The IPO of Check Cap, which has developed a capsule for locating polyps in the colon, has been cancelled, because the company failed to achieve a valuation of $70 million.
Sources close to the company told "Globes" that the IPO could probably have taken place at a valuation of $55 million, but the company preferred to forego it and to use its cash, $5 million, to carry out a clinical trial that it believes will enable it to reach the desired valuation, not necessarily on the Tel Aviv Stock Exchange.
It appears that several factors led to the cancellation, chiefly the high value that Check Cap sought for a product still at the early stages.
Check Cap has positioned its product as an alternative to colonoscopies, which is also the target market of Given Imaging Ltd. (Nasdaq: GIVN; TASE: GIVN). Given Imaging's product, an optical camera in a capsule, requires unpleasant preparation by the patient (complete evacuation of the bowel for several days before the procedure), whereas Check Cap's capsule works using radar, and it can therefore see through the contents of the bowel.
If Check Cap's product works as planned, it will be very attractive, but its effectiveness has not yet been tested in human beings. It has been demonstrated that the capsule passes through the colon and returns images without preparation by the patient, but it is still not known whether it really succeeds in identifying cancerous growths in humans.
Early this year, an IPO was held by Aposense, which, like Check Cap, is a diagnostics company controlled by Eli Hurvitz's Pontifax fund. Market sources say that many investors participated in Aposense's flotation at a valuation of NIS 760 million because of Hurvitz and his personal support of the company. It could be that these investors now feel that they have already bought one highly-priced diagnostics company from the Hurvitz stable, and they do not at present need another one.
When Check Cap presents results of testing on humans, it will be a different ball game, for better or worse.
Published by Globes [online], Israel business news - www.globes-online.com - on December 5, 2010
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