14 December 2022
The SGX Research and The Edge Singapore interviewed Trendlines – 10 questions in 10 minutes.
1. What are The Trendlines Group’s products and service offerings?
The Trendlines Group is an Israel and Singapore-based investment group that invests in innovations in agrifood and medical technologies. The group has a large portfolio of companies ranging from early-stage start-ups to revenue-stage companies. We establish and invest in companies primarily through our incubators and we also manage two venture funds.
We leverage our partnerships with investors, strategic players, inventors, and governments to provide our portfolio companies exposure and access to international players and markets. Our experience, partnership network, and resources are central to helping us achieve our mission of investing in companies to improve the human condition through food and health.
2. What are some notable accomplishments from your existing portfolio companies that the group has achieved to date?
We have exited 10 portfolio companies to date, with an average return on investment of 9.7x per exit and a weighted average internal rate of return of 175%. In 2020 and 2021, we sold two companies in the orthopaedics sector, our largest exits so far. ApiFix, a company that developed a device for the treatment of scoliosis in adolescents, was sold for US$67 million (our consideration for the deal was US$13.2 million) plus a potential earnout to OrthoPediatrics, a Nasdaq-listed company, specialising in paediatric orthopaedics.
Last year, our portfolio company OrthoSpin was acquired by Synthes GMBH, the orthopaedics company of Johnson & Johnson, for a total of US$79.5 million ($110 million) in cash (our consideration was US$15.8 million). Both companies are great examples of technologies that bring innovative treatment improvements to patients, making a big difference to many lives.
Among our current portfolio, we have seen notable funding rounds, strategic collaborations, regulatory clearances, and market progress in the last year. To highlight a few, Phytolon raised US$14.5 million from strategic and VC investors for its natural food colour platform that uses fermentation of yeast to produce natural food colour ingredients. Vensica Therapeutics raised US$19 million from strategic and VC investors for its needle-free, ultrasound-based procedure for the delivery of neurotoxins to treat overactive bladder. Escala Medical received FDA clearance for its incision-free treatment of pelvic organ prolapse and Arcuro Medical is ramping up sales for its meniscus treatment device.
3. How will the group ensure that its teams continue to have the requisite expertise to invest and build companies?
Our core staff have been involved in investing and building companies for many years. Our business development team regularly participates in major international conferences in order to both stay abreast of industry developments and maintain and deepen our contact with potential strategic partners and acquirers.
Going forward, business development initiatives for our more mature companies will help enhance the team’s capabilities and experiences even further. At the same time, we will continue to keep abreast of trends and developments in the investment sector so that when we deem it suitable to invest again, we will be ready to do so.
4. The group reported a net loss of US$11.9 million for 1H2022 as compared to a net profit of US$4.1 million as of Dec 31, 2021. How does the group plan to achieve higher levels of growth?
The loss reported was mainly due to the writeoff of portfolio company Stimatix GI. The acquirer of the company announced that it was discontinuing the marketing of the product of Stimatix and thus the royalties attributed to future sales would not be forthcoming. We expect further growth to come from our growing and maturing portfolio companies whose value is now more equally balanced and spread over the total portfolio value.
5. What is behind the announcement of the strategic transformation plan to shift focus to existing portfolio companies?
The shift of focus to our existing portfolio companies is intended to support the creation of more shareholder value in the short and intermediate term. In parallel, the decision enables us to make budget cuts in our operating costs with a leaner team and to prioritise and sharpen our focus, efforts, and resources to accelerate the rate at which we realise the value of our current portfolio.
6. How is the group going to develop its existing portfolio to maximise exit proceeds?
Will that mean divestments or spin-offs? We support the development of our companies towards exit in many ways. This includes bringing on key personnel to the companies, such as a chairperson, advisory board members and commercial or marketing officers, with the relevant expertise, market knowledge and valuable connections to the companies.
On top of that, we regularly showcase the companies to strategic multinationals in their sector, and actively assist the companies in raising follow-on capital which enables them to progress and to build their value to a point where they can be attractive to acquirers or are able to successfully go for an IPO on public markets.
7. What are your outlook for the medtech and agrifood industries?
Given the Covid-19 pandemic and climate change challenges today, we realise, more than ever, that food and health are sectors that cannot be neglected. Continuous investment in these systems is the only way to ensure our food security and our ability to provide healthcare for growing needs. Our portfolio companies address these pressing needs which are urgent today and will continue to be urgent tomorrow. We are fully committed to our investment focus in the health and food sectors to significantly impact lives, while building incremental value to our stakeholders.
8. Will the group plan to resume investing in new portfolio companies in the near future?
On what basis will the management team resume plans for this? As stated, we will temporarily suspend investments in new portfolio companies under the strategic transformation plan for 2023, and focus on our current portfolio companies to maximise value.
We continue to review our strategy from time to time and will adjust according to market changes and our positioning within those markets, all with a view to making the best decisions for all our stakeholders.
We also aim to reduce our 2023 operating expenses budget by US$2 million vs 2021, net of consolidated portfolio company expenses and grants.
9. What are some of the key ESG factors that are material to the group? How do you address these factors?
We identify ESG issues which are most relevant to our organisational environment and the investment sectors we focus on, distilling those principles when managing our portfolio companies. Some of the group’s key material ESG factors lie in our governance policies. This year, we received the Bronze Award for Best Managed Board in the smallcap category of the Singapore Corporate Awards, which recognise exemplary corporate governance practices in Singapore’s listed companies. We are proud that this is not the first time we have received an award in recognition of our management ethos. Additionally, the sectors in which we invest represent areas that are vital to our wellbeing and the sustainability of healthcare and food systems in the face of uncertain global climate changes.
10. What is the group’s value proposition to its shareholders and potential investors? What do you think investors may have overlooked about The Trendlines Group?
We believe that our company is undervalued by the market. We hold a diverse portfolio of companies that are valued conservatively, which do not represent their potential exit value. In fact, the exits that we have had to date have consistently demonstrated an average 4x value at exit compared to the value on our books pre-exit.
Editor’s note: this interview was published on the SGX 10 in 10 series.
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