HealthBeacon races to keep lights on as medtech burns through cash

Jim Joyce, e-bike riding co-founder of HealthBeacon, sat down at his computer two days after stepping down as chief executive of the Dublin-listed medtech on September 26th.

The Boston native posted on LinkedIn, the professional social network, of how he was inspired 10 years ago with the idea of turning sharps disposal bins for needles and syringes into a smart device that reminds patients to stick to injection schedules at home.

“As I look back, I see so many successes, so many achievements ... not always easy, not always in a straight line, but always driven by the mission to support the patients we serve,” the 53-year-old wrote in a 325-word account of the experience, which also highlighted the 800,000 injections that had been tracked by HealthBeacon’s devices, the company’s countless awards, and its growing revenues.

“The future,” he concluded, “is bright.”

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There was no mention the post, however, of how the sales warning had led to Joyce to being pushed out of the CEO spot.

Investors who pumped almost €50 million into the company in the past decade, including €25 million raised in a peak-of-the-market initial public offering (IPO) in December 2021, face the prospect of losing all that they have committed

Three weeks later, HealthBeacon is fighting for its very survival. With only enough cash to keep going for days, the board, which Joyce left last Friday after stepping down as a non-executive director, is desperately trying to secure fresh investment or a sale of the business as its advisers also work on a backup – or parallel – option of filing for examinership.

Investors who pumped almost €50 million into the company in the past decade, including €25 million raised in a peak-of-the-market initial public offering (IPO) in December 2021, face the prospect of losing all that they have committed.

They include clients of Cantor Fitzgerald Ireland, who own 11.4 per cent, Belfast-born tech entrepreneur Bill McCabe’s Oyster Capital, an early backer of the company which continues to own about 10.8 per cent, and Elkstone Partners vehicles, which own a combined 7.3 per cent.

[ HealthBeacon co-founder quits board amid funding crisis ]

Tommy Kelly, founder of ecommerce business EWS, in which he sold his remaining 49.9 per cent stake in 2021 in a deal that valued the business at more than €1 billion, had also cropped up on HealthBeacon’s shareholder register last year. His Eidervale vehicle owns a little over 4 per cent. Food flavourings entrepreneur Kieran Fox’s Quorndon Capital holds a 4 per cent stake.

“In my opinion, it is a serious concern that such a high-profile company would not have identified the reduction of cash reserves as a serious problem earlier and, in a timely manner, considered the various options with professional advisers,” said Mark Woodcock, a partner and head of corporate restructuring at law firm Fieldfisher’s Irish practice. “In fairness, one can only presume that they have been considering the options but not effected them properly for whatever reason.”

For many followers of the company, HealthBeacon’s main problem was listing on the stock market too early. At that point its flagship product, which was approved by the US Food and Drug Administration (FDA) in 2018, was still in the early commercialisation stage in Europe and the US.

The product, a little bigger than a standard toaster, is connected to a patient’s smartphone and used for the disposal of injector pens and syringes as well as being a device to track adherence to medication regimes and to prompt people to stay on track if necessary.

The problem with people not sticking to treatment plans is massive. According to the World Health Organisation, about half of patients fail to stay the course when long-term medication is prescribed.

The International Longevity Centre-UK, a think tank on the impact of longevity on society, estimated in a report last year that as much as $290 billion (€275 billion) of US healthcare expenditure is wasted every year as patients end up requiring additional treatment or hospitalisation for failing to stick to doctors’ orders on medication. It put the annual cost in Europe at $125 billion.

HealthBeacon research, peer reviewed and published in the International Journal of Clinical Pharmacy last year, points to a 26 per cent improvement in therapy adherence by patients who administer injectable medications for a range of chronic autoimmune conditions at home using the company’s device.

The story of HealthBeacon to date has been one of overpromising and underdelivering

—  Dublin-based angel investor in the company

The company estimates that the market of about 30 million people self-injecting with medicines across the US, Canada and Europe is worth about $10 billion per year, according to its website.

Its main distribution channel is through deals with pharmaceutical companies, which cover the cost of the devices. It also expanded in 2021 into selling units directly to consumers in the US through home appliances distributor Hamilton Beach Brands, and also has a sales channel where costs are reimbursed by health insurance programmes.

“The brainwave to try to turn sharps bins into modern-age devices to help with adherence led to a device being successfully created. And Jim was certainly able to convince people of the value of the proposition, with his natural American confidence,” said a Dublin-based angel investor familiar with HealthBeacon from when it was a private company. “But the story of HealthBeacon to date has been one of overpromising and underdelivering.”

In late 2020, when HealthBeacon raised €5.7 million in a funding round, the company forecast revenues would hit €10 million by 2022 and that it would be breaking even at operating profit level, according to sources. In the event, it delivered less than a quarter of the estimated sales and an operating loss of €13.2 million.

The key goal outlined to investors at the time of the IPO almost two years ago was that it would have 100,000 devices in the market by the end of 2023.

However, the company issued a warning in July of last year, saying device sales targets were running behind schedule and that the 100,000 objective would not be met until March 2024 – as delays in securing computer chips temporarily held up production. The timeline was subsequently pushed out again by a further three months.

“If a company is going to float on the market, it really needs to have clear visibility to deliver on its stated objectives over the following 12 months at least,” said the angel investor, who declined to be identified.

The shock sales warning last month saw HealthBeacon pull its previous targets that annual recurring revenues (ARR) would be around the “mid-teens” million-euro level by the end of this year and rise to €25 million by the middle of 2024. Instead, it said the ARR run-rate would only be €3.2 million by the end of this year and €17 million by the end of next year.

While the company has been successful in striking major distribution deals with US speciality pharma groups, it has been caught out by the red tape involved in rolling them out. Its current timelines are running up to nine months behind previous estimates.

“The irony in all of this is that the company had actually managed the crack the US market. It had delivered on its commercial promise,” said a source close to the company.

HealthBeacon launched its system with US speciality pharmacy partner Accredo for a “major global blockbuster” injectable medication in July and is currently receiving over 1,700 patient referrals a month.

It said last month that it is also in final launch planning with its next large speciality pharmacy and in contracting and negotiations with three others.

The sell-off was compounded by the business saying on October 5th that it was down to its last €500,000 of net cash, enough to continue trading until the mid- to late November

While the source close to the company said its “meticulous” project management and modelling ability helped it win over major speciality pharma groups, the estimated roll-out time frames proved to be overly optimistic.

HealthBeacon’s market value slump by 95 per cent to €1.18 million over 14 trading sessions between the revenue alert and the company moving last Friday to have its shares suspended.

The sell-off was compounded by the business – which had been burning through €1 million of cash month in the first half of the year – saying on October 5th that it was down to its last €500,000 of net cash, enough to continue trading until the mid- to late November. It followed up last Friday to warn that its “short-term working capital” had subsequently deteriorated and that it only had enough funds to keep its doors open “until the last week of October”.

It is understood that supply-chain partners tightened up on trade credit as a result of the company’s worsening financial position and the CEO exit. Former HealthBeacon non-executive director Rebecca Shanahan, whose Florida-based Shanahan Capital Ventures focuses on developing and restructuring healthcare businesses, has been acting as interim CEO since Joyce was forced out of the role by the board.

The woes of HealthBeacon also mark a setback for the Irish Stock Exchange operator, Euronext Dublin, as it seeks to entice market entrants at a time when some of its larger companies are departing. HealthBeacon is alone among scores of companies that have gone through the exchange’s IPO Ready programme since 2015 to take the plunge into the public market.

CRH, formerly the largest Iseq company, quit the Irish market last month as it moved its main listing from London to New York. Another Iseq behemoth, Smurfit Kappa, has said it also plans to delist in Dublin as it merges with a US rival. Flutter Entertainment, the parent of bookmakers Paddy Power, is also widely expected to drop its Irish listing in the near term.

HealthBeacon’s own IPO came in the same month that global equities – measured by the MSCI All-Country World Equity Index – soared to a peak, before central banks started to hike interest rates to rein in inflation.

“The IPO was priced as a tech offering,” said a market source. “There was a lot of hope value in it.”

The Irish Times reported on Tuesday that HealthBeacon has attracted parties interested in making an investment in the company or an outright purchase, at a time when Grant Thornton, which is also HealthBeacon’s auditor, is advising on restructuring options, including the possibility of seeking examinership protection from its creditors.

Sources have subsequently said that Joyce is among those to signal to the company an interest in committing fresh funds, alongside some existing and new investors. It is not clear what other investors are involved or whether this pitch would see HealthBeacon being taken private again or continue as a public company.

A spokesman for HealthBeacon declined to comment and efforts to secure comment from Joyce were unsuccessful.

“Whatever the directors do, they must do it quickly,” said Fieldfisher’s Woodcock.