Accelmed leads $17m investment in STRATA Skin

Uri Geiger Photo: PR

Strata Skin has developed a device for treatment of psoriasis, vitiligo, and eczema.

Israeli fund Accelmed, controlled by Dr. Uri Geiger and Arkin Holdings, has led a $17 million investment in STRATA Skin Sciences, which is marketing XTRAC, a product for treatment of psoriasis, vitiligo, and eczema. The product was originally developed by PhotoMedex, now a real estate company called FC Global Realty Inc. (TASE:FCRE). PhotoMedex was a medical devices company, but had to sell that activity after taking a loan to acquire a chain of clinics and failing to meet the covenants for the loan. STRATA Skin bought the activity from PhotoMedex but had no success with it.

According to the deal, the value of the activity was $20 million before money. After the deal is closed, the company will be worth $55 million at its current share price. Accelmed will own 50% of the company.

Accelmed is acquiring the activity in order to turn it into a marketing platform for an existing product, together with additional products according to the fund's unique model, which has already proved successful with Endochoice, Cogentix, and Volcano.

A deal was closed today in which Accelmed invested $13 million and $2 million was invested by Sabby Capital and Broradin Capital (two funds that already hold shares in STRATA Skin). $2 million more was invested by recently appointed STRATA Skin CEO Dolev Rafaeli.

Rafaeli managed PhotoMedex, increasing its revenue to $300 million and its market cap to $400 million, based on the No!No! hair removal product. He was also responsible, however, for the purchase of the chain of clinics that eventually led to the company's collapse. Geiger says that Rafaeli demonstrated his worth by increasing business from the XTRAC product from $8 million to $30 million in five years as part of PhotoMedex's business. Revenue is now stagnant because under STRATA Skin's ownership, the product was not advertised directly to the customer. Rafaeli and Accelmed, however, hope that the product can be resurrected by the resumption of advertising.

Between the announcement of the deal and its closure yesterday, Menorah Mivtachim Holdings Ltd. (TASE: MORA) became a shareholder in STRATA Skin. Menorah had a 7.89% stake before the current deal was closed, but its holding will now be diluted.

XTRAC is used for treatment of dermatological diseases, Mori Arkin's specialty, through frequency and location-focused ultraviolet radiation (UV). The treatment also reduces radiation risk in comparison with ordinary light treatment (phototherapy), which involves exposure to ordinary UV radiation like that in sunlight.

The company's product is being marketed to doctors, but doctors see a return on their investment only if patients come to their clinic and use it. Payment also depends on the extent of its use. The company therefore wants to aim advertising at the customer.

STRATA Skin is listed on Nasdaq. The company will strive to court investors in Israel but does not want to be listed on the Tel Aviv Stock Exchange (TASE) right now.

Geiger said, "We are glad to become the largest shareholders in STRATA Skin and are confident that the combination of Dolev Rafaeli's management and Accelmed's proven experience in creating successful medical device platform companies will generate enormous value for patients, doctors, and shareholders."

Published by Globes [online], Israel business news - www.globes-online.com - on May 30, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

Uri Geiger Photo: PR
Uri Geiger Photo: PR
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