Listings increasing in the Life Sciences sector in 2014

More than 20 companies in the healthcare and pharmaceutical sector are planning to apply to become publicly listed in Sweden in 2014. This is a significant increase on recent years. Several of the companies are heading for NASDAQ OMX Stockholm, both the main market and the growth market First North.

NASDAQ OMX Stockholm

NASDAQ OMX is the largest authorised securities exchange in Sweden and is the principal market on which shares, bonds, derivatives and other securities are traded in the country. Sweden also has a small exchange, the Nordic Growth Market (NGM), where small and medium-sized businesses can choose either a regulated listing on NGM Equity or an unofficial launch on Nordic MTF. Companies can also list on AktieTorget (another Swedish multilateral trading facility (MTF)).

NASDAQ OMX Nordic is the combined offering from NASDAQ OMX exchanges in Helsinki, Copenhagen, Stockholm, Iceland, Tallinn, Riga, and Vilnius. The Nordic list is a combined market comprising both large and medium-sized companies across three segments: small, mid and large cap. NASDAQ OMX Nordic also provides First North, which is NASDAQ OMX’s European growth market, designed for small and growing companies. Many large and established companies began their journey on First North and later went on to launch on the NASDAQ OMX regulated main market. 

Pipeline

According to Scandinavia’s largest business daily Dagens Industri, Adam Kostyál, Senior Vice President NASDAQ OMX, predicts there will be 25 new listings on NASDAQ OMX Stockholm by 1 July 2014, 10 of which will be on the main market and 15 on First North.

The forecast of approximately 10 listings on the main market should be compared to the number of launches between 2007 and 2013. Only two companies listed in 2013, none in 2012, five in 2011, three in 2010, none in 2009, three in 2008 and six in 2007.

The key factor, according to Kostyál, is that the valuation have reached levels at which equity holders consider a stock market launch to be equally or more attractive than selling the company. Another issue, says Kostyál, is the importance of advisers in preparing companies for their new life on the exchange, with legal advisers and managers having a particularly vital role. In addition, recently listed companies have enjoyed a successful start on the exchange and, according to Kostyál, the seven companies listed so far in 2014 have seen their shares rise by 29 percent compared to a 1 percent increase in the index.

Life sciences listings

Kostyál says that interest in launching on the NASDAQ OMX has come from many different industries, but that it has been greatest in the medtech and life sciences sector, as well as the real estate sector.

Recipharm AB, one of Europe’s leading pharmaceutical contract development and manufacturing organisations (CDMO) and a mid-cap company in the healthcare sector, is one of three companies to list on the NASDAQ OMX Stockholm main market so far this year.(1) First day of trading was 3 April 2014.

According to the website nyemissioner.se, the following life sciences companies are planning a listing on the NASDAQ OMX Stockholm main market in 2014 and 2015: Bactiguard Holding AB, Cederroth AB, InDex Pharmaceuticals AB, CRAD AB, Episurf Medical AB, Enzymatica AB, ApoPharm Holding AB, SciBase AB, Intervacc AB and Diaverum AB. So far in 2014, the following life sciences companies have been listed on First North: Scandi-Dos AB (first day of trading 11 April 2014), Doxa AB (first day of trading 7 April 2014) and Brighter AB (first day of trading 14 March 2014). According to the website nyemissioner.se, six more life sciences companies plan to list on First North in 2014.

The listing process

The Swedish public listing process is similar to that in other European jurisdictions.

For a company with no prior listing that is making a public offering of shares in connection with its listing, the process will normally take between four and six months and usually includes the following steps:

• Engagement of managers and legal counsel (and any other advisers).
• Initial discussions and meetings with NASDAQ OMX about the listing process.
• Appointment of an examiner (an accountant) by NASDAQ OMX. The examiner carries out an investigation which forms the basis for the decision of the Listing Committee (“Bolagskommittén” in Swedish). The purpose of the investigation is to determine whether the company satisfies the listing requirements. The examiner also reports on the suitability of the company’s internal reporting systems.
• The company needs to consider issues such as:

– Publicity guidelines and “black-out” period.

– Lockup arrangements or other restrictions on current shareholders and management.

– Placing agreement.

– Stock lending arrangements.

– Any internal restructuring required.

– Overallotment/greenshoe option.

– Offers by existing shareholders to sell shares in connection with the listing.

– Changes to employee incentive arrangements.

• Information gathering and a due diligence investigation performed by legal counsel.
• Drafting of the prospectus. The prospectus, which is often prepared by the legal advisers, should contain all the information required to enable an investor to make an informed assessment of the company’s operations and financial position and the rights attached to the securities in question. The examiner appointed by NASDAQ OMX follows this work and provides comments on the content of the prospectus.
• Filing of the prospectus (in Swedish) with the Swedish FSA for registration and approval.
• Approval of the listing application by the Listing Committee. Approval is based on the recommendation of the examiner appointed by NASDAQ OMX.
• A press release is issued, stating main terms of the offering and where the prospectus is available and where it may be obtained by the public.
• Book closure followed by pricing, allocation and execution of the placing agreement.
• Filing and registration of the shareholder or board resolution on the new issue of shares, as applicable, with the Swedish Companies Registration Office.
• The manager subscribes for the shares as set out in the placing agreement. Delivery of borrowed shares, if any, to the manager for delivery to investors.
• Signing of NASDAQ OMX’s Rule Book for Issuers.
• Listing – trading in the shares starts.
• Start of stabilisation measures, if any. The EU Regulation on stabilisation measures (2273/2003/EU) permits a manager to undertake measures to stabilise the price of shares in connection with an offering of shares, provided that certain conditions are satisfied.
• Exercise of overallotment/greenshoe option to cover any short positions not already covered by stabilising purchases.

Conditions for listing and considerations for the process in Sweden

NASDAQ OMX has established certain fundamental requirements for companies applying for listing on the exchange. These demands include the company having to undergo a legal examination carried out by an external attorney prior to listing and continual listing requirements. These include meeting NASDAQ OMX’s requirements regarding the general suitability of the board of directors and management, procedures for financial reporting, adoption of an information policy, implementation of routines for how information is to be disseminated and requirements for the board of directors, senior management and auditors elected at the shareholders’ meeting to have basic knowledge of the rules and regulations on the stock market.

Listed companies must have their shares registered in, and their share register maintained by, the computerised bookentry share registration system administered by Euroclear Sweden AB.

Sweden has implemented the Prospectus Directive, the relevant rules of which are set out in the Trading Act.

Swedish limited liability companies cannot indemnify persons who acquire shares or other securities of the company in an IPO or a new issue of shares for damages resulting from errors or inadequate disclosures in the prospectus. Damages may, however, be sought from the board of directors of the company if the losses for which damages are sought are the result of wilful or negligent behaviour by the board members.

The board is less exposed to prospectus liability claims if the company has engaged well-reputed legal and financial advisers. In larger offerings it is customary to request the auditors to provide a comfort letter in respect of the financial information included in the prospectus.

In Sweden, it is market practice to make the prospectus and application forms, once approved and/or registered by the Swedish FSA and duly published, available online, both on the company’s and the manager’s websites. Under the Trading Act, a listed company is required to post the prospectus on its website. Before making a prospectus available online, the company should, however, seek legal advice and take measures to avoid targeting the public in certain other jurisdictions.

Concluding remarks

Several healthcare and life sciences companies are planning to list on NASDAQ OMX Stockholm and First North, as well as on unofficial lists such as AktieTorget. Some companies that are already listed are considering moving, for example to the main market from First North or Aktietorget. When preparing to list or switch to a different exchange, companies need to also ensure that they are aware of and will comply with the legal requirements for listed companies. Legal advisers play a significant role in preparing companies for their new life on the stock exchange, where they face an extensive package of new rules and regulations that apply to public companies.

(1) Setterwalls was legal adviser to Recipharm and its founders in connection with the listing of Recipharm on NASDAQ OMX Stockholm.