The Globes-Prometheus index, which tracks Israeli companies traded on Wall Street, was cut by 7.4% last June. During the same period, the Nasdaq index fell by 8.7%, while the Tel Aviv 125 index fell by about half, by 4.1%.
Despite continued declines in the markets, the Globes-Prometheus Life Sciences sub-index continues to surprise and maintain stability: in June it rose by 1%, unlike the Nasdaq biotechnology index which lost about 8.2%. The Tel Aviv Biomed index weakened in June -4.8%.
The medical company that posted the highest rise in June is Eugene Pharma, Whose shares soared by 54%. Prometheus’ economic consulting research department notes that Yrogen is a biotechnology company focused on developing innovative treatments for cancer and diseases in the fields of urology, uro-oncology, and immunology. The company offers treatments using RTGel, a long-release hydrogel-based technology that makes topical treatment more effective, and improves the treatment performance of existing drugs.
The company has a license agreement with Allergen for the development, use, sale and import of pharmaceutical products containing RTGel, as well as of Agenus products for the treatment of orthoreal cancer. In addition, Eurogen has a research collaboration agreement with MD Anderson to promote research treatment for high-grade orthoreal cancer.
During June she participated Eugene Pharma At a health conference where she presented the performance of her products in clinical trials and described the milestones for the future. Despite declining quarterly revenue, the company reported quarterly growth of 10% in the number of patients seeking to try its flagship product. Eurogen presented data that out of a sample of 100 urologists, 96% reported using the product within two years of receiving FDA approval, which will happen according to the company’s reports in 2024.
Decreases in technology stocks
The Globes-Prometheus Technology sub-index lost 5.3% in June, while the Tel Aviv Technology Comparison Index fell by 2.4%. In contrast, the Nasdaq Technology Index fell by a more significant 11.3% in the last month. The company that showed the sharpest rise in the sub-index is Sargon Networks, whose share has climbed 45%.
Sargon Specializes in the development, production, and marketing of 5G and 4G broadband wireless communications solutions. The company offers a variety of Backhaul and Fronthaul solutions, using microwave technology and millimeter waves to transfer telecommunication traffic between base stations, and the service provider’s network core.
Prometheus explains that the main reason for the rise is that at the end of the month, Sargon received a letter from Aviat Networks shareholder who submitted an attractive offer to buy all the company’s shares for $ 2.80 per share, and even offered to give part of the consideration in Aviat shares. . This offer reflects a value of $ 230 million toSargon Which boosted the share price by more than 23% in one day.
Nova: You can expect more purchases
Nova Is one of the oldest companies in the Globes-Prometheus index. The company was issued on NASDAQ back in 2000 and has since made a number of additional raisings, the last of which was $ 175 million in convertible bonds in 2020.
Nova Provides hardware and software solutions for making measurements during the chip manufacturing process. Its revenues in the years 2016-2021 grew at an average annual rate of 20%, while in 2021 alone revenues grew by 54.5%. This trend continues this year as well, with revenues in the first quarter of $ 134 million, compared to $ 121 million in the previous quarter and $ 84 million in the corresponding quarter last year. According to the company’s forecast, in the second quarter its revenues will be $ 133-141 million.
According to Nova’s management, its financial results are the result of its operating strategy as a supplier not only of hardware, similar to most market players, but also of software. This strategy sets it apart from the competition and makes its solution more affordable and quality. Moreover, the provision of software services generates recurring revenue for the company and may improve profitability rates, since the revenue from software does not involve high manufacturing expenses.
The demand for Nova products is naturally affected by the activity of the chip manufacturers and the global demand for chips and therefore, the significant increase in demand for chips in the last two years has also contributed to the company’s growth. Prometheus notes that the global increase in demand for chips is due to the growth of various technological sectors that need chips for their manufacturing processes, including: robotic automation, cloud computing, industrial IoT, autonomous vehicles, 5G, artificial intelligence and virtual reality.
Prometheus’ analysts explain that the chip makers who purchase measurement products are mostly captive customers. This is because chip makers are required to make a significant investment in order to test, select and integrate capital equipment within their production line. The measurement systems are specially developed to meet the measurement requirements of the manufacturer’s production line, and are used by it in the early stages of developing the production process, about a year and a half before the actual production line is established. Thus, once a consumer chooses a supplier, he will have a negative incentive to replace it, make another financial investment and go through the whole process described above. As a result, the rate of customer abandonment in the field is low.
Therefore, Nova’s growth strategy focuses less on increasing the existing market share and more on increasing the size of the potential market (TAM) by expanding the range of segments and territories in which it operates, as well as mergers and acquisitions. Indeed, Prometheus notes that Nova has proven that it knows how to grow not only organically but also through mergers and acquisitions. In particular, the acquisition of Rovera in 2015 for about $ 45 million proved itself when Nova correctly identified Rovera’s product as a growth engine in the innovative field of measuring the composition of materials in three-dimensional transistors. This year Nova made another acquisition when it paid $ 80 million in cash (with a contingent consideration of an additional $ 10 million) for German Ankosis. Ankosis is a provider of solutions for monitoring and analyzing the chemical composition of materials in the electronics industry, and its acquisition by Nova is intended to further expand the company’s product range and potential market size.
The head of Prometheus’ research department, Eyal Shevach, emphasizes that more deals can be expected from Nova as it holds $ 341 million in cash as of the end of the first quarter, and in addition, last July it announced a strategic growth plan called “Nova 500” which is one of its pillars Is a $ 300-350 million merger and acquisition budget. According to the company, its potential market size has grown from half a billion dollars in 2015 to 2.2 billion dollars in 2022 and the company as stated wants to continue in the same direction.
Nova’s gross profit was $ 268 million in the 12 months ended March 2022, compared to $ 237 million in 2021 and $ 153 million in 2020. Operating profit was $ 133 million in the 12 months ended last March, compared to $ 113 million in 2021 and $ 56 million in 2020. Prometheus notes that gross profitability has remained fairly stable, between 58% -59%, and is expected to remain at this level in the future. Operating profitability, on the other hand, increased from 21% to about 29%, with the change mainly due to a decrease in the rate of research and development expenses from revenues.
Shevach concludes that so far Nova has managed to increase its activity by organic and inorganic means in an impressive way and according to its recent business moves one can only predict that this trend is expected to continue. The capital market, he says, also believes in the company and accordingly its adjusted share price has risen over the past 5 years from $ 22.5 in 2017 to $ 88.5 as of the end of June 2022 (after a 17% decline in the stock last month).
The index, compiled by Prometheus Economic Consulting economists, represents all Israeli companies traded on major US stock exchanges – NASDAQ and the New York Stock Exchange – including Israeli companies that are listed on a double listing. The calculation of the index began in early 2015 and stood at 1,000 points on the day of its launch. The weight of each company is determined according to its market value, but does not exceed 10% of the total index. Prometheus Economic Consulting and its managers have in recent years performed economic work for companies included in the index. The work does not constitute advice and should not be seen as a substitute for investment advice