Check-Cap raises $24m, including Nasdaq IPO

Check-Cap

The diagnostic capsule company raised $12 million on Nasdaq, and $12 million from Fosun Pharma, GE Healthcare and Pontifax.

Check-Cap (Nasdaq: CHEK), which is developing an X-ray capsule for diagnosing intestinal cancer, today announced the pricing for its Nasdaq IPO. The company raised $12 million at a $92 million company value, after money. The offering took place at the lower edge of the price sought by the company in its most recent prospectus - $15 million at a company value of $100 million, after money.

At the same time, the company also yesterday closed a $12 million private placement, led by Chinese fund Fosun Pharma, with the participation of Check-Cap's previous major investors: GE Healthcare, Pontifax, and others, meaning that the company raised a total of $24 million in the two financing rounds.

The IPO also included options, which is unusual for a biomedical offering. One of the two options series issued is especially interesting: it is designed to provide an incentive for long-term shareholders, and therefore allows investors to exercise their options at a $6.90 per share - one third after a year, and two thirds after two years, but only if the holder of the option also continues to hold the shares for which he received the options.

Despite the lower-than-expected price, the IPO can be termed a success, because Nasdaq is less open right now to medical equipment companies (as opposed to pharmaceutical companies, for example), particularly medical equipment companies that are still in the clinical trials phase, for which there is still a risk that they will never reach the market. In addition to US underwriters Felt & Co., the company also used the services of Leader Holdings and Investments Ltd. (TASE: LDER) and Cybele Investments to help raise Israeli capital for the share. 15% of the $12 million raised on Nasdaq came from Israel.

Influential shareholders with deep pockets have been like a stepdaughter for the biotech sector on Nasdaq. Check-Cap will now have to put up a big fight for its share's trading volumes and price. The IPO and the accompanying private placement should be enough, however, to complete the company's clinical trial on 60 patients, which could enable it to register its product for marketing in Europe in 2015, and to commence marketing there in 2016, while conducting additional studies for market support. More capital will probably be raised for a US clinical trial, scheduled to start in 2016, and the company believes that it will be able to launch the product in the US in 2017.

Check-Cap's influential and deep-pocketed shareholders include medical equipment company GE Healthcare (5.1%) and Fosun Pharma (13%). Other investors include Pontifax (19%), company cofounder Dr. Yoav Kimchy (8.6%), Docor (5.5%), the BRX fund (5.5%), and others. Two TASE-listed companies are also benefiting from the IPO: holding company Biomedix Incubator Ltd. (TASE:BMDX), which directly or indirectly owns a 3.8% stake after investing in Check-Cap five years ago, and whose share fell 5.3% today, making its market cap NIS 12 million, and holding company Capital Point Ltd. (TASE:CPTP), which invested $500,000 in Check-Cap this year, and is not a party at interest, and whose share was up 4.5% today, boosting its market cap to NIS 54 million.

Published by Globes [online], Israel business news - www.globes-online.com - on February 19, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

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