CATALIST-LISTED The Trendlines Group - an Israel and Singapore-based incubator of medtech and agritech startups - has disclosed that an asset it described as its "Most Valuable Portfolio Company" is Stimatix GI.
In a statement on Monday, Trendlines said that Stimatix, which develops medical products to aid patients with intestinal blockage, sold its assets in November 2014 to a subsidiary of German medical device company B Braun Group. B Braun will market Stimatix's ostomy products internationally from mid-2018.
Trendlines said that it currently maintains a 28.2 per cent holding in Stimatix, which has a current fair value of US$42.6 million, a figure set by an independent firm that specialises in the medical device industry.
"The US$42.6 million valuation represents the projected net present value of Trendlines' share of the estimated future royalty payments from the sale of the company's product, after adjusting the cash flow to take account of multiple risk factors ... and then applying a financial discount rate."
B Braun is currently in the process of completing a high-volume manufacturing facility for the production of Stimatix's products. The product launch is on schedule for mid-2018, said Trendlines.
Until Monday, Trendlines had never identified its "Most Valuable Portfolio Company", using only the term in its financial statements and other reports. The 2014 Asset Purchase Agreement (APA) included a non-disclosure agreement that prevented the release of information, said Trendlines. "Now that the product is coming to market, B Braun has authorised disclosure by Trendlines of the identity of the 'Most Valuable Portfolio Company' and the fact that B Braun was the acquirer."
Under the APA, B Braun acquired Stimatix's assets and agreed to sell Stimatix's ostomy products worldwide. The acquisition transaction included a cash payment at closing, milestone payments, and royalties from future product sales.
In addition to a dividend received after the initial closing in November 2014, Trendlines Incubators Israel Ltd (Trendlines' wholly-owned subsidiary) has additionally been paid about US$1.6 million in dividends to-date, upon Stimatix's completion of relevant milestones.
Under the 2014 APA, B Braun will make royalty payments to Stimatix based on product sales. While at the discretion of the board of directors of Stimatix, royalties so received are generally expected to be distributed to Stimatix shareholders as dividends, said Trendlines.
Steve Rhodes, the group's co-chairman and co-chief, said: "The sale of the Stimatix assets to B Braun in 2014 marked a very significant achievement for Trendlines. Stimatix was started within the Trendlines incubator in 2009 as one of our first medical device companies and within five years of its establishment, we were able to sell its assets for an estimated return of 79.1 times and an internal rate of return of 80 per cent."
B Braun is a cornerstone investor in Trendlines' 2015 initial public offering. It has also invested in Trendlines' other portfolio companies, and is a co-founder and investor in Trendlines Medical Singapore, the group's Singapore-based medtech incubator.
On Monday, Trendlines shares lost 2.52 per cent or 0.3 Singapore cent to close at S$0.116.