Life science IPOs: listing in UK or US

The decision to take a company public is never taken lightly. For life science companies, however, that decision is further complicated by deciding where to list?

Life science IPOs are back in force. In 2013 there were 66 life sciences IPOs completed globally. But 2014 saw an extraordinary 133 life science companies completing IPO’s raising $11 billion. Of those 133 IPOs, 106 of them were on US exchanges accounting for US$7 billion.

Whilst the UK may trail behind its US life sciences capital markets colleagues there has been some very significant domestic activity, including Circassia, Abzena and Horizon Discovery. It is a sector on the up. So should UK life sciences companies stay in the UK or take their company across the water and float in the US?

The UK

UK life sciences companies have, according to the Financial Times (October 2014), hit a seven-year high raising finance. Big sums have been achieved – take, for example,

Circassia, the anti-allergy specialist, that raised £200m through its IPO.

Yet whilst the UK stands head and shoulders above its European neighbours, it still trails way behind the US. The three top US biotech clusters – Boston, San Francisco and San Diego – have, for example, more than five times as many drugs in development that the UK.

But there remain some very good reasons to consider a UK IPO.

The UK is home to some very exciting and dynamic life sciences businesses, well supported by academia - we have the science, the clinical development and infrastructure. We also have world-class management. All the ingredients are there, and whilst the long-term capital might not yet support that, there is a strong investor community.

And there is, of course, the advantage of being physically close to the markets. The investment community will expect regular briefings and updates from the company’s senior management team, and that can be time consuming. This is much easier if you are based in the same country.

But, and this is the critical question, will your business raise as much in the UK as it would if it were to go public in the US, and will the company achieve such a high valuation in the UK as it would in the US

The US

For all of the inroads the UK has made, the US remains the preferred global location for life sciences IPOs. The number of foreign issuer IPOs has climbed from 12 in 2012 to 60 in 2014. The main attraction of the US markets is always going to be the much larger pool of potential investors that understand the lifescience sector with the risk appetites to match. This is always going to generate greater interest leading to higher amounts raised.

And with a significantly larger investor and analyst community, businesses may find it that much easier to tell their story. Yet on the flip side, businesses that struggle or do not sufficiently ‘play the game’ may all too quickly fall out of favour. There are a number of orphan companies listed in the US ignored by analysts.

For UK companies listed in the US that does present challenges. This community will want access to senior management teams. That will usually mean two or three visits a year – valuable time that could potentially be better spent elsewhere.

Yet that is unlikely to deter ambitious and forward thinking life sciences companies looking to go public. On average the businesses that launched onto the US capital markets in 2014 ended the year up by 35%. And that is a powerful pull.

James Cowper Kreston’s guide to a US float.

To achieve a successful US float, UK companies must consider the following:

• Final fund raise before IPO – it is not something to do on the cheap

• The right advisers:

- CPA firm, with experience of the biotech sector and knowledge of the SEC regulations

- Law firm – preferable one with strong UK connections

- Underwriter

- Transfer agent

• A strong management team, preferably with a CEO that has taken a company public before

• A strong Board of directors

• An experiences CFO

• A finance team that is familiar with SEC rules and regulations