Last week, US company NeuroPace, Inc. (Nasdaq: NPCE), which is developing a treatment for epilepsy, completed an IPO on Nasdaq. Accelmed Partners, controlled by managing partner Dr. Uri Geiger, had invested $15 million in NeuroPace for a 20% stake, and has now made a fivefold return on the investment. NeuroPace raised $100 million at a post-money valuation of $500 million.
The investment in NeuroPace was made on Accelmed's opportunistic model. The fund generally buys control of a medical device company with an existing sales network but low growth, and merges into it young companies with complementary technologies that can generate growth. It allocates part of its capital, however, to opportunities that do not fit this model. In such cases, it usually takes a minority stake, as with NeuroPace.
In the framework of the IPO, Accelmed exercised an option for a further $10 million investment at a price lower than the offering price, and will record an additional return on this investment. The IPO was led by J.P. Morgan and Morgan Stanley.
The investment in NeuroPace was made from Accelmed's second private equity fund. A month ago, Accelemed announced the closing of the fund at $400 million.
NeuroPace has developed a system for treating epilepsy patients who do not respond to drug treatment. Epilepsy is a disturbance in the brain's electrical activity, and NeuroPace's product is a electrical stimulation system that monitors the brain and identifies an approaching attack, and then provides a counter stimulus that reduces the symptoms. There are several companies producing electrical stimulus devices designed to intervene in epilepsy attacks, but NeuroPace distinguishes itself by the fact that its electrodes are placed exactly on the region of the abnormal brain activity.
The company was founded in 1997, and over the years $350 million have been invested in it, by, among other investors, Kleiner Perkins, the OrbiMed fund, and the investment arm of Johnson & Johnson. According to the IPO prospectus, NeuroPace had sales of $28.5 million in 2018, $37 million in 2019, and $41.1 million in 2020, when it posted a loss of $24.3 million. The company says that, were it not for the coronavirus pandemic, it could have grown by more in 2020.
Accelmed made contact with NeuroPace in 2019, through OrbiMed, but at that time the company sought investment at a relatively high valuation. Accumulated debts, however, led it to agree to an investment at a valuation of under $100 million in 2020.
"Accelmed is positioned as one of the world's leading investment funds in medical technology, and it became NeuroPace's first choice for leading its restructuring. We are delighted to be supporting a company whose innovative technology allows a new life for millions of epilepsy patients, and will shortly do so for Parkinson's patients as well, and perhaps for Alzheimer's," Geiger said last week, adding, "The IPO attracted a very large oversubscription, and I expect that this will be reflected in the start of trading in the company, and also in the future, as sales growth accelerates."
To date, NeuroPace's share price has risen to $25.44 from its IPO price of $17.
Published by Globes, Israel business news - en.globes.co.il - on April 26, 2021
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