Hardman & Co Monthly: July 2024
Feature article: UK life sciences needs more local institutional support to survive.For two years running, the Hardman & Co Healthcare index has declined, underperforming both the FTSE 100 and the FTSE All-Share indices. This is quite unusual for healthcare stocks. Apart from the general economic influences, which have made institutions more risk-averse, there was a common knowledge that several companies were in need of additional working capital; so, share prices were marked down in anticipation of equity raises.
However, there is nothing new in small- and mid-cap life sciences companies being capital intensive. What has changed is within investing institutions and pension funds. Consolidation has created a much smaller number of groups with enormous funds under management that are much less interested in small, capital-intensive companies. Consequently, the pool of institutions interested in such investments has diminished significantly, which has also had a significant effect on valuations.
This, in turn, has made a number of companies reconsider where their primary listing should be. Several companies have already left the London market. Since we wrote our initial report, they have been joined by Indivior (INDV), which has just moved its primary listing to NASDAQ, citing that it would be relocating to where it does most of its business and where it plays an important role in the market for addiction treatment. Among the small caps, three have already delisted from London this year over poor valuations, with at least one of them expecting to relist in the US when the time is right.
We conclude that things need to change. Institutional investors operating in the London market must be more supportive of the UK life sciences industry, which, historically, has offered them very good returns, otherwise, we fear that the sector could disappear within a few years. This, too, is a topical issue, with an article: “UK start-ups turn to Silicon Valley to fill the void left by risk-averse pension funds” published in the Financial Times (2 July 2024, /content/b8716f43-0f64-4c26-8155-6a39691c647b), and supported by a quote from GSK’s chair, Sir Jonathan Symonds, that “…lifting investment in high-growth companies is a prize worth fighting for...we have a wonderful [UK] life sciences industry…we’ve got to support UK innovation with UK capital…”.
Accesso Technology Group is engaged in the development and application of ticketing, mobile and eCommerce technologies, and virtual queuing solutions for the attractions and leisure industry. Co.'s solutions include accesso LoQueue, accesso Passport, accesso Siriusware and accesso ShoWare. Co. primarily has operations or customers in the U.K., the U.S., Canada, Italy, Germany, Australia, Brazil, and Mexico.
Apax Global Alpha is a closed-ended investment company that invests in a diversified portfolio of private equity funds and derived investments in debt and equities. As of Dec 21 2017, Co. targeted an annualized Total Net Asset Value Return across economic cycles of 12-15%, net of fees and expenses. Co.'s investment activities are managed by Apax Guernsey Managers Limited (the Investment Manager) under a discretionary investment management agreement. The Investment Manager obtains investment advice from Apax Partners LLP (Apax Partners). Apax Partners advises on investments globally in companies across four sectors: Tech & Telco, Services, Healthcare and Consumer.
Arbuthnot Banking Group is primarily involved in banking and financial services. Co. is organized into three main operating segments: Retail banking (associate), which incorporates household cash management, personal lending and banking and insurance services; U.K. Private banking, which incorporates private banking, commercial banking and wealth management; and Group Centre, which is comprised in Co.'s Group Centre management. As of Dec 31 2016, Co.'s total assets were £1.27 billion.
H&T Group is a holding company. Through its subsidiary, Harvey & Thompson Limited, Co. is engaged in pawnbroking, gold purchasing, retail of jewellery, cheque cashing, unsecured lending and other related services.
ICG Enterprise Trust is an investment trust. Co. is a private equity investment company focused on buyouts in developed markets. Co. invests in private equity funds and also directly in private companies. As of Jan 31 2017, Co.'s total investment portfolio amounted to £594.3 million.
Shield Therapeutics is a specialty pharmaceutical company focused on the development and commercialization of late stage, hospital-focused pharmaceuticals which address areas of high unmet medical need. Co.'s key products are Feraccru®, commercially available for the treatment of Iron Deficiency Anaemia, and PT20, for the treatment of systemic phosphate accumulation (otherwise known as hyperphosphatemia). Co. has an additional pipeline of three prescription pharmaceutical assets (PT20, PT30 and PT40) with commercial synergies.
Volta Finance is a closed-ended investment company with the objective of investing, among other asset types, in the following main asset classes: Collateralized Loan Obligation, Synthetic Corporate Credit, Cash Corporate Credit and ABS. Co. has appointed AXA Investment Managers Paris S.A., as its Alternative Investment Fund Manager to manage the investments of Co.
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