Neofect's road to public listing has been smooth even without turning a profit

Neofect, a medical technology start-up, passed a preliminary screening to be listed on the country’s junior Kosdaq bourse last week in a move that could raise up to 15 billion won ($13.4 million).

The decision came after the company filed an application in July for an initial public offering (IPO) on the bio and tech heavy index.

The company is expected to be valued at around 100 billion won after Neofect was valued at 70 billion won in a pre-IPO stage earlier this year. A total of 11.7 million shares will be offered.

Ban Ho-young, CEO of Neofect, said that he will use the proceeds to extend the business portfolio and expand overseas.

“We are intending to better compete with the competitors abroad,” Ban said, “Many of our competitors, especially in the United States, are well-funded because there, the average size of investment is bigger than in Korea.”

He said that in Korea, 5 billion won is considered fairly large while an investment of around 50 billion won falls into a category of big funding in the U.S.

“We believe that the listing will help us invest in product development and operations in different countries.”

Neofect has made inroads into the U.S., Germany and Japan as well as its presence in Korea.

Ban looks to the U.S. as a target market.

“The U.S. is the largest market for medical devices and it is a country where the most competitive and high-tech medical startups gather to compete and win the hearts and minds of consumers,” he said.

Korea Investment & Securities was selected to manage the listing process.

The anticipated valuation at 100 billion won factors in the high state of the technologies that Neofect weaved into its products including NeoMano, ComCog and Rapael Smart Glove.

The government-certified technology assessment agency gave Neofect the highest rating in June before it applied for the listing.

But one shortcoming lies in profitability. The company has yet to generate an operating profit.

Neofect posted 4.22 billion won in operating losses with 4.45 billion won in revenues.

“I think we are now in a stage to expand our customer base rather than generating profits,” the CEO said.

Neofect has collected 13 billion won worth of investment from a group of investors after being founded in 2010. The investment companies include DSC Investment, Company K Partners and SBI Investment Korea.

Market research firm Grand View Research said that the global rehabilitation devices market for neurological disorders in 2015 was valued at $915.1 million and is estimated to reach $3.2 billion by 2024.

“Around 1 billion people are suffering from neurological disorders across the globe. These neurological disorders are resulting in increased movement disabilities,” the market research firm said.

“The increasing prevalence of movement disability, attributed to various neurological disorders (multiple sclerosis, strokes) along with the need for comprehensive management are key factors driving growth.”

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]