The Israel Securities Authority has ordered medical device company Medigus Ltd. (TASE:MDGS) not to hold a secondary offering, because of remarks its chairman, Yair Rabinowitch, made to the media, which the Securities Authority considered as improper disclosure of information. However, so far as is known, Medigus has no plans to hold an offering in the near future.
Medigus develops esophageal endoscopes for the treatment of gastroesophageal reflux disease (GERD). At the demand of the Securities Authority, the company issued a statement clarifying Rabinowitch's remarks to the media. According to the statement, Rabinowitch said in an interview, "I believe that by the end of 2011, we will obtain US Food and Drug Administration (FDA) certification… After FDA approval, the switch to profit will be rapid." He also said, "The company is examining the possibility of launching sales of the endoscope we developed at hospitals in Europe."
Medigus's clarification says that, under its timetable, it will probably file an application for approval of its product during the third quarter of 2011, at which point the timetable depends on the FDA. In previous statements, Medigus said that this process would be completed by the end of 2010, but that the FDA requested more information.
Medigus added that it cannot know precisely when and under what conditions it will become profitable. As for EU CE Mark certification, Medigus said that it already has marketing approval for its first-generation SDS endoscope.
Medigus also said today that, after seeing strong sales of its SRS endoscope to research institutes for research and laboratory work, it has decided to mark this as a strategic field. The company recently delivered 15 endoscopes to research institutes in the US, Europe, and Asia. It has sold several hundred endoscopes, which cost several thousand dollars each.
Medigus's share price was unchanged at NIS 1.02 today, giving a market cap of NIS 76 million.
The Securities Authority previously sanctioned drug developer D-Pharm Ltd. (TASE: DPRM) and stent maker Allium Medical Ltd. (TASE: ALMD) for similar offenses. The case at D Pharm involved remarks about the company's market potential by president and CEO Dr. Alexander Kozak, who said, "We already see billions."
The case at Allium involved remarks by CEO Ronen Castro in which he said that the company was undervalued in his opinion. In a clarification he said that he meant that to say Allium's value was less than that of its peers.
In both cases, the Securities Authority ordered the companies not to hold any public offerings for two months. This is the same sanction presumably ordered for Medigus.
The Securities Authority appears to be focusing on life sciences companies, where timetables for certification of their products (if they are not disclosed in financial reports) are of particular importance. The Securities Authority is even trying to establish a uniform standard for such announcements by life sciences companies, similar to the standard that the Securities Authority has set for oil and gas exploration companies.
Published by Globes [online], Israel business news - www.globes-online.com - on April 12, 2011
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