BioLight Life Sciences — Update 5 January 2017

BioLight Life Sciences — Update 5 January 2017

BioLight Life Sciences

Written by

Pooya Hemami

Analyst - Healthcare

BioLight Life Sciences

Chinese investor LOI to privatise company

Acquisition letter-of-intent

Pharma & biotech

5 January 2017

Price*

NIS13.09

Market cap

NIS34m

*Priced at 3 January 2017

NIS3.85/US$

Net cash (NISm) at 30 September 2016

31.8

Shares in issue

2.6m

Free float

45%

Code

BOLT

Primary exchange

TASE

Secondary exchange

N/A

Share price performance

Business description

Based in Israel, BioLight is an emerging ophthalmic company focused on the development and commercialisation of products and product candidates that address ocular conditions. Lead products IOPtiMate and VS-101 are directed towards the treatment of glaucoma.

Analysts

Pooya Hemami, CFA

+1 646 653 7026

Maxim Jacobs, CFA

+1 646 653 7027

BioLight has announced that on 6 November 2016, following approval from its board of directors and an independent special committee, it signed a non-binding letter of intent (LOI) with an unnamed Chinese investor (the Fund), that offers to privatise BioLight by acquiring 45% of its currently outstanding shares (COS) at a price of NIS16.50 per share. Pricing terms could change given that the due diligence process and negotiations about the definitive agreements are still ongoing and may take several weeks.

Year
end

Revenue (NISm)

PBT*
(NISm)

EPS*
(NIS)

DPS
(NIS)

P/E
(x)

Yield
(%)

12/14

0.9

(30.1)

(8.91)

0.0

N/A

N/A

12/15

1.4

(25.1)

(6.96)

0.0

N/A

N/A

12/16e

2.3

(23.9)

(5.98)

0.0

N/A

N/A

12/17e

6.6

(33.8)

(11.82)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

The Fund proposes a two-stage deal where it would first acquire all COS, excluding those held by the four largest existing shareholders. We understand that the four largest current BioLight investors (Rock-One Group, Shanghvi Dilip, Dexcel Holdings and BioLight chairman Israel Makov) hold about 55% of COS, and that most or all of these will be excluded by the Fund’s offer to purchase the COS which, at NIS16.5/share, would be worth c NIS19.4m (c $5.0m). In a second stage, following BioLight’s privatization, the Fund, potentially with other investors, plans to inject $5-7m of additional capital into BioLight, at an identical price per share, thereby obtaining a controlling stake in BioLight.

Given BioLight’s NIS31.8m end Q316 net cash and our projected 2017 NIS31.7m burn rate, the company would likely need to raise capital in H117, if an acquisition were not to proceed. Compared to our previously published NIS37.00 per share rNPV (ex-cash), which assumes peak US market share forecasts of 30%, 7%, and 15% for IOPtiMate, Eye-D VS-101 and TeaRx, respectively, we estimate the NIS16.50 offer reflects peak US share estimates of 20%, 4.5%, and 10%, respectively. We also reiterate that our rNPV approach assesses the company’s product pipeline and does not explicitly factor liquidity risks or the potential effects of dilution.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Tel Aviv +44 (0)20 3734 1007
Medinat Hayehudim 60,

Herzilya Pituach, 46766

Israel

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