People often complain to me that they can not invest in the market because they do not have enough money. But if you can spare 100 shekels, you can now invest in the market.
Hadasit is the technology transfer company of Israel’s foremost medical research institution, Hadassah Hospital. In a unique technology transfer and capital markets experiment, Hadasit has floated on the Tel Aviv Stock exchange Hadasit Bio Holdings (HBL). Due to the current market meltdown, HBL is now priced at under a shekel a share (down more than 80% from its IPO pricing level). It allows the public for the first time to buy into the best and brightest research being conducted at Hadassah Hospital at an early stage. This kind of opportunity was previously only available to high net worth individuals or sophisticated VC's.
Biotech investing is high risk, but HBL minimizes this risk by having ten companies in their portfolio. In the field of auto-immune diseases, the companies in the HBL portfolio are ProtAb, KAHR, Verto, and Tolarex; in oncology, they own TK Signal and InCure; and in tissue regeneration and stem cells, it is Cellcure and Thrombotech. HBL also owns small percentages of two public traded companies, Forticell and Bioline.
Before being placed in HBL’s portfolio, these companies were properly vetted by leaders of the biotech community. All the companies have established proof of concept via animal testing. According to IBI investment house, HBL chose these companies because of one common denominator: all of them are developing drugs for markets estimated at more than one billion dollars. These drugs are intended for markets where there is no current solution or the one available is inadequate. .
HBL’s model works to the advantage of the investor. One of the important measures of a biotech company is its burn rate, the rate at which it exhausts its cash. Hadasit portfolio companies are able to use the resources of Hadassah Hospital at cost; therefore, their costs and burn rates are lower than those of other biotech companies, allowing more effective research and higher "bang for the buck" for the investment dollars.
The valuation of the company relative to its portfolio is cheap. Cellcure was valued at $14 million after Teva participated in its latest round of financing. HBL owns approximately one third of the company, which means that HBL’s stake is worth close to $5 million dollars. With a market capitalization of $5,600,000 for the entire company, an investor is getting all the other companies in the HBL’s portfolio (not to mention the potential to invest in future opportunities coming out of Hadassah) almost for free.
Biotech investing can be a minefield, but one of the ways to reduce the risk is by investing with the big boys, the pharmaceutical companies. Two market leaders in Israeli biotech, Teva and Clal Biotechnology, have invested in Cellcure and Thrombotech respectively.
The market value of R&D companies is determined by the progress of clinical trials. Hadasit’s business plan calls for them to sell or partner with a bigger company upon reaching the conclusion of Phase I or II human trials. One of its portfolio companies, Verto, has successfully completed a human clinical trial of ten Lupus patients. Two more should start them in 2009. Cellcure will start them in 2010. Incure, developer of a diagnostic kit to detect metastatic cancer, is ready for an exit and is actively looking for a partner.
Hadasit’s capable management, Dr. Rafi Hofstein and Ophir Shahaf, are bullish on the prospects of the company. Shahaf noted, “We expect several clinical trials to commence within the near future which will result in corporate deals and significant appreciation in the HBL stock.”
Biotech investing is only for the patient. It takes a long time for drugs to wind through the regulatory process. If you have perseverance or enjoy playing the lottery, it would be worth considering buying shares in HBL, traded under the symbol HDST on the Tel Aviv exchange. You just might win the biotech lottery while you are at it help cure serious diseases. ?
Laura Goldman worked on Wall Street for over twenty years for such firms as Merrill Lynch and UBS Warburg. She now runs her own investment advisory, LSG capital, from Tel Aviv. She is an independent commentator, and her views do not necessarily represent those of "Globes".
This article should not be taken as advice to buy, sell or continue to hold any securities without consulting a qualified investment professional, and anyone acting on the advice of this column does so at his or her own risk.
Published by Globes [online], Israel business news - www.globes-online.com - on October 7, 2008
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