Exalenz Bioscience seeks buyer

Mori Arkin  / Photo: PR

The company's trial of one product failed, and it downwardly revised its sales guidance.

Israeli medical diagnostics device developer Exalenz Bioscience Ltd. (TASE:EXEN), controlled by Mori Arkin, announced today that it had hired an investment bank to manage the sale of the company. The company also lowered its annual sales guidance. The sale of Exalenz Bioscience follows the postponement of the company's planned offering on Nasdaq in late 2018.

The offering failed because Exalenz Bioscience failed to meet its projected sales for its lead product, and because a trial of its product for diagnosing inflammation caused by fatty liver failed. The company's share price tumbled 75% over the past year, driving its market cap down to $20 million. The share price fell a further 5% today, after the company reported that following initial talks with a number of potential buyers, it had been decided to hire an investment bank to coordinate the process and help the board of directors consider various alternatives.

Assessments are that companies of Exalenz Bioscience can be sold for four times their annual revenue turnover if they are breaking even or making a profit. Although the company is still losing money, its shareholders, headed by Arkin, who holds 75% of its shares, aim to sell it for $60 million, more than triple its current market cap. Arkin has carried Exalenz Bioscience on his back since 2010, and has invested a total of $40 million in the company. Migdal Insurance holds 5% of Exalenz Bioscience's shares.

Exalenz Bioscience revised its guidance, and now projects a slower increase in its sales than in its preceding guidance. The company says that the reason is "information obtained about sales figures from an important customer." According to Exalenz Bioscience, its 2019 sales will total $14-15 million, compared with at least $16.25 million in its preceding projection. This is not the first time that Exalenz Bioscience has lowered its predictions: in 2018, the company published guidance including $25 million in revenue in 2019. This projection was later reduced, and has now been reduced again.

According to the current projection, revenue in 2019 will be 6.5-14% higher than in 2018, According to the company's figures, revenue totaled $10.27 million in the first three quarters of 2019, 4.7% more than in the corresponding period last year. The company states that despite its downwardly revised projection, it expects to continue generating a positive cash flow from current activity and growth of over 10% in sales in the coming years.

Aims in breath testing were not achieved

Exalenz Bioscience develops and markets the product it developed, a breath test for detecting Helicobacter pylori (H. pylori) bacteria in the digestive tract designed to replace a blood test that is less comfortable and less precise. Most of the company's revenue from this product come from its main customer, US company LabCorp, one of the leading laboratories in the US.

In addition to the H. pylori diagnosis product, which is in a growing but competitive market of limited proportions, Exalenz Bioscience hoped that its breathing test would become a platform for diagnosing many digestive tract diseases. The failure of its fatty liver product trial last year, however (designed to replace a liver biopsy with a non-invasive test), aroused disappointment in the market, pushing down Exalenz Bioscience's share price, and culminated in the cancellation of the planned Nasdaq offering.

Exalenz Bioscience CEO Raffi Werner said, "We have recently received a number of queries from potential buyers expressing interest in the company. In view of the board of director's belief that the company's value expressed in capital market does not reflect Exalenz Bioscience's full business potential and the queries received, the board of directors has authorized the company's management to contract an agreement with a leading investment bank for management of an orderly professional proceeding for assessing the strategic opportunities available to the company and helping the board of directors evaluate the various options. We continue to believe in the company's business potential and in its ability to continue developing. The company board of directors believes that a strategic deal is likely to help enhance the company's latent value, and to create value for all of the shareholders."

Published by Globes, Israel business news - en.globes.co.il - on October 16, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

Mori Arkin  / Photo: PR
Mori Arkin / Photo: PR
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