Facing up to the biotech IPO and financing challenge - PART THREE

Biotech and Money, the industry’s newest and most innovative virtual, online and physical private biopharma community officially launched on 12th June with the ‘Biotechs and the City’ Evening Reception at Bird & Bird‘s offices in central London.

The VIP Networking Launch Reception was open to a selection of UK Biotech and Bioscience CEOs, Investors, Industry Analysts, Pharma and Financial Services professionals and was themed around IPO and raising finance in the UK. The evening featured an exclusive hour long panel and Q&A with leading industry and city thought leaders, with ample time for informal networking.

Key panellists at the event were:

Dr Karl Keegan, Chief Corporate Development Officer, Vectura - Raised £52m through public placement in March 2014
Dr Paul Cuddon, Equity Analyst, Healthcare and Lifesciences, Peel Hunt - Peel Hunt Ranked 1st Healthcare & Lifesciences (Thomson Reuters 2013 Extel Survey)
Simon Allport, Partner, Bird & Bird
Chris Mayo, Consultant, Primary Markets, London Stock Exchange
Neil Darkes, Co-CEO, Biotech and Money (chair)
Terence O’Dwyer, Co-CEO, Biotech and Money (chair)

In this third blog of the series, we bring you the thoughts and contribution of Chris Mayo who works in primary markets at the London Stock Exchange, responsible for educating and assisting biotechs considering IPO and public market capital raising:

When, why and how should biotechs approach public markets?

Terry O’Dwyer [TO'D]: Chris, I understand you’re a consultant in primary markets at LSE. Perhaps you could just elaborate on what you’re role is there and where you fit into this picture?

Chris Mayo [CM]: What I do day to day is go out to companies in London and the South East and educate them and their investors about how to approach IPO strategy and provide guidance at an early stage. What people misunderstand is they think we’re going into companies 3 to 6 months before they are considering out listing. There’s not really much value in that kind of engagement, we are there years before an IPO may be considered and what we’re trying to do is raise awareness so that companies in the UK consider this as a possible route to financing and is also a possible partial exit route for some of their investors in the future.

For some of these companies it’s not going to be the right kind of option however, there is a slight issue in this country in that it isn’t almost seen as an aspiration to access the public markets in the way that it is in the US and we’d like to change that and also create a pipeline of well-run professional companies who are able to come to the market.

TO’D: Could you tell us how you think the public markets fit into the biotech financing roadmap?

CM: There is a perception that it doesn’t and from some of the comments that Paul has made you realise that actually that’s not true; there is actually receptivity towards biotech companies of the right kind in the UK. I looked at some stats before I came out and it was interesting that there’s been less than 10 biotech IPOs since 2010 in the UK which isn’t a hell of a lot but what was interesting was I looked at the number of follow ons and there was something like 40 follow ons in that time so if you do get access to the market you are able to come back and raise further financing to finance your growth and that’s a very important story for companies to understand that the markets are there and they are supportive to biotech companies.

There are a couple of issues in that obviously in the same period there was something like 70 IPOs in the US so it is a very different story when you consider the US and what we’d like to do is at the margin, broaden the appeal of biotech so that they’re can be more IPOs. Obviously we’re not going to get to a level that they have in the US because there is an entire specialist community of investors there, we don’t have that here so what we really need to do is raise the awareness in generalist investors about the attractions of biotech.

‘What we really need to do is raise the awareness in generalist investors about the attractions of biotech. ‘

TO’D: What are the best strategies to broaden that appeal? How do you go about doing so?

CM: Paul made some good points on actually articulating to investors the success stories in biotech. There are a number of success stories in this sector such as Clinigen and Retroscreen that have been unheralded and we need to do better PR so investors understand that. There aren’t enough investible opportunities for investors so they can actually take more of a portfolio approach to biotech investing and if we could actually raise the supply then there could be a fundamental difference in the way that investors approach these opportunities. There’s a couple of things we can do specifically on that. On the supply side we can help to educate companies on how to position themselves best to be accepted well by the public markets and The Exchange have a new programme called The Elite programme which is basically a mentoring and coaching and training and also access to finance programme for growing companies. What we’re going to look to do there is something that’s adapted for the biotech sector because you need something that’s more tailored for the biotech companies because the nature of their business is very different than the average sector. That’s something we’re going to look to do and we’ve actually been in discussions with MedCity and the Mayor about doing something in that way. We want to be able to do something quite concrete to help companies ready themselves for the market and on the demand side similarly we’ll look to try and get events in place where we can talk to investors about the success stories in biotech but also go through some of the issues in terms of how do you value a biotech company? What are the key issues with regard to regulatory approval and obviously someone like Paul has a wealth of information that he could share and investors if they understood just a little bit more about this sector they’d be much more willing to invest in it.

Part Four in this series will feature the comments made by Karl Keegan of Vectura. If you would like to see the full transcript of the entire panel click here to access it.