Setterwalls takes the pulse of Swedish IPO activity within life science

There is currently a great deal of activity where public offerings in the life science sector in Sweden(1) are concerned. Many companies are opting for the stock exchange as a means of funding, and there are no indications of a decline in this approach in the near future. In 2016, so far, two life science companies have been listed on Nasdaq Stockholm Main Market (further referred to as Nasdaq Stockholm), and Alligator Bioscience, Diaverum, Immunicum (switching from Nasdaq First North) and Pharmalink have announced that they are planning to list their shares on Nasdaq Stockholm before year-end. Should all four of the scheduled initial public offerings (IPO s) be completed before the end of the year, it would entail a vast increase in the number of IPO s for life science companies on the Swedish regulated markets in 2016 compared to 2015.

The companies that have been listed on the regulated markets in 2016 are Wilson Therapeutics and AddLife, both listed in the Mid Cap segment on Nasdaq Stockholm. The share issue in connection with the IPO of Wilson Therapeutics, a biotech company focusing on the rare genetic disease Wilson’s disease, raised a total of SEK 435.6 million, and the company has a current market cap of almost SEK 1.3 billion. AddLife, a combined lab- and medtech company with 25 subsidiaries, listed their series B shares on Nasdaq Stockholm following a spin off from AddTech in March 2016. The share started trading at SEK 99.82 in April 2016 and the trading price has since rocketed to SEK 134.75, giving AddLife a current market cap of more than SEK 3 billion.

In 2015, R&D-focused pharmaceutical company Camurus was for the first time listed on Nasdaq Stockholm, and Hansa Medical switched from First North to Nasdaq Stockholm. Both companies have seen overall positive development in stock market value since their listing on
Nasdaq Stockholm.

In October 2015, Uppsala-based Oasmia Pharmaceuticals, which develops drugs within human and veterinary oncology, completed a public offering of American Depositary Shares and warrants on Nasdaq Capital Market in New York, generating gross proceeds of USD 10.4 million. Although the stock price has dropped by more than half since the listing, Oasmia Pharmaceuticals is still one of three companies with a dual listing on both Nasdaq Stockholm and Nasdaq Capital Market in New York, accompanied by giants Autoliv and Ericsson.

Broadening the horizon and looking beyond 2016, Immunovia and XVIVO Perfusion have flagged for a move from First North to Nasdaq Stockholm in 2017. Saniona, listed on First North Premier, is also planning a move to Nasdaq Stockholm, possibly during 2017.

Looking at the less regulated Swedish growth markets, known as MTFs, approximately 30 life science companies were listed on either First North, Aktietorget or NGM Nordic MTF in 2015, out of a total of approximately 90 listed companies. So far this year, 15 companies have been listed on First North or Aktietorget, and another ten companies are in the pipeline for listing before year-end. One of the planned listings regards Medivir, already listed in the Mid Cap segment on Nasdaq Stockholm. The company is planning a spin off of its current pharmaceutical portfolio and a subsequent listing of the new entity on First North Premier. 

So why has the rate of life science IPOs been so high over the last couple of years? First of all, the overall appetite for investments is high at the moment. However, there are other life science-specific explanations for why life science companies often choose the IPO route over venture capital investment. One reason is the large amount of funds needed. Drug development companies in particular are in need of a great deal of funding in order to sustain product development and to take the product all the way from idea to big pharma sale, licensing deal or market introduction. However, the high costs related to life science operations do not serve as a full explanation for why an IPO should be favoured over a venture capital investment. There are many venture capital firms with the capacity to finance even extremely cost-intensive businesses. However, such firms are risk averse, and investing in life science companies, particularly those in the field of drug development, involves high risks. Thus, many investors strive to diversify their ownership portfolios, making the IPO route suitable for attracting investors while still enabling them to spread the risks through smaller investments. Also, company ownership through the stock market gives greater liquidity. Lastly, the attention that an IPO attracts should not be underestimated when analysing the reasons for why companies choose to go public.

 

(1) In this article the focus is on public offerings on the Swedish stock markets for companies in the life science sector. “Life science companies” are defined here as companies in the fields of pharmaceuticals, medtech and biotech. All figures are as per 26 October 2016 and do not include listings where companies have moved from one multilateral trading facility (MTF) to another (i.e. First North, Aktietorget and NGM Nordic MTF) or between the regulated markets Nasdaq  Stockholm and NGM Equity. However, listings where companies have switched from an MTF to a regulated market are included in the data, as well as companies moving from an MTF or regulated market abroad to a Swedish MTF or regulated market. Lastly, no listings of life science companies have been made on NGM Equity in 2015 or 2016, which is why it has been omitted from the article.