Two recent acquisition announcements — Ergomed and Instem — highlight a growing trend: private equity firms targeting undervalued UK life sciences companies unable to fulfil their growth aspirations through AIM's limited capital pools.
For students of the sector, the transactions are part of a broader pattern that has seen a slew of smaller British innovators picked off in recent years for relatively modest sums. On the list are names such as BTG (LSE:BTG), UDG, Clinigen, and Amryt Pharma.
The speculation is that the two latest PE conquests will ultimately ‘do an Arm Holdings’.
In other words, they will pop up several years later on the Nasdaq worth a whole heap of money more before they were taken private.
In the life sciences sector, the westerly migration has been going on for at least a decade.
“Investors in the US understand the US healthcare marketplace better than those in the UK (they live the system on a daily basis),” said Max Hermann, a healthcare analyst at American investment bank Stifel.
Turning to the broader market, the AIM All Share has fallen 0.7% to 735.96 over the last five trading days. This meant it marginally underperformed the FTSE 100, which traded sideways over the same period.
The back-to-school uptick in activity didn’t properly kick in until Wednesday when news flow, at least, returned to more normal levels – even if share trading volumes remained low.
Infrastructure India was the week’s stellar performer with the shares up 130% on the back of the sale of its main asset, a logistics operation on the sub-continent, in a deal worth $10 million in cash, plus shares.
An early strong riser on Friday was Atlantic Lithium, which was up 20% at 24.86p on the day and 27% over the week. This followed the news that Ghana’s Minerals Income Investment Fund will invest around £26 million to support the company’s flagship project.
Another top performer in the sector was Tertiary Minerals (up 30% at 1.2p). The Swedish government has told the country’s Mining Inspectorate to look again at why it blocked the Storuman Fluorspar Project.
The cost of raising new capital at the small-cap end of the market was brought into sharp relief by the efforts of battery group AMTE Power and its advisors.
It expects to bring in just over £2 million of fresh investment. But in doing so, has found itself discounting shares to 1.7p as part of the process.
That led to an almost vertiginous drop in the price of 7.35p, or almost 80% to 1.9p.
Sticking with the fallers, capital equipment supplier 600 Group (AIM:SIXH) copped a whipping as the stock dropped 46% to 2.55p.
It appears to face a litany of problems. Its audit won’t be completed before the annual meeting later this month, the shares are set to be suspended in October, while trading conditions remain difficult.
China Nonferrous Gold (CNG), which owns a gold project in Tajikistan, finds itself in a tough spot.
It said a $65 million loan due for renewal won’t be extended. According to the company’s latest update, it has just under $5 million of cash and $316 million of loans, of which $242.65 million is due in the next 12 months.
Reflecting its financially parlous situation, the stock was down 55% at 0.8p on Friday.
By contrast, the issues facing Advanced Medical Solutions Group (AIM:AMS) would appear far more benign – growing pains, if anything.
Yet the market for small-caps would, to mangle a cliché, appear to be an unforgiving mistress.
The stock fell 26% to 185p after the company downgraded earnings estimates amid a lack of clarity over certain US royalty payments.
In an update, AMS said there were concerns around reimbursement for a diabetic foot ulcer treatment licensed to a company called Organogenesis.
It’s at this point of the report we take a look at a stock that may not be on everyone’s radar. This week it’s ANGLE. Now, this company has been around for some time but has made significant progress of late.
Led by founder Andrew Newland, ANGLE has developed an FDA-approved liquid biopsy system that picks up the tell-tale signs of cancer, which can then help with the more effective treatment of cancer.
It's unique in that not only has Newland and the team created the tech, they have now got it to the cusp of commercialisation.
Research from investment banks Berenberg and Jefferies highlights ANGLE's promising revenue growth and momentum into the second half of the fiscal year.
According to Berenberg, ANGLE is making "encouraging progress in both content and clinical data development," which supports increasing revenue momentum in the future. Recognising this, the shares ended the week 40% higher at 16.01p.