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Teva invests USD 100m in startup medical technology company

The world's largest generic drug company, Teva, is buying 12.5 per cent of the shares in medical technology company, Mediwound, from Clal Biotechnology Industries at a price of USD 100m.

The world's largest generic drug company, Teva, is buying 12.5 per cent of the shares in medical technology company, Mediwound, from Clal Biotechnology Industries at a price of USD 100m.

Teva revealed it was also buying shares for USD 7.4m from Clal Biotechnology, USD 2.6m from other shareholders and will also be paying USD 5m for an allocation of stock. In total, Teva and the other shareholders are investing USD 20m in Mediwound stock.

Mediwound, which is also based in Israel, specialises in technology to treat burns. The main product in its portfolio is Debrase Gel Dressing, which uses enzymes to remove burnt skin layers, without damaging healthy tissue.

Mediwound is effectively claiming that the technique will replace surgery: "Deep second and third degree burns result in a thick layer of necrotic tissue which must be removed (debrided) prior to further treatment. The process is usually accomplished only by excision surgery or mechanical procedures. In most cases, following a single application of four hours, the necrotic tissue turns into a gelatinous form and can be wiped away leaving a clean healing or graftable bed."

Per the agreement, Teva will win exclusive rights to market and distribute Mediwound's main product in certain countries. Upon receiving marketing approval for the EU, Teva will receive an option to expand its marketing license to that region.

Should Teva exercise its EU market option, Mediwound shareholders will receive an option to sell Teva shares at a doubled company value of USD 200m. The option could increase Teva's stake in the startup to 25 per cent. In return, Teva will receive an option to buy more shares at a company value of USD 250m.

If the US Federal Reserve Board approves Debrase Gel Dressing, Teva will also get an option to expand its marketing license to North America. Should the company exercise its right, Mediwound shareholders will receive an option to sell Teva 26 per cent more of the company at a value of USD 245m. Teva will receive an option to buy the same amount of shares at a company value of USD 306m.

After the stock sale and allocations, Clal Biotechnology's stake in Mediwound will reduce from 65 per cent at full dilution to 50 per cent. Clal will post an ILS 30m (USD 7.1m) capital gain on the sale of shares to Teva. Regarding the USD 20m investment by Clal and other shareholders, the company will book an ILS 45m (USD 10.6m) deferred gain.

Ruben Krupik, CEO of Clal Biotechnology Industries, said that the burns treatment market was worth USD 400-500m annually.

27th June 2007

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