Eynat Tsafrir, an independent director at stem cells company Kadimastem Ltd. (TASE: KDST), announced her resignation yesterday. Explaining her resignation, she said, "The company did not report that it was in a dire financial situation and needed immediate additional financing in order to continue its activity as a going concern. If the company does not manage to raise more money, there is a real concern that it will be unable to continue doing business, and its activity could be terminated in the near future."
Shortly after Tsafrir's resignation announcement, Kadismastem announced that it had received a grant from the Israel Innovation Authority Chief Scientist. The award is referred to as a NIS 12 million grant, but the Chief Scientist's share is only 38% (NIS 4.5 milion). The grant is designed to support the development of a drug based on stem cells for treating amyotrophic lateral sclerosis (ALS - Lou Gehrig's Disease).
Kamidastem's share price is down more than 18% on the Tel Aviv Stock Exchange today.
Kadimastem cofounder and CEO Yossi Ben-Yossef said that the controlling shareholders in the company would guarantee the rest of the grant. A few weeks ago, Kadimastem cofounder, director, and chief scientist Prof. Michel Revel, who owns an 11% stake in the company, provided it with a NIS 500,000 guarantee. This measure supports both the allegations of the company's difficult financial situation and the claims of a supportive response by the controlling shareholders.
The company's 2016 financial statements contain a going concern warning, which has appeared in most of its reports since Kadimastem's IPO. As of the end of 2016, the company, whose current market cap is NIS 68 million, had NIS 2.5 million in cash, but it has since raised NIS 15 million from private investors and the public. Kadimastem burned NIS 13.7 million on its regular activities in 2016. According to the company's statements, it is scheduled to begin clinical trials by the end of the year. On the one hand, this will accelerate its cash burn rate, but it is also likely to facilitate raising additional capital.
Tsafrir is an economic consultant and former Israel Discount Bank (TASE: DSCT) business development manager. She served in various positions at Discount Bank and Bank Leumi (TASE: LUMI), including founding and managing the capital market department at Bank Leumi, as a business administrator in Bank Leumi's commercial banking division, and as an economist in the bank's economic division. She is an external director at Altshuler Shaham Ltd., the leading investor in Kadimastem's IPO.
Kadimastem was the only biomed company to hold an IPO on the Tel Aviv Stock Exchange (TASE) in 2013, and one of the few to hold an IPO anywhere that year. Altshuler Shaham was actually responsible for the IPO's success, injecting NIS 10 million of the NIS 20 million total raised. The company value in the IPO was NIS 88 million, after money. The company share has since lost 23% of its value.
Published by Globes [online], Israel Business News - www.globes-online.com - on June 5, 2017
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