Israeli medical devices company Brainsway Ltd. (TASE:BRIN) has filed a public prospectus for a Nasdaq offering to raise at least $30 million. Companies listed on the Tel Aviv Stock Exchange (TASE) usually raise capital at the same value at which they are traded in Israel. Brainsway's market cap is NIS 357 million, but the company's share price fell 3% today, following the announcement of the prospectus.
Brainsway has developed and markets a magnetic helmet for treatment of neurological diseases using magnetic stimulation of the brain's interior. The product was approved for marketing, and has been sold for a number of years for treatment of depression. Last year, it was also approved for treatment of obsessive compulsive disorder (OCD).
The current US government shutdown is preventing stock exchange offerings there, because offerings require approval by the US Securities and Exchange Commission (SEC), a government agency. At the same time, the company can begin its roadshow 15 days after the prospectus is filed, and if the shutdown ends during this period, the company's plan will not be delayed.
The company can make its offering according to its reports for the third quarter of 2018 until February 11. If it has not done so by that date, it can revise its prospectus to include its results for the fourth quarter and the full year and make its offering according to the revised prospectus. Late January is an opportune time for offerings by health companies, so it is worthwhile for Brainsway to submit its prospectus now in order to take advantage of the opportunity if the shutdown ends. This was also the preference of Anchiano Therapeutics Ltd. (TASE: ANCN) (formerly BioCanCell), which submitted its prospectus two weeks ago, and probably also Itamar Medical Ltd. (TASE:ITMR), which recently announced that it was preparing for an offering in the US.
Second attempt at US offering
Brainsway, which has been listed on the TASE since 2010, tried to hold an offering in the US in 2011, but withdrew the plan after failing to obtain the market value it sought. The previous attempt was before the company had made any sales and under different management. In retrospect, it appears that this decision was correct. After 2011, Brainsway obtained marketing approval for its product and tried to penetrate the US market, but had trouble initially, replaced several managers and business models, and began to achieve commercial success only recently (according to its reports). It was probably better for the company to experience these problems when it was traded in the Israeli capital market and to tackle the US market in a more mature state. Brainsway currently has $10 million in cash and burns $1 million a quarter, so that if the current state of the market prevents the company from carrying out its offering, it will be able to carry on in the local market.
Brainsway posted $11.62 million in revenue in the first nine months of 2018, 54% more than in the corresponding period in 2017. This increase is attributable to a change in business model led by CEO Yaacov Michlin, who took up his position in early 2017. Michlin switched Brainsway from the sale of machines, which generates immediate revenue, to a model based primarily on leasing systems and regular usage fees, which generates less revenue in the short term, but more in the long term. After a period of declining revenue after the new model was implemented, revenue began rising and exceeded its level before the change. Brainsway now also has a higher backlog of expected revenue.
Brainsway's gross profit margin was 78% in both the third quarter and first nine months of 2018. The company is still posting an operating loss, but this fell from $1.2 million in the third quarter of 2017 to $900,000 in the third quarter of 2018, and from $4.5 million in the first nine months of 2017 to $3.4 million in the first nine months of 2018. The company's net loss in the first nine months of 2018 was $4.3 million, compared with $4.2 million in the corresponding period in 2017, and its net loss fell from $1.8 million in the third quarter of 2017 to $1.4 million in the third quarter of 2018.
In addition to its activity in treatment of depression and OCD, Brainsway is also developing its product in a number of other brain indications, and is currently conducting a trial of the helmet in helping smokers to stop smoking.
Published by Globes, Israel business news - en.globes.co.il - on January 15, 2019
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