Too small for Nasdaq, too big for VC: Telix up 18pc in ASX debut after $50m IPO

Telix Pharmaceuticals made its ASX debut at a 28 per cent premium Wednesday after one of the biggest recent biotech initial public offerings.

The biotech, which raised $50 million at 65c a share, hit 83c in its first hour of trade — a gain of 28 per cent. It finished at 77c — up 18 per cent for the day.

Telix (ASX:TLX) will use the cash to bring a late stage pipeline of cancer drugs and diagnostic products to the market, based on radiopharmaceuticals or molecularly-targeted radiation (MTR).

Telix occupies an awkward space in Australia’s biotech financial market.

The biotech wanted more cash than local venture capitalists would hand over — but too little to justify a listing on a US exchange such as Nasdaq, chief executive Dr Chris Behrenbruch told Stockhead.

The IPO, which valued Telix at $130 million, was “pretty large domestically for a biotech company” Dr Behrenbruch said.

“It is technically the largest IPO in the biotech space… [It’s] the largest biotech IPO since CSL in 1994, and that tells you all you need to know about how people tackle an ASX listing in this space.

“The problem is that VC [venture capital] as an asset class in biosciences is not that mature yet. So the ASX has become a substitute for VC.”

Telix’s drugs are also much further down the development track than is usual for an ASX biotech listing, Dr Behrenbruch said.

“Usually people list early stage assets with a ‘snifter’ of capital.”

Telix plans to have a commercial product in the market within two years. It has a range of products currently in Phase 1, 2 and 3 clinical trials.

“People [in Australia] are not used to large biotech listings.”

Speculative biotechs valuable

Dr Behrenbruch was once skeptical, but now believes that a market open to more speculative biotechs is a valuable part of Australia’s maturing medical sector.

“There is a growing base of translational research,” he said. “The [Therapeutic Goods Administration] is relatively pragmatic about our field and there’s a lot of flexibility in how we take these products to patients and evaluate their merits.

“Nuclear medicine is an extremely well-integrated subspecialty in Australia”

The trick now was to turn Australia into the world’s premium secondary biotech market.

“The US will always have a major advantage purely because of its scale. But maybe for Israeli companies, maybe for European companies, Australia could be [another place to list].”

Takeover target

Dr Behrenbruch says Telix is a takeover target.

Last month Novartis bought France-based radiopharmaceuticals developer Advanced Accelerator Applications for $3.9 billion, a valuation based on a therapy that has just finished Phase 3 trials.

“I couldn’t ask for better timing on this because I’ve been evangelising for a long time that there is interest in this space — that there are transactions in this space,” he said.

“I’m very comfortable saying to the market that we were established to be acquired.”

Foreign support

Dr Behrenbruch initially told Stockhead they wanted half of the money to come from overseas.

On Tuesday he confirmed they’d achieved this with about 40 per cent of the funds coming from foreign institutions.

The register is entirely made up of existing investors and institutions — the IPO bookbuild wasn’t open to retail investors.

Those who got in have agreed to lock up 25 per cent of their stock for at least three months, and escrow the rest for a year.

“This is a company that is essentially two years [away from] revenue and has a late-stage drug pipeline that is of huge interest to the pharmaceutical industry, so we’re not looking [to make small profits for traders].”