Public offerings on the Tel Aviv Stock Exchange by biomed companies are usually considered by venture capital funds as a way of raising funds rather than an actual exit. According to this outlook, the TASE route does not contribute to high liquidity and a market cap of hundreds of millions of dollars for a young biomed firm. Only the sale of the company, an overseas public offering or a commercial agreement, so the theory goes, will bring that about.
The belief is that venture capital funds only go for a TASE offering if they have lost interest in a company. Not necessarily because the companies are no good but because their time to market is far longer than the venture capital fund considerable reasonable. In addition, some of these companies do not have the potential for a huge exit. More often than not venture capital funds prefer to focus on other sectors.
But recent development concerning biomed companies on Ahad Ha'am Street have proven these conventional wisdoms to be wrong. Some of the companies concerned had imposed a lock up prohibiting the selling of stakes for 18 months and these periods expired at the end of 2008 and the start of 2009 when Israeli biomed shares were at their nadir. However, the picture had changed by the summer of 2009, when like the rest of the market, biomed shares had started soaring.
And a look at the situation shows that some venture capital funds have done quite well from their TASE exits. Some VC funds have doubled or even trebled their investment. This is impressive in a period when companies, some of them mature, are being sold for half their value in order to avoid delisting.
Notable examples of successful exits by venture capital funds recently include: VitaLife investment in Can-Fite BioPharma Ltd. (TASE:CFBI), which held a public offering on the TASE in July; Pitango and Giza sale of their holdings in drug development company BiolineRX Ltd. (TASE:BLRX); IHVC Life Sciences Fund's and Dor Ventures sale of their holdings in Mazor Surgical Technologies Ltd. (TASE:MZOR), and Ofer High-Tech's sale of its stake in Medigus Ltd. (TASE:MDGS); Pitango and IHVC sale of their stakes in
D-Pharm Ltd. (TASE: DPRM) following its recent public offering and many more.
Can-Fite CEO Prof. Pnina Fishman dismisses the argument that the sale of their holdings in biomed firms by a venture capital fund can send the value of a share plunging. She said, "VitaLife realized its investment on our public offering because it does not hold publicly traded companies and it also realized for liquidity considerations. There are other venture capital funds that still hold a stake in our company and can realize there investment for double what they put in but they prefer to wait for a more significant exit."
Mazor CEO Ori Hadomi also sees the exit of venture capital funds as a positive trend even though the sale of their stake in his company by IHVC and Dor did push down the price of his company's share. He said, "The sale of shares does not always come at the right time from the company's point of view. But the venture capital funds have their own timing. For companies this can be positive because it increases trade in shares."
Hadomi said that he has been contacted by local investors interested in putting money into publicly traded Israeli companies possibly through local venture capital funds.
Even though revenues are very low, the recent successful exits of Israeli biomed companies traded on the TASE by venture capital funds can only serve to stimulate interest in future investments, and persuade promising companies to embark on public offerings. This will result in better and more mature Israeli biomed companies.
Published by Globes [online], Israel business news - www.globes-online.com - on November 10, 2009
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