Given Imaging fails to go it alone

Shiri Habib-Valdhorn

It's impossible to call an exit of almost $1 billion disappointing, but Given Imaging is joining the list of Israeli companies that could not go it alone any longer.

The timing of the sale of Given Imaging Ltd. (Nasdaq: GIVN; TASE: GIVN) is a bit surprising. The company is due to receive at any moment the hoped-for US Food and Drug Administration (FDA) approval of its Pillcam Colon 2 capsule. Usually FDA approval boosts a company's value, so why not wait to sell the company until after the approval has been obtained? In this case, the pending approval is already included in the company's valuation (and delays in the regulatory process are always possible, although the company is optimistic that the approval will be obtained this year). In any case, for Given Imaging, FDA approval is not a do or die alternative; it already sells a range of endoscopic capsules in the US and around the world.

Given Imaging has already obtained marketing approval from Japan's Pharmaceuticals and Medical Devices Agency (PMDA) for a different capsule, with a market potential of hundreds of millions of dollars, and will begin sales in a month. The FDA approval will add another potential market of $1.5 billion. Again, why sell now? Because despite the market potential, an opportunity to create value for shareholders has popped up, and they won't have to wait to educate the market about the new PillCams, which would involve marketing new products.

In October, in a letter to Given Imaging's board, Discovery Group partner Mark Buckley demanded an immediate share repurchase program and the sale of the company to a larger strategic buyer. Discovery Group owns 3.7% of Given Imaging. He claimed that a sale to a strategic buyer could be expected to achieve a value of $26-30 per share - 30-50% above Given Imaging's closing price on Nasdaq at the time. He probably did not believe that a deal would soon be made at the upper end of his estimate.

Given Imaging was unperturbed by the letter, stating in response, "The board of directors will discuss the letter and respond at a time of its choosing." This nonchalant response may have been because the board knew that talks were underway, or maybe not. Company executives said that it was easy for outsiders to talk about selling at a high price when reality does not meet expectations. It turns out that this small shareholder called it correctly.

"I am always disappointed to hear about an exit when I think that something else was possible. I am referring to cases in which there is a product with a good chance of reaching market, and it would be possible to build around it large independent activity in the global market. This isn't something bombastic, and Given Imaging is an example of a company that has done it," former Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) CEO Israel Makov told "Globes" in an interview several years ago. It is impossible call an exit at almost $1 billion with a handsome premium is disappointing, but Given Imaging is joining the list of Israeli companies that could not go it alone any longer.

Published by Globes [online], Israel business news - www.globes-online.com - on December 8, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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