Brighter Outlook for Medical-Device Floats
This article appeared in the December 2011 edition of the Listed @ ASX newsletter.
More North American life-sciences companies consider an ASX listing, as ASX takes its Road to IPO in Australia Workshop to San Francisco in January.
An emerging trend is more North American life-sciences companies choosing to list on ASX over other markets. The $85-million initial public offering for REVA Medical in December 2010 and the $80-million IPO for GI Dynamics in September 2011 were two of the largest floats in the past 12 months. Canadian-based Bioniche Life Sciences raised $12.5 million and listed in January 2011.
Chief executives and corporate advisers report strong interest from North American life-sciences companies in launching IPOs in Australia. REVA executive chairman, Bob Stockman, told Listed @ ASX: “I have had many calls from US-based venture capitalists and executives of emerging medical-device companies asking about the potential to raise capital and list in Australia, and about REVA’s experience with its IPO and since listing.”
ASX is taking its "Road to IPO in Australia Workshop" to San Francisco in January, to host an event during the prestigious JP Morgan Healthcare Conference. ASX will meet North American venture-capital firms and emerging life-sciences companies, and promote the benefits of an ASX listing and Australia’s record in medical-devices research. More information on this ASX workshop is available here.
US markets difficult for smaller IPOs
REVA’s Bob Stockman believes a weak economy and troubled IPO markets in the US are encouraging North American life-science companies to consider an ASX listing. “When US equity markets were stronger, investors would back emerging life-sciences companies that had gone through clinical trials and even those with strong early clinical results,” he says. “Now, investors mostly only back IPOs on NASDAQ that produce revenue.”
Stockman believes ASX is an attractive option. “Australia has had one of the strongest economies during the GFC, has a good record in medical-devices research, and has institutional investors willing to back promising offshore life-sciences companies at the right price. REVA was very pleased with its ASX listing and after-market interest.”
Inteq a key player
Boutique corporate adviser Inteq has played a leading role in helping North American life-sciences companies list on ASX. Inteq was corporate adviser and lead manager for the 2005 IPO of Heartware, a heart-pump developer. Inteq helped Heartware raise $100 million through secondary offers on ASX, and dual-list on NASDAQ in 2009. It was also lead manager and corporate adviser to the GI Dynamics and REVA IPOs, and helped Unilife Medical Solutions list on NASDAQ in 2010.
Inteq’s managing director, Kim Jacobs, says his firm is receiving more enquiries from North American life-sciences companies about an ASX listing. “Australian investors have a good record in backing high-quality medical-device makers. Cochlear and ResMed’s success paved the way … and showed how good this country is in biomedical research.”
Jacobs believes North American life-sciences companies see ASX an “incubator” for an eventual dual listing in Australia and the US. “The reality is, America is the centre of the universe for the medical-device industry,” he says. “When medical-device makers reach a certain size, it makes perfect sense to dual-list in the US and tap a larger investment pool and a more developed biotechnology industry. Australia can play a larger role in attracting younger life-science companies that are nearing commercialisation, help fund their growth, and keep them dual-listed on ASX and NASDAQ.”
Role for superannuation funds
Jacobs says: “Australia has a world class reputation for doctors, specialists and clinical researchers to develop and commercialise medical-device innovations. What it lacks is depth of investment capital. The IPO success of REVA and GI Dynamics shows there is intelligent capital to back high-quality emerging medical-device companies. But there is a need for more of this capital in Australia to back a much larger number of offshore as well as local life-sciences companies.”
He says more superannuation investment in life-sciences would help the sector reach its potential. “Medical-device research is poised to be one of the next big long-term growth industries for Australia. That is not to say all emerging life-science companies are suited to this market. They need exceptional technology, strong management and board directors, a simple story to sell, and an Australian connection.”
REVA’s Bob Stockman says being based in San Diego and listed in Australia has posed few problems. “We are an event-driven stock and our research milestones are very clear,” he says. “We have had good coverage from sharebroking analysts and fund managers, and Australian institutional investors ask plenty of smart, tough questions about REVA, which I like. We were able to raise enough capital on ASX to get REVA through to commercialisation.”
“A delay in our clinical trials has affected REVA’s share price since listing, but with a potentially disruptive technology targeting a US$5-billion market, we wanted to be very precise and conservative with our research approach. I believe Australian fund managers understand the nature of life-sciences research and have shown they are willing to invest for the long term.”
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