Biotech Zombies in Tel Aviv: Still Staggering but Going Nowhere

Medical tech is a heady field that demands much patience. But some of these listed companies may not reward investors after all.

Biopharmaceuticals, medical devices and biotech research. Cutting-edge, exciting stuff, if not investments noted for their speedy return – if they achieve returns at all for investors.

Some companies in this genre do beautifully for their backers, and some do not. Israel has a number of companies in which investors once had high hopes. Now they're more like the walking dead, staggering on with shrinking market caps as they claw immediate gratification from investors still willing to finance the dream.

Nasvax had been founded based on the research of Prof. Yehezkel Bernholz, inventor of breast-cancer drug Doxil, one of the rather few original drugs to originate from Israeli pharma research. Among Nasvax's bigger shareholders are Pontifax, a pharma investment fund founded by the late Eli Hurvitz of Teva Pharmaceutical fame.

None of that has stopped Nasvax, which is developing orally administered antibody treatment for inflammatory conditions, from telling investors about talks with potential investors willing to put several million shekels into its R&D.
It only has enough liquidity to cover its needs for some weeks, Nasvax explains, and it is preparing for the eventuality that the negotiations with the potential investors won't work out. It therefore gave notices of dismissal to all its workers, to reduce costs to the absolute minimum, and if the money does arrive, says Nasvax, it will cancel the dismissals.

At the third quarter's end Nasvax had NIS 4.8 million in cash, after cash burn (excess spending over income) of NIS 2.8 million in the quarter. And its offering in December only brought in NIS 281,000. 

That is a sorry state of affairs for a company that had raised NIS 95 million so far.
Since it first went public in 2005, Nasvax stock has lost 96% of its value. Its market cap on the Tel Aviv Stock Exchange is a miserly NIS 7 million. Eli Hurvitz probably never imagined he'd invested in a company whose market cap is smaller than Teva's sales in an hour.

Preparing the plank for top talent at Glycominds

Nor is Nasvax, whose name derives from "nasal vaccine", the only walking dead on the Tel Aviv Stock Exchange's biotech sector. Another is Glycominds, which makes diagnostic tests to help develop personalized therapy approaches for patients with multiple sclerosis. The tests gauge the state of the disease's advance.

Glycominds says the potential for sales of its tests is a billion dollars a year. Meanwhile, on Monday it closed at a market cap of NIS 6.5 million, having lost 23% in that one day, on microscopic turnover of NIS 1,785.

At the third quarter's end Glycominds had NIS 3.5 million cash. Considering that its cash burn rate is roughly NIS 3 million per quarter, it's close to rock bottom cashwise. That could explain why last week the Glycominds board decided to fire the CEO and R&D veep if no big investment shows up by March 31. So far, by the way, Glycominds has scored no less than NIS 119 million in investor funding.

Warning signs in D-Medical report

The company's managers, CEO, chief finance officer and chief operations officer have all quit, which could hinder execution of the company's plans, observes D-Medical in its own financial statement for the third quarter. Well said.

It also observes that its cash reserves have dwindled and it doesn't have enough resources left to commercialize and market its products. Several of its distributors advised the company of defects in its products. The company's efforts to penetrate the market based on certain schedule failed, it adds.

Therefore, D-Medical sums up, its management suspects it may miss its sales targets in the next two years.

These are some of the warning signs dotting D-Medical's financial report for the penultimate quarter of 2012.

D-Medical develops insulin pumps for diabetics, and is working on low-pain inoculations. At the third quarter's end it had NIS 3.3 million cash, having burned up NIS 3 million in the third quarter. The company's market cap has contracted to NIS 5.3 million, having lost 92% of its value in 2012. The wholesale stampede by its top management and directors in September could attest that they suspect the board doesn't have what it takes to raise more money – on top of the NSI 244 million invested in the company so far.

eran Wolkowski