Kadimastem Ltd., which develops living tissue based on stem cells for drug research and possible future use in transplants, raised NIS 20.4 million in its IPO on the Tel Aviv Stock Exchange (TASE), the first IPO on the market since late 2011. The company issued blocks of shares and warrants at NIS 6.60 per share (for an effective price of NIS 5.30 per share). This was its minimum price, giving a market cap of NIS 88 million.
Rosario Underwriting Services (AS) Ltd. was the lead underwriter. It was joined by Discount Underwriting & Issuing Ltd. and Menorah Mivtachim Underwriters & Management Ltd. The underwriters bought NIS 3.2 million of shares and warrants in the offering. Rosario still has an option worth NIS 456,000.
It was interesting to see that, of the two life sciences IPOs planned for the past two weeks - Kadimastem and Neuronix Ltd. Kadimastem's offering was successful, even though it is the more innovative biotech company, which is harder to understand, and farther from the market. It is also a stem-cell company, a field that while very popular on the TASE, suffered a blow last week when the US Food and Drug Administration (FDA) suspended a clinical trial of Pluristem Therapeutics Ltd. (Nasdaq:PSTI; DAX: PJT: PLTR).
The interest is apparently because of previous achievements by Kadimastem executives: founder and chief scientist Prof. Michel Revel has already brought a drug to market; and chairman and CEO Yossi Ben-Yossef has a track record of investment in biotechnology. Investors may have been impressed by Kadimastem's drug development agreements.
Kadimastem has a joint development agreement with Merck Serono SA, and a second agreement with a partner whose identity has not been disclosed. Although the company had no revenue in 2012, it said that it has $50,000 in deferred income under the joint development agreement, which it will record in the second quarter of 2013.
A valuation by Variance Economic Consulting Ltd. before the IPO stated that Kadimastem had $2.8 million revenue in 2012 and that it could reach $13.6 million in 2013, but that the orders backlog does not yet reflect this high estimate. It is possible that previous ties by the company's executives help attract to the IPO investors who paid the initial amount.
Kadimastem held the IPO despite a going concern warning, a common occurance for R&D companies that list on the TASE at this stage. The company lost NIS 10 million in 2012, and this figure is unlikely to change substantially until it sees income from the joint development agreements. From the beginning, the company acted as if it were a large stem-cell company with extensive laboratories and 30 employees, and all the costs of them.
Kadimastem will uses some of the IPO proceeds to repay debts, guarantees for the rent of its laboratories, and NIS 3 million in grants to its management. The company said that it will need a secondary offering to complete its R&D program.
Published by Globes [online], Israel business news - www.globes-online.com - on June 9, 2013
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