Brothers Charles and David Koch, two of the world's 15 wealthiest people, are leading a $75-150 investment in Israeli medical equipment company Insightec. The investment is at a company value of $460 million, before money. The investment is through Koch Industries, one of the two largest private companies in the US.
Koch Industries is an oil, gas, and commodities conglomerate based on Wichita, Kansas with over 100,000 employees worldwide and $100 billion annual turnover. Charles, 82 and David, 77, jointly own 84% of Koch Industries' shares, and the Bloomberg news agency estimates their personal wealth at $48 billion each, putting them in 13th and 14th places on Bloomberg's billionaires ranking. The Koch brothers are among the largest contributors to the US Republican Party.
Insightec, founded in 1999, develops, manufactures, and markets medical systems used for non-invasive treatment of internal tumors. The company's technology combines the use of focused ultrasound beams and magnetic resonance imaging (MRI). Elbit Medical Technologies Ltd. (TASE:EMTC), which owns 31% of Insightec's shares (25% fully diluted), reported the new investment agreement signed by Insightec with Koch Industries today. Under the agreement, Koch Industries and other investors will invest $75-150 million in Insightec in two stages for an allocation of new Series E preferred shares in the company that will constitute 17% of its issued capital (14% fully diluted). Koch Industries and other investors (including Insightec's previous investors) will also be granted an option to invest $75 million more in Insightec for an allocation of additional preferred shares. The announcement sent the Elbit Medical's share price soaring 10%, pushing its market cap up to NIS 310 million. When the investment deal is completed, Elbit Medical's Insightec stake will be diluted to 26% (22% fully diluted), and if the investment reaches the maximum of $150 million, its share will be diluted to 22% (19% fully diluted).
Up to five more years of activity
Insightec's high-power focused ultrasound beams make it possible to destroy tissue deep within the body without incisions or damage to other tissue, while controlling the results of the treatment. Following a decade in which Insightec's revenue was based primarily on a product for treatment of intrauterine myoma, in recent years the company has also been offering a product for treatment of the brain in order to relieve non-Parkinson's Disease tremors, a product for relieving pain caused by bone metastases, and a product for the treatment of prostate cancer. The company today announced that the US federal agencies for medical insurance for senior citizens, the disabled, and the needy (Medicare and Medicaid) were raising the level of insurance reimbursement for treatment of movement disorders (initial tremor) from $9,751 to $17,500 starting on January 1, 2018, contingent on endorsement of the decision by the two agencies' regional offices.
Insightec finished the first half of 2017 with a 45% increase in revenue to $10.9 million, but also a 36% rise in the company's operating loss to $19 million. Insightec burned $15 million during this period, leaving the company with $22 million in cash at the end of June. The new investment guarantees the company 2-5 more years of activity.
Published by Globes [online], Israel Business News - www.globes-online.com - on December 14, 2017
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