ISRAEL 
HIGH-TECH & INVESTMENT REPORT

from the December 2013 issue


Lumenis to raise $100m on Nasdaq

The medical devices company plans to raise the money at a company valuation of $500 million by February.

Sources inform Ô'Globes'' that Lumenis Inc. has set a target date of February 14 to return Nasdaq. The medical devices company, controlled by Viola Group unit VPartners and XT Group Ltd. unit XT Investments Ltd. (formerly Ofer Hi-Tech), has picked Goldman Sachs as the lead book runner and Credit Suisse as one of the co-managers of the offering. It has also set a target of $100 million and a company value of $450-500 million, after money.

The amount of the offering and the company value are well above previous estimates that Lumenis could achieve. The difference is apparently due to developments in the US capital market for IPOs for technology companies in general and life sciences companies in particular, compared with a few years ago, and because of Lumenis's improved financial results.

Lumenis still files annual financial reports with the US Securities and Exchange Commission (SEC) to order to preserve certain rights when it resumes being traded. The latest report states that revenue was $248 million in 2012, similar to amounts in 2011 and previous years. It is possible that this stagnation prevented the company from going public before, as well as negative sentiment toward the aesthetic devices market, which accounts for a third of the company's business. Profit, however, rose to $7 million in 2012 from $700,000 in 2011.

However, the situation appears to have changed in 2013, and Lumenis has shown growth.

Lumenis had $27 million in cash at the end of 2012 and $82 million in debt, including $13 million in short-term debt. Raising $100 million could allow the company to expand its marketing network, speed up the development of new products, and make acquisitions of other companies in its field.

Lumenis develops medical devices that are mainly based on lasers. It has three divisions: medical aesthetics; laser surgery, and ophthalmology. It was founded in 1991 as ESC by Dr. Shimon Eckhouse, and subsequently went through several upheavals, including a change in management following a hostile takeover, an IPO on Nasdaq in 1996, and delisting in 2006, following heavy losses. The buyers who took Lumenis private were VPartners (which owned 45.3% of the company at the end of 2012) and XT Investments (34.9%), after they acquired control of the company at a value of $280 million. The IPO may include an offer to sell, depending on demand.

VPartners and XT Investments rebuilt Lumenis as a private company, at first under CEO Dov Ofer, and in the past year, under his successor, Tzipi Ozer-Armon, who previously served as an executive at Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) and SanDisk Corporation (Nasdaq:SNDK).

As part of a financing round in 2009, Agate Medical Investments LP and Sky Fund invested in Lumenis. Other investors include Anglo-American Veritas Ltd., MedMax, Nitzanim Venture Fund, Medica Venture Partners, and Goldman Sachs.

Lumenis's recovery included a joint marketing agreement for invasive surgical devices for the digestive tract with Boston Scientific Inc. (NYSE: BSX), which is also the company's major customer and distributor of its products in Japan. Lumenis says that this agreement is an important source of income.

The aesthetics market, which accounts for an important part of Lumenis's revenue, has been struggling since the economic crisis in 2007-09, and many Asian competitors entered the sector. Lumenis was nonetheless able to enter new markets, neutralizing some of the blow. In 2012, 32% of sales were in the US, 30% in China and the Asia-Pacific region, 17% in Europe, the Middle East and Africa (although less than 1% in Israel), and 16% in Japan. The company has 160 distribution agreements and 310 direct sales staff.

At the end of 2012, surgical devices were the company's biggest activity, 38% of the total, followed by aesthetic devices at 36%, and ophthalmic devices at 25%. Surgical devices have increased as a proportion of the company's business at the expense of aesthetic devices.



Reprinted from the Israel High-Tech & Investment Report December 2013

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