Israeli ultrasound co Insightec raises $150m

Israeli Medical Devices Company Insightec It raised $150 million in an oversubscribed funding round. The ultrasound developer, founded in 1999, had previously raised $700 million. The new funding comes several months after Insightec announced layoffs and attached continuity qualifications to its financial results.

The round was led by Fidelity Management & Research Company and co-led by Nexus Neurotech Ventures and Ally Bridge Group with support from new investors Baillie Gifford, Catalio Capital Management and Fayez Sarofim & Co. and Gilmartin Capital, along with existing investors led by affiliates of York Global Finance/Community Fund and Perceptive Advisors. The Koch family, the largest investor in the previous two financing rounds and the controlling shareholders with a 40% stake, did not participate. The new financing round will enable the company to avoid going concern qualifications in its second quarter results.

The financing round, completed in 2020, was led by the Koch family, valuing the company at $1.3 billion. Since then, Israeli institutional investors, including Bank Leumi, Mori Investments, and venture capital fund Peregrine, have invested in Insightek at a company valuation of $1 billion. Around the same time, during the tech boom, Insightec was in talks for a SPAC merger valuing the company at $1.9 billion, which did not happen due to deteriorating market conditions. By 2023, the company's valuation in its financial reports had fallen to $211 million, with a 3.1% ownership of Elbit Medical (TASE: EMTC) worth just $5 million.

Insightec has 230 employees in Israel. According to financial results published by Elbit Medical, Insightec generated revenues of $14 million in the first quarter of 2024, down 30% from the corresponding quarter of 2023. In the first quarter of 2024, the company incurred a net loss of $26 million. In 2023, revenue was $87 million, down from $96 million in 2022, and net loss widened 16.5% to $101 million.

“We are at a critical moment of change for the company,” said Maurice Ferry, CEO of Insightec. “After a period of successful market penetration and establishing our position, obtaining insurance reimbursements and conducting studies that prove the effectiveness of the technology in the real world, we are ready to become a performance company.” A more predictable, and even more profitable company. To do this, we have raised capital from one of the leading and most knowledgeable investors in our industry, and additional investors from the industry as well – a cross-class institutional investor.”

Regarding the decline in revenues and cuts the company made last year, Ferry said: “We have shifted to a model of building each system on demand, compared to the previous model where we were building systems even before it was time to standardize. This is a more efficient structure, but it creates a gap.” For several quarters in which systems have been ordered but not yet delivered, it is impossible to identify revenue from them. Additionally, our new product was approved in October, and some of our customers have chosen to wait for the new product. We estimate that within a few quarters, these will be identified. Numbers on their own.

Insightec has developed a system that uses focused ultrasound radiation, under MRI guidance, to burn tissue deep in the body without making an incision into healthy tissue. After applying this technology to the field of removing uterine fibroids and treating bone cancer metastases with less commercial success, it today focuses on treating movement disorders by highly targeted burning of specific areas of the brain. The primary market for the product today is the treatment of non-Parkinson's tremors, and the company also has approvals to treat several subtypes of Parkinson's disease, although the primary tremor market is its largest (25-30 million patients worldwide, with the company having Hoping to reach hundreds of thousands of them), and is expected to remain so in the coming years as well.

The company also has ongoing trials in epilepsy and Alzheimer's, but at this time, and depending on its financial situation, it is now focused on commercial matters and realizing the potential of the approved indications.

The systems are expensive, with prices reaching $2.5 million per system. To date, 160 systems have been installed, and each system also generates fixed costs, at 65% of system revenue and 35% of usage costs. As the number of installed systems increases, the company hopes to rely more on regular revenue and achieve stability.

Published by Globes, Israel Business News – en.globes.co.il – on June 19, 2024.

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