The High Court has appointed an interim examiner to Dublin-based medical technology firm HealthBeacon after hearing it had “run out of cash” and needed external funding to meet its payroll commitments on Friday.
The petition for examinership came in “most unusual” circumstances as “literally there is no more gas in the tank” for the company to financially support itself even during the 100-day period of court protection, said senior counsel Kelley Smith on behalf of HealthBeacon’s directors.
The company has lined up US home appliances distributor Hamilton Beach Brands, which has an existing partnership with the business, to fund the examinership with a €1.85 million loan that needs to be repaid after 120 days. The credit line is on condition that Hamilton Beach would rank ahead of secured and unsecured creditors in the event of the company going into liquidation.
Mr Justice Rory Mulcahy appointed insolvency practitioner Shane McCarthy, of KPMG, as interim examiner.
The publicly quoted company had an initial market value of €98 million when it floated in Dublin in December 2021 with an ambition of accelerating the roll-out of its flagship product, a digital sharps disposal bin for needles and syringes that reminds patients to stick to injection schedules at home.
However, its market capitalisation had collapsed to €1.18 million by October 13th, when its shares were suspended, as investors fretted about the company’s ability to remain in business as it burned through cash.
A 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 big 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.
HealthBeacon had also started to sell its product directly to consumers in the US in 2021 through Hamilton Beach Brands. The partnership was widened earlier this year, with Hamilton Beach Brands also taking on the management of the Irish company’s supply chain in the US.
[ HealthBeacon races to keep lights on as medtech burns through cashOpens in new window ]
Contributing to the company’s current financial woes was an increased staff headcount, the building of new infrastructure and the heavy focus on research and development, said Ms Smith, who was instructed by A&L Goodbody’s Mark Traynor. She said the company has been focused on building its own patented technology.
HealthBeacon has 75 employees, of which 50 are based in Ireland. It is expected that about 20 staff members will be made redundant, Ms Smith said.
It was hoped the firm was “turning a corner” and would produce better results in 2023, after it made losses of just under €10 million for the year up to September, she said.
Independent expert Nicholas O’Dwyer, of Grant Thornton, determined that the company has a “reasonable prospect of survival” as a going concern if a successful rescue plan is put together.
Unsecured creditors would receive 19 per cent of what they are owed if the company was to be liquidated, and it is anticipated they would do better under a restructuring, he said in a report.
The court heard HealthBeacon has a net asset position of €10 million, with liabilities of €6.3 million primarily due to trade creditors and general unsecured creditors. Taoglas, a Co Wexford firm, is the largest creditor, the court heard.
The Revenue Commissioner, which is usually treated as a preferential creditor in insolvency situations, is owed just under €62,000.
Mr Justice Mulcahy was satisfied the statutory requirements were met and that it was appropriate for him to exercise his discretion to make the appointment.
He noted the application came before him while only the company was represented in court and notified. He adjourned the case until a date next month.
