Brainsway Ltd. (TASE:BRIN) has raised NIS 30 million ($8.5 million) from Israeli financial institutions, including The Phoenix Holdings Ltd. (TASE: PHOE1;PHOE5) and IBI Investment House Ltd. (TASE:IBI), which already has an 8% stake in Brainsway. The round was held at a price per share of NIS 15.5, representing a discount of 4.4% on the market price. It was led by Discount Underwriting and Cybele Capital Markets.
Brainsway, managed by CEO Yaacov Michlin, develops and markets magnetic stimulation helmets for treatment of neurological and psychiatric diseases. The company has a NIS 245 million market cap, and had $6 million in cash as of the end of the third quarter, while its burn rate is $3 million per quarter.
The current financing round makes it less likely that the company will seek a Nasdaq listing in the near future. Brainsway, one of the few medical companies of its size on the Tel Aviv Stock Exchange (TASE) (together with Itamar Medical Ltd. (TASE:ITMR)), has remained loyal to the local stock exchange, and has refrained from dual listing. The company considered a Nasdaq offering several years ago, but gave up on the idea after failing to obtain the valuation it wanted.
Brainsway had $7.5 million revenue in the first nine months of 2017 from its product for treatment of depression, which it is marketing mainly in North America. The company switched early this year from a business model of selling machines to a rental business model, with or without additional per usage payment, resulting in a drop in revenue in the second quarter, but recovered with $3 million revenue in the third quarter.
Michlin previously told "Globes" that the company had a $6 million orders backlog for 2018 and 2019 just from the rental agreements that it had already signed, which he called a "floor" for the company's revenue in those years. Rental agreements amounting to $1 million have been added in the current quarter, which Michlin sees as evidence that if everything goes as planned, the company will be able to grow by one million dollars each quarter on the basis of its method of treatment for depression. This is obviously a forward-looking hypothesis whose materialization depends on sales continuing at the current pace and continuation of the company's existing rental agreements.
In the coming months, the company is expected to receive an answer from the US Food and Drug Administration (FDA) to its application for marketing approval for its magnetic stimulation helmets for treatment of obsessive compulsive disorder (OCD). Should the application be approved, it will be the first medical device in the market for this condition, for which the drug treatment is usually also not specific - general anti-anxiety drugs are usually used. Brainsway believes that approval of its anti-OCD product for use will bolster both the pace of its sales and the rate of use, which is relevant in payment for use. It can also encourage clinics to hire a second machine. The produce achieved good results in a multi-medical center clinical trial for treatment of OCD.
Results from another trial of a treatment for helping smokers to kick their habit are due to arrive in late 2018. Before the current financing round, Michlin told "Globes" that if the company holds another financing round, the money will be invested mainly in additional treatments, not in expanding the sales apparatus.
Published by Globes [online], Israel Business News - www.globes-online.com - on December 11, 2017
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