HomeBlogFinanceLife sciences IPO lined up for London

Life sciences IPO lined up for London

A new company will test investor appetite for IPOs in London, with plans to raise money to acquire stakes in promising life sciences and biotech firms that have been hit by a slump in values in the sector.

Conviction Life Sciences wants to raise as much as £100mn in the premium segment of the main market of the London stock exchange, which has struggled to attract new companies this year owing to political and economic turmoil.

The plans come after a number of other investment companies have been forced to shelve plans to IPO given reluctance among investors to commit money to new businesses.

Companies including Sustainable Farmland Trust, Welkin China Private Equity and Independent Living Reit have all paused planned flotations in recent weeks.

The investment company, which is targeting its fundraising efforts at family offices and high net worth individuals, is aiming to float in December. Shore Capital is acting as sponsor to the deal.

The investment manager of the company, Plain English Finance, wants to acquire stakes in life sciences and medical technology businesses that it sees as undervalued in the UK, Europe and Australia. It is targeting annualised total returns of 20 per cent.

Investment manager Andrew Craig said that many smaller life sciences companies listed on London’s junior Aim market were being undervalued by UK investors.

“We’ll be buying into these companies at astonishing levels,” said Craig. Their revenue growth potential was attractive as was the probability that some will become acquisition targets for larger pharmaceutical rivals, he added.

About 70 per cent of capital will be invested in publicly traded companies and 20 per cent in private businesses, with 10 per cent retained as cash for follow-on investments.

The company expects to hold minority equity positions in between 20 and 40 businesses that will provide a spread of technologies including diagnostics and therapeutics, as well as pharmaceutical services.

Craig said that these smaller life sciences companies were often too specialist for fund managers that focused on investing in Aim market stocks, while being too small for the large generalist funds.

The lack of research coverage for these stocks, which has been exacerbated by the impact of Mifid 2 rules, has also caused many companies to become marooned from investors, he added.

Craig said that there were social and economic reasons to believe that life sciences companies developing clinical solutions would be needed more in the future, pointing to the ageing population in many countries.

These firms would also benefit from faster regulatory approvals following progress on such systems since the pandemic, he added.

Life sciences has been a focus for ministers keen to help develop new industries in the UK, although many founders complain about a lack of funds available for growth.

Last year, the UK government agreed to create a £1bn partnership with Abu Dhabi’s Mubadala Investment Company, a sovereign investor, to invest in UK life sciences over five years. The government said these funds were needed to provide “much needed stable investment into the next generation of life science companies around the country”.

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