After Deal Stalled, Shine Medical Eyeing Up to $160M from Deerfield
[Update 11/27/18 8:34 p.m.]
Following the publication of an Xconomy report that Shine Medical Technologies appeared to be on the verge of landing a nine-figure investment from Deerfield Management, the two companies said Tuesday that Deerfield will invest up to $150 million in Shine to support the construction of a radioisotope-manufacturing facility.
[Story originally published 11/26/18 1:57 p.m.]
Wisconsin’s biggest startup investment in recent memory didn’t end up happening, but now the two companies involved appear to be on the verge of striking a potentially larger deal.
Shine Medical Technologies, a startup seeking to become one of the first companies in decades to produce a crucial medical radioisotope in the U.S., has agreed to preliminary terms with the New York-based healthcare investing firm Deerfield Management for it to provide Shine with up to $160 million in secured debt financing, Xconomy has learned. In September, executives of Janesville, WI-based Shine sent company shareholders an e-mail message and related documents detailing terms of the agreement, which Xconomy has obtained.
Reached by phone Monday, Shine vice president of business development Katrina Pitas declined to say whether the documents are authentic, or comment on information in them related to the potential investment.
The investment had not been finalized as of late September, according to the e-mail to shareholders. Pitas declined to comment on the putative deal’s status.
Under the deal terms detailed in the documents, Deerfield would invest $20 million in Shine at the time the deal closes. Deerfield would provide the remaining $140 million to Shine across five subsequent loan installments, or “tranches,” if the startup meets pre-determined milestones. They include constructing a “building shell” for a facility that could eventually house equipment for manufacturing molybdenum-99—an isotope that decays into technetium-99m, the most widely used radioisotope in medical diagnostic imaging—and demonstrating that Shine’s process for producing molybdenum-99 works as anticipated.
The deal would be significant for both Shine and its home state of Wisconsin. Startups based in the Badger State together raised $115.5 million in funding last year and $223.2 million in 2016, according to data from PitchBook and the National Venture Capital Association. Those totals only count equity funding and do not include debt financing, the form of investment Shine would receive from Deerfield. Still, it would be notable if a Wisconsin-based startup raised a nine-figure investment of any type, though deals of that size are common in Silicon Valley and other technology hubs.
The relationship between Shine and Deerfield goes back several years. In 2014, Deerfield announced it struck an agreement with Shine that called for Deerfield to provide Shine with up to $125 million in debt and equity financing. However, Pitas said earlier this year that Deerfield did not end up investing any money in Shine under the terms of the agreement announced four years ago.
While what was putatively the largest Wisconsin venture deal since 2009 didn’t actually happen, now Deerfield appears ready to invest. Pitas declined to say whether the terms of the potential deal detailed in the documents obtained by Xconomy are brand new, or if the deal is an amendment of a term sheet Shine and Deerfield signed in 2014.
Shine is seeking to capture a share of the global market for molybdenum-99, which founder and CEO Greg Piefer has said is worth about $600 million per year. The isotope is used in certain types of stress tests, bone scans, and other medical procedures.
Producing molybdenum-99 domestically represents not only a major business opportunity, but also a hedge against shortages of the isotope that can occur when nuclear reactors are shut down for maintenance. A shortage can force hospitals into using alternative scanning technologies that expose patients to higher doses of radioactivity.