Exalenz Bioscience sold at NIS 165m valuation

Mori Arkin and Uri Geiger

The price at which the company is being sold is 97% lower than the price at which trading in the share began in 2007.

Exalenz Bioscience Ltd. (TASE:EXEN), which develops medical devices for diagnosing digestive problems through breath analysis, announced that it would sign an agreement today for its sale to a US investor. The share price in the deal is NIS 6.10, a 70% premium on the today's opening share price at a market cap of NIS 165 million. The company's share price is up 60% in trading today, boosting its market cap to NIS 155 million. The share price rose 10% yesterday, before the announcement.

Exalenz Bioscience has known ups and downs since its IPO on the Tel Aviv Stock Exchange (TASE) in June 2007. Even with the premium, the sale price is a disappointment for investors in the Israeli capital market. The price at which the company is being sold is 97% lower than the price at which trading in the share began in 2007.

Investor Mori Arkin acquired control of Exalenz Bioscience in 2010, and injected at least $50 million into the company over the years. In certain periods, his support was the only thing that kept the company afloat. Arkin, who currently owns 75% of the company, will lose at least $10 million on the deal. He can take comfort in the fact that he "stole" Uri Geiger, Exalenz Bioscience's founder and first CEO, who became Arkin's partner in the successful Accelmed medical devices fund. Geiger is currently the fund's managing partner, while Arkin became one of the investors in it (but is no longer the anchor investor).

At the same time as he invested in Accelmed, Arkin also invested in TASE-listed company Medical Compression Systems (MCS), which was eventually sold for only a few million dollars - another unsuccessful medical devices investment in the Israeli capital market for Arkin. On Nasdaq, however, Arkin has been reaping hay, with investments in Sol-Gel Technologies and UroGen Pharma. Arkin also invests in a number of private medical companies through Arkin Holdings.

Referring to Exalenz Bioscience, Geiger said, "This may not be a success to boast about. The company failed in its clinical trial, as is liable to happen in this sector, but has emerged from a deep hole, and is now on a positive trend. The deal signed is at a large premium and a high revenue multiple."

Exalenz Bioscience, currently managed by CEO Raffi Werner, developed a breath test for detecting the presence of H. pylori bacteria, which cause ulcers. The company was interested in developing additional tests for detecting the presence of liver diseases, but suffered a number of disappointments in both a clinical trial for one of its leading products and its efforts to obtain large-scale financing in order to develop the product (from both the market and potential partners).

During the 13 years in which it was listed on the TASE, the company shifted between a focus on its product for H. pylori, valuated by the company in the US at several hundred million dollars, and large-scale and more ambitious plans for detection of diseases such as liver cancer and Nonalcoholic steatohepatitis (NASH). The company eventually achieved good revenue from its H. pylori product, and even signed a distribution deal with one of the leading testing laboratories in the US, Laboratory Corporation of America Holdings (LabCorp), thereby further increasing its revenue to $9.3 million in the first nine months of 2019, the most recent period reported.

Two years ago, after signing the agreement with LabCorp, Exalenz Bioscience tried to hold a financing round on Nasdaq. The company published very ambitious revenue guidance, and grew substantially, but this was still short of its guidance. The news was published before the planned offering, which was thereupon shelved.

Instead of an offering, Exalenz Bioscience announced last October that it was up for sale. The target price in the sale was $60 million, but the eventual sale price was only 75% of this.

According to its guidance published at mid-year, Exalenz Bioscience will post $14-15 million in revenue in 2019, 6.5-14% more than in 2018, but still far short of the $25 million guidance published by the company in early 2018 in preparation for its planned offering. Exalenz Bioscience has a positive cash flow, and anticipates growth of over 10% in the coming years under the new buyer's ownership. The company also recently reported good results in a trial of one of its dream products - forecasting development of NASH.

Published by Globes, Israel business news - en.globes.co.il - on February 19, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

Mori Arkin and Uri Geiger
Mori Arkin and Uri Geiger
Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018