A study by "Globes" has found that only four of the 31 biomedical companies that listed on the Tel Aviv Stock Exchange (TASE) in 2005 are traded above their IPO levels: Brainsway Ltd. (TASE:BRIN), Exalenz Bioscience Ltd. (TASE:EXEN), LifeWave Hi-Tech Medical Devices Ltd. (TASE:LIFE), and Mazor Surgical Technologies Ltd. (TASE:MZOR). Biomedical companies that entered the TASE by merging with stock market shells are also traded above their levels at the date of their entry.
All the other biomedical companies are traded below their IPO levels, some as low as an embarrassingly quarter of the IPO price: BioView Ltd. (TASE:BIOV), BiondVax Pharmaceuticals Ltd. (TASE:BNDX), BSP - Biological Signal Processing Ltd. (TASE:BSP), ProCognia (Israel) Ltd. (TASE:PRCG), TRD Instrum Ltd. (TASE:TRD), and WideMed Ltd. (TASE:WDMD). Despite a strategic agreement with GE Healthcare, WideMed has a market cap of NIS 9.9 million. Topspin Medical Inc. (TASE:TOPMD) has a current market cap that is barely a tenth of its IPO value.
An international comparison shows that the situation in Israel is not as bad as it appears. Biomedical companies that have floated on Nasdaq since 2003 have an average negative return of 24.3%. The average negative return of Israeli biomedical companies listed on the TASE since 2005 is 31%, so the difference is not great. The median return of Nasdaq biomedical companies is minus 46% compared with minus 45% for TASE-listed biomedical companies; again, an insignificant difference.
The comparison suggests that what ails Israeli biomedical companies, whether a global crisis in drug development, or the global financial crisis that has caused investor flight from high-risk stocks, or a combination of the two, is not unique to Israeli companies.
Another interesting, albeit inexact, comparison is between biomedical companies and the TASE Midcap 50 index, which has fallen by 25% over the past three years. The comparison is inexact because the biomedical companies were floated at different times over this period, and at different company values and in varying market climates, so their returns vary accordingly. Nevertheless, the comparison shows that the condition of biomedical companies is not exceptional to the market as a whole.
The worrying aspect about the negative yields of the biomedical companies is that most of them are still in the clinical trials stage, and do not yet have sales. The companies were supposed to gradually gain market value on the basis of progress in the trials. Companies that fail, vanish. Although no company floated since 2005 has disappeared, almost none of them have created value because almost none have had a significant clinical trial success.
Published by Globes [online], Israel business news - www.globes-online.com - on May 20, 2008
© Copyright of Globes Publisher Itonut (1983) Ltd. 2008