Safeguard Scientifics Second Quarter 2011 Financial Results Recap

Posted by | July 27, 2011

This morning, we announced our second quarter 2011 financial results and reported on the exciting progress we’ve made this quarter.

  • We deployed $45.8 million of capital in new and existing partner companies, including NovaSom, PixelOptics, and Alverix.
  • We realized $145.4 million, including $7.6 million held in escrow, through the sale of life sciences partner company Advanced BioHealing ― which was a principal driver for our income in Q2’11, which was $121.8 million versus $2.7 million in Q2’10. Subsequent to the quarter, yesterday in fact, we announced that the Portico Systems / McKesson transaction officially closed, for which Safeguard expects to receive $38.1 million in aggregate cash proceeds representing at 4x cash-on-cash return and 36% IRR.
  • We formally announced that we will acquired a 36 percent interest in Penn Mezzanine, which provides subordinated debt and structured equity financing to lower middle market companies in the Mid-Atlantic and adjacent regions.  This strategic partnership will further diversify our business platform and generate solid opportunities for fee income and profit participation.

Since January 2006, we have deployed approximately $268 million and realized approximately $631 million through the sale of partner companies and private-equity holdings that represented transactions undertaken and value built by Safeguard’s current management team.  While there is more work ahead, our strategic growth plan is firing on all cylinders, and we couldn’t be more optimistic about our prospects for continued growth.

Some highlights about our partner companies:

  • NovaSom: During the quarter, we led a $35 million equity financing round for a 34 percent primary ownership position. NovaSom is a diagnostic service provider of at-home testing and evaluation of sleep-disordered breathing, which includes obstructive sleep apnea (OSA).  The diagnosis of OSA in adults is a fast-growing $4 billion domestic market, and NovaSom’s at-home diagnosis kit is Medicare and FDA approved.  In addition, NovaSom’s innovative home service delivery model, combined with a pioneering cloud-based portal technology, connects NovaSom with physicians, therapy providers and payers to achieve alignment in patient preference, cost and quality objectives.
  • PixelOptics: Safeguard deployed $25 million of a $45 million equity and debt financing round. PixelOptics is a medical technology company that is commercializing the world’s first and only electronically-focusing prescription eyewear. This innovative company is changing the standard of care for eyeglass wearers. PixelOptics’ novel approach to vision correction is revolutionizing how eyeglass wearers will be able to transition between near and far distances.

Our pipeline is flush with interesting opportunities.  We continue to focus on life sciences opportunities in the areas with lower relative technological and regulatory risk, specifically in molecular and point-of-care diagnostics, medical devices, regenerative medicine, specialty pharmaceuticals and selected healthcare services.  In technology, we still pursue transaction enabling applications with a recurring revenue business model in Internet/New Media, financial technology, healthcare IT and other selected business services.  Our deal teams are actively evaluating the potential for several new capital deployments over the near term.

If you missed this morning’s call, we’ll be posting the full transcript on our Investor Relations website within the next few days.  Alternatively, you can download the podcast at www.safeguard.com/podcast, or listen to a replay of the call using the following dial-in information: 855-859-2056 // (International) +404-537-3406 (Replay available through August 27, 2011 at 11:59 pm EDT).

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