from the October 2016 issue

EndoChoice raises $96m in NYSE IPO

The company, however, did not achieve sales for its products at the speed expected by the market, especially its innovative Israeli product. The result was a fall in value and embittered investors. The company was therefore sold at a value lower than the previous offer, but at a very high premium on the current market price. EndoChoice was not a commercial failure; its revenue grew 18% to $75 million in the year ending on June 30, 2016, and sales of its Israeli product grew by over 100%. At the same time, the market's expectations (based on the company's assessments) were much higher.

The leading Israeli investor in EndoChoice was Accelmed, owned by Dr. Uri Geiger and Mori Arkin, which held 10% of EndoChoice, and will receive double its investment. Another Israeli fund,Evergreen Venture Partners, also invested in EndoChoice. The company has 60 employees in its development center in Caesarea.

EndoChoice was the result of a merger between a US marketing company and Israeli technology. Israeli company Peer Medical developed the Full Spectrum Endoscope, which detects more cancerous polyps and abnormal lesions. The product can transmit a 330-degree field of vision, compared with 170 degrees with existing endoscopes, and is therefore capable of detecting polyps and tumors concealed within the intestine. The Full Spectrum Endoscope was invented by Avi Levy, who has already had an exit with colonscopy company Sightline Technologies, sold to Stryker for $150 million, but which was closed down several years later.

CEO Mark Gilreath, former Given Imaging VP marketing, founded EndoChoice with a team of endoscope marketing experts. The company's vision was being a focused gastrointestinal company that would develop and market a broad basket of improved medical devices adapted to the doctor's needs. A colonscope is one of the most important devices for such doctors; the company accordingly sought to market an exceptional colonscope, and found it in Peer Medical. The Israeli company found in EndoChoice an excellent marketing arm, in accordance with the vision of Accelmed of turning a US company with single-digit growth into a company with much faster growth by merging Israeli technology into it. At the time of the merger, the merged company raised $53 million in a round led by the Sequoia Capital fund.

EndoChoice was unable to realize its vision by creating a strong independent company focusing on gastrointerologists, but it is likely to become such a division within Boston Scientific. Boston Scientific Endoscopy Division senior VP and president Arthur Butcher said, "The addition of EndoChoice products and services to our portfolio supports our strategy to provide comprehensive solutions to gastroenterology caregivers and the patients they serve. We expect the acquisition to expand our leadership into new categories in the endoscopy market, and to drive strong, continued growth of our endoscopy business." With respect to the product that originated with Peer Medical, Boston Scientific said it was "considering various possibilities." It appears that the results of this assessment will decide the future of the Israeli development center.

Reprinted from the Israel High-Tech & Investment Report October 2016

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