The tremendous investment made by US pharmaceutics firm Boston Scientific in Medinol, the medical instrumentation manufacturer, was, it transpires, just the first stage in the success of a spring manufactured by the Israeli company, and named after the late Captain Nir Foraz.
A reminder: at the beginning of 1996, Boston invested some $40 million in Medinol, a company operating in Tel-Aviv’s Atidim industrial zone. About one third of that amount flowed into shareholders’ pockets.
"The Nir spring is quite simply the best spring we have ever seen". This comment came, at that time, from Pat Nicholas, head of the US company. "In combination with the Boston Scientific product line in the field of catheterisation (angioplasty) balloons, we think this technology is the basis for a wide variety of springs designated for the many markets in which we operate".
The device developed by Medinol obviates the need for cardio-bypass surgery. Medinol has developed a spring that is inserted into the cardiac artery. The spring
supports the artery, helping to maintain the artery's natural diameter and preventing blockages from occurring, thus reducing the need for bypass surgery.
Medinol has developed a urological implant including a supportive spring, intended to be inserted into human body tubes and prevent blockage (again preventing by-pass surgery). According to sources with good access to the company, Medinol is presently negotiating with the US Food and Drug Administration to secure approval of the device, which will enable it to be marketed in the United States.
This is evidently the reason why the company is still not making its way to Wall Street, even though present capital market assessments regarding the value at which the company will be issued start at $300 million and amount to as much as one billion dollars.
Great Success in Europe
As reported by Boston Scientific, even today the company’s device is arousing a great deal of interest in the European market. On March 13 1997, Boston Scientific brought action against Johnson & Johnson (which had a quick fling with Medinol before Boston bought in) over breach of patent rights on the Nir device.
Lawsuits were filed in Holland, Britain, Belgium and France. Later, similar actions were brought in Germany, Sweden, Italy and Spain. Johnson & Johnson and Ethikon, its subsidiary, brought an all-European action in which it was alleged that the Medinol device is in breach of a European patent awarded under licence to Ethikon.
At a study day held not long ago by an Israeli brokerage firm, data were presented concerning the Nir device, which indicate that the product is reaping great success in Europe. Medinol, which started to operate also in an industrial plant on Har Hotzvim, Jerusalem, earns an estimated $7 million per quarter, a profit that is expected to increase significantly when the patent is approved in the United States.
Springing from Giant to Giant
Medinol was founded by Dr. Kobi Richter, an advanced technology entrepreneur: Gregory Pinhasik, a scientist who immigrated from the CIS; Ira Yaron, who, together with Richter previously founded the high-tech company Orbotech; and Prof. Benad Goldwasser, former director of the urological ward at the Tel-Hashomer Sheba Hospital.
The company was founded in December 1992. In September 1995, it was reported that mammoth US corporation Johnson & Johnson, operating in pharmaceutics and cosmetics, was to acquire the company for $360 million. One month later, it transpired that negotiations for making the investment in Medinol had broken down and that Dr. Kobi Richter and his wife, Yehudit, who had been negotiating with the American company, had signed an investment agreement with Boston Scientific.
According to the agreement with Boston, apart from the moneys that flowed into Medinol and into the founders’ pockets (and in consideration of which the US company became a 13% owner of Medinol), Boston Scientific obtained sole world-wide marketing rights for Medinol’s products. Commencing March 1996, Boston started marketing the device in Europe.
Jarring Notes
Jarring notes were shortly sounded in what seemed to be the Cinderella story of a local company, following a dispute among the shareholders. Prof. Goldwasser alleged in court that since the Richters discovered Medinol’s significant potential, they had been exerting pressure and threats to get company shareholders to sell them their shares.
Reports from Boston Scientific to the US stock exchange indicate that in April this year, the company purchased Goldwasser’s shares (which constituted 15% of Medinol) for $23 million, at a company value of $153 million, half the value at which it originally invested in Medinol shares. Goldwasser, who in the first round sold shares to Boston Scientific for $2.4 million, thus became a dollar millionaire.
A further development in Medinol’s control was the allocation of 6.2% of the shares to Kobi and Yehudit Richter, who now control 49.8% of the company’s shares. In his affidavit to the court, Goldwasser alleged that the Richters demanded, in consideration of obtaining the agreement with Boston Scientific, an 8% allocation of Medinol shares as a bonus. The allocation diluted the holdings of the other partners, including Boston Scientific (26.3%), Efraim Gildor, the Polaris fund managed by Dovrat Shrem, Efraim Abramsohn, Pinhasik and Irit Cohen.