Insightec develops MRI-guided focused ultrasound devices for the treatment of uterine fibroids, tumors, and neurological disorders.
GE Healthcare has invested $13.75 million in InSightec Image Guided Treatment Ltd. in the form of a convertible loan. GE Healthcare owns 64.3% of Insightec, which develops MRI-guided focused ultrasound devices for the treatment of uterine fibroids, tumors, and neurological disorders, such as essential tremor‚ neuropathic pain and Parkinson’s disease.
Insightec has been marketing its non-invasive device for the treatment of uterine fibroids for years, but the company is still not profitable, and sales are stagnant. Insightec said that it would use the proceeds to finance its development plan for 2012 in R&D, sales and marketing, customer support, and financing legal costs in cases filed against it.
The loan will bear 6% interest, and can be converted into equity at a price set when a new partner invests in Insightec, or when the loan matures in 2016. Given that Elbit Medical Technologies Ltd. (TASE:EMTC), controlled by Mordechay Zisser, have tried to keep their stakes in the company, the loan will apparently be converted in the event of an exit or strategic marketing agreement, possibly by GE Healthcare itself. It is also possible that the companies believe that such an event will happen before 2016.
Insightec and GE Healthcare have been collaborating since the 1990s. Until 2007, GE held a minority stake in Insightec through GE Capital, and, together with Elbit Medical, made regular investments in the company to maintain its stake. Insightec's devices were adapted to GE's MRI devices, and marketed as a complete product.
GE Healthcare last invested in Insightec in 2008. The new investment is directly into the company, rather than through Elbit Medical, suggesting the strategic importance that GE attaches to the investment.
The investment comes as Zisser faces problems. Zisser's real estate company, Elbit Imaging Ltd. (Nasdaq: EMITF; TASE: EMIT), which owns 90% of Elbit Medical, faces severe liquidity problems. Although Elbit Imaging has promised a NIS 39 million credit line to Elbit Medical, which has promised a NIS 58 million credit line to Insightec, it is convenient for them if the loans are not requested. Elbit Medical had just $658,000 in cash at the end of September 2011.
GE Healthcare's loan is at the same terms as in loans by Elbit Medical to Insightec. The loans are secured by a floating lien on Insightec's assets. Elbit Imaging has lent Insightec NIS 130 million in loans over the years, and it will probably maintain its stake in Insightec, even if GE Healthcare converts its loan into equity.
Elbit Medical's share price fell 2.7% by mid-afternoon to NIS 0.216, giving a market cap of NIS 174 million.