Israeli medical device company Insightec has raised $150 million in an oversubscribed financing round. The ultrasound developer, which was founded in 1999, had previously raised $700 million. The new financing comes several months after Insightec announced layoffs and a going concern qualification was attached to its financial results.
The round was led by Fidelity Management & Research Company and co-led by Nexus Neurotech Ventures and Ally Bridge Group with support from new investors, Baillie Gifford, Catalio Capital Management, Fayez Sarofim & Co., and Gilmartin Capital, along with existing investors led by affiliates of York Global Finance / Community Fund and Perceptive Advisors. The Koch family, the biggest investor in the previous two financing rounds, and the controlling shareholders with a 40% stake, did not participate. The new financing round will enable the company to avoid a going concern qualification in its second quarter results.
The financing round in 2020, which was led by the Koch family, was completed at a company valuation of $1.3 billion. Since then Israeli institutional investors including Bank Leumi, More Investment and the Peregrine venture capital fund invested in Insightec at a company valuation of $1 billion. Around the same time, during the tech boom, Insightec was in talks for a SPAC merger at a company valuation of $1.9 billion, which did not happen because the market conditions worsened. By 2023, the company valuation in its financial reports had slumped to $211 million, with the 3.1% holding of Elbit Medical (TASE: EMTC) worth only $5 million.
Insightec has 230 employees in Israel. According to the financial results published by Elbit Medical, Insightec had revenue of $14 million in the first quarter of 2024, down 30% from the corresponding quarter of 2023. In the first quarter of 2024, the company had a net loss of $26 million. In 2023 revenue was $87 million, down from $96 million in 2022 and the net loss widened by 16.5% to $101 million.
Insightec CEO Maurice Ferre said, "We are at a moment of decisive change for the company. After a period of successful penetration into the market and establishing our position, obtaining insurance indemnification and conducting studies that demonstrate the effectiveness of the technology in the real world, we are prepared to become a company with much more predictable performance, and even a profitable company. To do this, we have raised capital from one of the leading and most knowledgeable investors in our field, additional investors from the field as well as first-class institutional crossover investors."
On the fall in revenue and the cuts made by the company last year, Ferre said, "We switched to a model of building each system to order, compared with the previous model where we would build the systems even before it was time to standardize. This is a more efficient structure, but it creates a gap of several quarters in which systems were ordered but not yet delivered, and it is impossible to recognize the revenue from them. In addition, a new product of ours was approved in October, and some of our customers chose to wait for the new product. We estimate that within a few quarters, these numbers will sort themselves out."
Insightec has developed a system that uses focused ultrasound radiation, under the guidance of an MRI, to burn tissues deep in the body without making an incision in the healthy tissues. After applying the technology to the field of removing fibroids from the uterus and treating bone cancer metastases with less commercial success, it is today focused on the treatment of movement disorders by highly targeted burning of certain areas of the brain. The main market for the product today is the treatment of tremors of non-Parkinson's origin, and the company also has approvals to treat several subtypes of Parkinson's, although the primary tremor market is its largest (25-30 million patients worldwide, with the company hoping to reach hundreds of thousands of them), and expected remain so in the coming years as well.
The company also has trials underway in the field of treating epilepsy and Alzheimer's, but at this time, in accordance with its financial situation, it is now focused on commercial matters and realizing potential of approved indications.
Systems are expensive, and prices reach $2.5 million per system. To date, 160 systems have been installed, with each system also generating fixed costs, at a ratio of 65% of revenue from the system and 35% of usage costs. As the number of installed systems increases, the company hopes to base itself more on regular revenue, and achieve stability.
Published by Globes, Israel business news - en.globes.co.il - on June 19, 2024.
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