Israel Health-Care IPOs Soar as Jefferies Sees Maturity

Israel’s health-care companies are taking advantage of booming U.S. share sales to expand as years of clinical trials bring them closer to marketing their products.

More than half of the $1.5 billion of Israeli shares sold in the U.S. in the past 12 months came from the health-care industry, with MediWound Ltd. raising $70 million this month, according to data compiled by Bloomberg. Companies from Kamada Ltd., which in April raised more than $50 million, to Migdal Ha’Emek, Israel-based Enzymotec Ltd. are seeking funds to market new products and expand geographically.

Jefferies LLC, ranked by Bloomberg as the top underwriter of Israeli share offerings in the past 12 months, expects at least two more sales after working on four this year. Credit Suisse Group AG, which has raised more than $500 million for Israeli companies in the past year, estimates there will be at least six more deals in 2014.

“On the biotech and pharma side, we’re going to continue to see interesting technologies coming forward,” Gil Bar-Nahum, a London-based managing director at Jefferies who most recently worked on the MediWound deal with Credit Suisse, said by phone March 24. “It’s a byproduct of their actual maturity that you see so many companies seeking an IPO now.”

Kamada is awaiting results from an advanced study of its inhalator device for Alpha-1 Antitrypsin deficiency that could catapult the company into the European market, says Tel Aviv brokerage Leader & Co. Enzymotec is expected to double revenue by 2015 as sales of its products in the U.S. grow, according to data compiled by Bloomberg.

Investors Benefit

Investors who bought into the IPOs benefited from a rally in health-care stocks, with the Nasdaq Biotechnology Index more than tripling over the past three years. Since listing in the U.S., Kamada has surged 64 percent, while Enzymotec soared 75 percent and MediWound gained 22 percent as of the March 24 close. The Tel Aviv Biomed Index, which has gained 38 percent in the last 12 months, was little changed at the close today in Israel.

Recent drops may deter new investors. The Nasdaq Biotechnology Index has fallen 12 percent since rising to an all-time high in February. Options on an ETF tracking the gauge are the most expensive ever relative to the Standard & Poor’s 500 Index, a sign of rising demand for insurance against further declines.

“Companies with limited data, looking to make marginal improvements in terms of treatment shifts could be the first to be affected,” Adnan Butt, a San Francisco-based analyst for RBC Capital Markets, said by phone yesterday. “Companies that don’t have a major technology platform will find the tougher market more challenging.”

Open Market

Interest in health-care stocks has pushed companies with no approved products to seek a listing. Businesses that might have opted for a merger or acquisition are finding they are better off taking the IPO route, according to Doron Averbuch, managing director at Credit Suisse and head of its Israel office.

Alcobra Ltd., which has no revenue and is working on medicine with reduced side effects to treat Attention Deficit Hyperactivity Disorder, raised $25 million last year. Mapi Pharma Group and NeuroDerm Ltd., both of which have no products approved by regulators, are also seeking U.S. listings.

“Because the market is open and receptive to these companies, you can now take companies that you couldn’t have taken public a few years ago,” Averbuch said by phone yesterday.

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