D Medical Industries Ltd. (Nasdaq: DMED); TASE:DMED) is firing most of its employees in Tirat Hacarmel, slashed executive salaries, and stopped all independent marketing of its products. Meanwhile, it will only market its products through large distributors or as components of other companies' products. The company calls this move "a strategic restructuring designed to focus its business on maximizing and realizing the value of the company's novel technology and intellectual property by licensing and/or selling such technology (or part of it) to third parties."
D Medical is giving up its dream of becoming an independent medical device company that develops and produces insulin pumps and other diabetes products. If it cannot license its technology, or find a buyer for its operations, it will probably close down. The company had 70 employees at its peak.
D Medical had just NIS 1.1 million in sales in January-September 2011, and had NIS 9.7 million in cash at the end of September, an amount that has probably since dwindled.
D Medical CEO Efri Argaman told "Globes", "To reach the next milestone in our operations, we would have had to raise at least several million dollars. It is currently impossible for an Israeli life sciences company to raise such an amount. The field has been abandoned. Investment institutions have withdrawn from it, and there are no funds with money engaged in the field."
Argaman added, "The Tel Aviv Stock Exchange (TASE) is no good. The daily turnover on the Biomed Index is NIS 4 million, which is concentrated in three or four companies. We cannot continue raising negligible amounts of capital and managing in conditions of uncertainty."
In the face of Argaman's disappointment from the market climate, other sources point to something of a recovery in the life sciences and increasing investment by funds.
D Medical developed the Spring Zone insulin pump, which is based on a mechanical operating system, rather than an electronic system, enabling the production of small, cheap, and reliable pumps. But simultaneously with the company's development, competition in the insulin pump market intensified, and manufacturers of electrical pumps succeeded in miniaturizing their products with innovative intefaces.
D Medical also suffered from production obstacles, which delayed the launch of its pumps. It tried to launch an interim product - the Spring Universal Infusion Set for use with insulin pumps of all companies - but it lacked the resources for a large marketing campaign in the US.
The company dual-listed on Nasdaq in 2010. Although it raised $10.5 million, the 20% discount for the IPO harmed investor confidence, and only Israeli investors participated in the offering. The company is at risk of being relegated from the Nasdaq Capital Market, but Argaman promises that he will do whatever necessary to keep the listing.
D Medical's share price opens at $0.50 on Nasdaq today, giving a market cap of $4 million, after rising 1% on the TASE today to NIS 1.84.
Published by Globes [online], Israel business news - www.globes-online.com - on March 22, 2012
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