idea when this Arizona law came about that enabled us to be a non-lawyer-owned firm. Now with the advent of AI, we had the ability to really disrupt the whole legal process around patent prosecution.
We think that everyone's seeing it, of course, in the practice of law today. We see a big opportunity to roll up the industry and support lawyers in a way that they've never been supported. The way we see the world transforming is that PatentVest is going to be a great place for the most brilliant legal minds to do their work and be supported by our analyst team, by AI, our analysts that enable the AI, and process and string all those processes together. We're very excited about that. We're currently going to spin that off as its own business unit and fund it separately through outside investors. eXoZymes is public. It definitely is the most disruptive synthetic biology company that we've ever seen. We launched that company, took it public almost two years ago. We own about 40% of the company.
We think it's a multi-billion dollar opportunity. They're not here at the conference, but you guys should take a look at them. We just filed a registration statement for Paulex Bio, which could be one of the best treatments or potentially even a cure for type 1 and type 2 diabetes. We own 7 million shares of that. That IPO should go out sometime next year, and we're very excited about it. It's a company that we started with people that we had a big success with in a company called Provention Bio. They got bought out. I talked about this a bit. I won't go into too much more detail, but really the team at our firm did a phenomenal job getting this off the ground. It is not easy to do it, to get a new self-clearing firm up and running. We got it up and running.
It's operating great. You can go to MDB Direct. The app works great. We've built that firm, and now we want to partner with somebody, and we think that we've had multiple people show interest in it, and so we're hoping to announce something quite soon with that. PatentVest. Patent prosecution in the U.S. is about a $15 billion business. It's very fragmented. There's very few law firms that have any material share of the market, and everybody knows that the way patents are going to be prosecuted are going to change very dramatically. There is probably 1,000 legal tech AI firms out there. That's not what we're selling.
We're using all of those legal tech folks, or we're developing our own agents to work with our analysts to support the best lawyers, to create a great work environment for the best lawyers, to create the best IP, and really enable these companies in the AI era. The thing that I find so exciting about what's happening is that AI is going to probably cause an explosion in new patent applications. The reason why is that not only is AI enable inventions to happen at a much greater rate, but AI is also going to, I think, cause what I call a land grab in IP. Because now that invention is happening so much faster, people are going to be racing to get there faster with IP, with patents.
When you think about what's happening in drug discovery today, drug discovery is ramping at a ferocious rate because of AI, and people want to get there before somebody else does. Because everybody's employing AI, everyone knows that these pathways need to be patented. We think that the space will grow. It'll be a lot more efficient, so there'll be some compression in pricing from law firms. But if you're a lawyer today, do you want to work in a big law firm where you've got huge expenses, and partners scraping off the top? If you're a brilliant legal mind, you want the best associate base and efficient firm to prosecute those patents behind you. You don't want to work at a big law firm.
I think that big law firms are increasingly going to get out of patent prosecution, and I think most of the legal work is going to go to a firm like ours. I'm super excited about what we're doing there, and we've been adding a lot of clients. We've been adding lawyers, and I think we're about ready to go into hyperscale. The thing that's really kind of cool about this is that when we first started, we were looking at our AI budget to be several million dollars and being very difficult. Now what's happening is our ability to program up agents to do things that we would do. To give you an example, a patentability search, we would spend 40 hours on a patentability analysis with one of our analysts, and it's probably down to two hours now, and it's quite dramatic.
We think that the examinations for these patents are going to happen before they're even filed now. We've actually analyzed. Everyone thinks, I don't know, Wilson Sonsini, to pick on one firm. We'll go analyze their applications that they file on behalf of their patents, and we can find out exactly how those patents are going to get rejected and show them to the clients. It's pretty disruptive when we can go and say, "Oh, yeah, you're at this big law firm and you're spending a lot of money." It's very easy for us to go to them and say, "Hey, there's a better way to do this. Higher quality, less cost." We think that the best strategy, guys, that these big law firms will want to migrate to a process like this.
We think we are really the future of IP law, and it is super exciting. eXoZymes is now transitioning to a commercial phase. It was a really big idea that we started, I don't know, about six years ago, I guess. We spun it out of UCLA. There was another company called Ginkgo Bioworks that went public through a SPAC. It traded at a $20 billion valuation based on the promise of making natural compounds or making small molecule drugs through synthetic biology. They were using fermentation. It didn't scale. They have pivoted. They are kind of trying to be an AI company now. They are still public. We said we can actually make these things. The company is progressing very fast. I think it is a multi-billion dollar idea that is now going into commercialization, and all you guys should take a look at it.
I think it is probably, I think, one of the most exciting companies we have ever started. Right now it is suffering a bit in the micro cap market right now, but I think as we transition into commercialization, that should change. Paulex Bio. We started this company with Francisco Leon and Miguel, how do you spell Miguel, his last name?
Sanjuan.
Sanjuan. Okay. That is easier than I thought. Francisco was the Chief Scientific Officer of Provention, and with that, we started that as an idea on the back of an envelope with Francisco, and a drug got approved for the Provention or the delay, actually, of type 1 diabetes. It got bought by Sanofi for $2.9 billion. One of our success stories a few years ago that it got sold. After they sold to Sanofi, they decided that they wanted to still work on diabetes. There was a lot of work to be done. They had a number of assets that they were looking to bring into a new co. We liked one of the assets. We helped them to license that technology from Mount Sinai, and we think it has the potential to regenerate beta cells.
For type 1 diabetics, could start to produce insulin again, and with regard to type 2 diabetics, we could really impact how type 2 diabetes gets looked at. The ability to expand beta cells is a really, really big idea. We think this has got a really good shot of working. The first clinical trial for safety, which is a big, big milestone, is going to start in December, and I think once we show that the drug is safe, which anytime you are going to cause beta cells to grow, people are worried about safety. But I think once we show it is safe, we will probably be taking that public early next year, and we are pretty excited about it. We think this could be a multi-billion dollar idea, and we are well on the way to seeing that be realized.
Basically this is what we own of these various entities, and we are fairly well-positioned in all of these. We own 100% of Public Ventures and PatentVest, and we own nice percentages of both eXoZymes and Paulex Bio. If any of these things go to meaningful valuations, there is a lot of leverage because there is only 10 million shares at MDB, roughly 10 million shares. So there is a ton of leverage. If something goes to a billion-dollar valuation, you get a lot of leverage, especially since our stock is less than $2 a share right now. So roughly a $20 million market cap with nice positions and things that could be quite big.
Risk factors, I guess this was our second quarter presentation, so really the biggest thing in my mind is what is happening in the microcap market, and everybody is complaining about it here and what have you.
I look at it as an opportunity. For our companies that we own already, that is painful. For the ones we do not own yet, it is exciting. All of you are here to find the big ideas of tomorrow. We have some here that you should take a look at, that we own, but we are really good at finding stuff. We have been doing it for a lot of years. We have made a lot of money for a lot of investors. Last few years have been really tough, but we are pivoting. We are going to pivot. What we did in taking Buda Juice public was a pivot. That company is doing super well. It is profitable, so you are not worrying about dilution.
And those are the issues that we are facing right now, these companies that need to raise more capital, there is going to be significant dilution unless this market really turns around.
From our perspective, we have never needed a lot of capital. When you look at, we raised capital when we went public, but a lot of that went into investment in Public Ventures and development of Public Ventures. A lot of it went into the development of PatentVest and, to some degree, the development of these companies because our whole team puts these companies together and gets them ready to go public. When you looked at our OpEx, so much of the OpEx was really directed at getting these companies stood up and getting ready to take them public. We really want to monetize, we do not want to dilute MDB, and we really want to distribute the value to the shareholders. We have never needed a lot of capital to operate.
We're going to be more capital efficient, when you start to strip out some of the OpEx that have been going into the development of these companies. We do banking transactions, which do offset our OpEx, which are about $10 million a year. We've done two in the first half of 2026, which offset some of that. I don't think we're going to do two transactions in the second half of 2026 because Paulex Bio got pushed out and what have you. Basically, once we spin out both Public Ventures and PatentVest, our OpEx drop down to about $6 million a year. The hurdle goes down quite a bit, and I think what will end up happening is we want to start to be profitable from operations while we're still building equity positions in these new companies, and that's our goal.
We really think that we operated for 27 years, if you will, profitably and going public really changed that paradigm for us. We're not going to scale. We built up to scale. Now we're going to cut our OpEx to basically be rifle shot investors like we did before we went public. Operate lean, launch big ideas that have huge asymmetric upside, and own meaningful pieces of the equity. This is really what we're all about. All of our companies improve the human condition, and we've made a difference, and we've had huge drugs. The largest selling prostate cancer drug in the world is something we launched. We've had numerous FDA approvals, things that really make a difference in people's lives, and so we're proud of that. That's what drives us, and thank you guys for coming. We've got 3.5 minutes for questions.
Did you guys retain a stake in Buda Juice? If so.
We have a small position in Buda Juice. We have warrants in Buda Juice. So yeah, we have a small stake in Buda Juice, but it's not.
It's not big enough to put on the slides or it's not—
It's not big enough to put on the slides, no. If it goes to 1,000, it'll be big, yeah. But it might go to 100 and it'll still be big, yeah.
I'm curious about the pipeline and how these opportunities are coming to you.
Yeah.
Only because I only see things. Do you want to hear from—
Yeah. What's really changed dramatically is our pipeline has always been, we go out and we read things like scientific publications, we look at grant fundings, we have a lot of tech transfer or universities bringing us things. We've been around for a long time, so a lot of people in this community bring us opportunities knowing that we like to launch big ideas. They also know we're super choosy, and there's not many things we do. We're not a deal a week kind of firm. We love to see stuff. The thing that's gotten great is that we've taken our process and our analysts have basically replicated themselves in the form of AI now. Literally, we're going to be launching a thing.
We always had a thing, submit your big idea, but now you're going to interact with our analysts, an AI version of our analyst to get an answer very quickly. If there's been a complaint, it's people bringing us stuff, and then we take forever to get back to them. It's just hard. You got to do the work, right? AI is a total game changer for us in doing the work. I really encourage everyone to bring us new stuff. Bring us new stuff, we'll get back to you much quicker than we used to in the past, so I'm excited about that. Our team is-- We're finding AI is going to be a total game changer for us because it's always those gaps of information that you don't have, that you need to get.
A lot of it doesn't come necessarily just from talking to the scientists or the inventors or whatever. Yes, we love to see everything.
Okay.
Just to clarify the monetization concept, you wouldn't monetize eXoZymes at 52 weeks over, do you?
Ideally, no. No, you don't. That's the last thing you want to do.
Okay.
Yeah. No, listen, we've lived through this. Provention, which was a company that got bought out a few years ago that we had. We were the dumbest person in the world. The stock was going down. It was $5. Everybody said, "Oh, this thing's not worth anything." Friday, Silicon Valley Bank got taken over. They had all their money at Silicon Valley Bank. It was a total disaster, right? Monday morning, it got bought for $25 a share, and then we were the smartest people in the world. We're used to being dumb and smart alternatively, depending on what day we wake up. Anybody else? 28, 27. [Mr. Grunfeld].
You have some thoughts about timing on a spinoff of PatentVest?
Hopefully soon. We're in discussions with a lot of strategic people and investors. Ideally, super soon, like in the next couple of months. All right. Thank you all again for coming.