Investment fund Conviction Life Science will float in London in an £100m IPO to capitalise on a stream of undervalued biotech and pharma firms, its investment chief told City A.M. yesterday.
While the UK is home to Nobel-winning science, the industry gets a bad rap for being too risky and lossmaking.
The company had mulled a Luxembourg-based SICAV and called a Nasdaq listing too expensive. Ultimately, London just made sense in terms of local valuations.
“It’s the valuation point. Because we have amazing science and we don’t value it,” said investment manager Andrew Craig.
“There’s a lot of value and innovation in British science. We’re not very good at commercialising it.
“A lot of these businesses are really struggling. Struggling to raise capital, struggling to get the oxygen of attention from the investment community.”
Craig, who authored financial literacy book How to Own the World, explained that there is a “single stock risk” in the sector but if you have a portfolio of 40 businesses, the “risk becomes a lot more asymmetric.”
“If our thesis plays out, as I suspect it will, you’re going to get five or six new midcaps in the UK and in Australia,” he added.
Conviction is planning on targeting the smaller firms in the UK and Australia which get far less attention for even more specialist investors – the types of firms that get snapped up by conglomerates or asset management giants in the US, mainland Europe or Singapore.
This is great for the first year, he said, but “annoying for years three, five and seven” because other countries benefit when the smaller firms grow and reach their potential.
The life sciences industry is also still reeling from the collapse of Neil Woodford’s empire, including Rutherford Health which went into liquidation in June.
Craig sought to distance Conviction from Woodford’s defunct investment vehicle, saying: “First lets juxtapose us from them. We’re raising up to £100m, [Woodford] had £17bn at peak and he was putting billions to work across a very wide range of companies. He had a much heavier weighting in the private sector.
“Apart from his patient capital investment trust, he was all open ended. We’re 100 per cent closed ended. So, you don’t have a redemption problem.”