Two healthcare IPOs in the works

At least two initial public offerings in the healthcare space are in the pipeline, industry sources say.

New Zealand biotech Innate Immunotherapeutics further along in the process, attempting to raise $16.5 million in Australia with Paterson Securities acting as the lead manager and underwriter for the IPO.

Subscribers to the 30 cents a share float will also receive a non-renounceable rights issue exercisable at 45 cents with an expiry of two years.

Institutional investors have until tomorrow to throw in their bids, according to the company’s indicative timetable. If the IPO gets sufficient interest, the biotech expects to lodge its prospectus on the October 25 and to float on the ASX on December 9.

Innate, which recently migrated its management team to Australia, has a phase II drug candidate to treat secondary progressive multiple sclerosis (SPMS) – a $3 billion target market with no approved treatments.

The company’s strategy is to partner with a big pharmaceutical company to take the drug to market after completing the phase II trial by late 2015.

The company is confident that the trials will be successful as its drug has been used in selected patients in New Zealand over the past five years with good results.

However, the biotech is still a highly speculative investment proposition, according to Canaccord Genuity analyst Matthijs Smith. 

“From a clinical perspective, they’ve got a lot of challenges because there currently is no well-established clinical framework for the indications that they are going into,” says Smith.

“What that means is that they need to run a program to first establish the end-points, and that can be challenging in its own right.”

From the raising, $7 million is slated to fund a phase II clinical trial for the drug in Australia – to commence in the second quarter of next year – with the remainder to repay debt. Innate can place up to an extra $3 million of additional shares if there is enough demand.

Word on the street is Canaccord is also working on an IPO in the medical space. The world’s first wearable wireless sensor developer to monitor body movements, dorsaVi, is making its rounds to fund managers to drum up support for a possible float.

The company is looking to raise $14 million on a pre-money valuation of $30 million, and lists the Essendon Football Club as a client. Not sure how far that’ll go in establishing credibility with the investment community given the doping scandal at the club.

The technology aims to screen and identify athletes at risk of injury, optimise players’ sporting techniques and help doctors ascertain if an athlete has fully recovered from an injury.

Healthcare companies have been joining the recent flurry of IPOs on the ASX, with stem-cell firm Regeneus (RGS) debuting on the ASX last month – the first non-device biotech float in more than two years (see Brendon Lau's Making money from small cap IPOs).

Regeneus opened higher on its first day and is currently trading around 10% ahead of its 25 cent offer price.