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Aussie Fluoroscence Firm Fluorotechnics Files IPO, Hopes to Raise Up to $9.7M

Upstart Australian proteomics firm Fluorotechnics last week filed for an initial public offering in the hopes of raising up to Aus$12 million ($9.7 million).
The company’s stock would be traded on the Australian Stock Exchange and has an issue price of Aus$1 per share. Fluorotechnics expects the IPO to float between 26 million 28 million shares and yield a market cap of between Aus$26 million and Aus$28 million.
BBY is the lead manager on the float.
Spun out of Macquarie University in New South Wales, Sydney-based Fluorotechnics is looking to capitalize on a market it estimates at $2 billion and growing. In its IPO prospectus, available here, the company said it will use gains from the IPO for seven specific purposes: to increase production capability; expand its sales and marketing team; increase its production staff; increase its reserves for general purposes and for future acquisitions; fund other costs; pay for the IPO; and help pay for the proposed purchase of the Gel Company, a deal also announced last week that is contingent on the completion of the IPO. The Gel Company, based in San Francisco, sells tools for cell culture, DNA sequencing, proteomics, microarrays, and liquid handling.
In addition, Fluorotechnics said that going public would help raise its profile, help it retain key employees, give it freer access to equity markets, and fund future growth.
In an e-mail to ProteoMonitor, Fluorotechnics co-founder and CEO Duncan Veal  said that the company is not a “classical” proteomics firm and “we have products and manufacturing and [plan to use the IPO] funds for scale-up rather than for research and development. We have the international team in place that covers all aspects of the business from development through manufacturing to sales and marketing.”
In seeking to go public, the company is also attempting to go against market forces that have sharply reduced the number of IPOs being filed across all industries.
Fungus Success
Fluorotechnics’ technology is based on a fluorophore called epicocconone, produced by a fungus called Epicoccum nigrum.
A number of companies have fluorescence-based products on the market, and according to Fluorotechnics, techniques based on fluorescence offer several advantages over traditional color and radioactive labels, including heightened sensitivity, a wider dynamic range, and the ability to remotely study dynamic processes occurring in living organisms in real time.
In addition, because they are natural, Fluorotechnics’ epicocconone products are non-toxic and can therefore be used to study live organisms in real time, and can be disposed of more cheaply than fluorescence products that are based on heavy metals and toxic.
Epicocconone also fluoresces only on reversible binding to proteins and peptides, which “results in exceptionally low background fluorescence providing greater sensitivity and wide dynamic range,” Fluorotechnics said in its prospectus. “Proteins or peptides under study are not changed and can be further analyzed,” which the company said is crucial in most proteomics studies.
In addition to its fluorescence stains, recently developed electrophoresis gels are being prepared for market launch, and the company said that demand for the gels has “outstripped” Fluorotechnics’ manufacturing capacity.
In addition to epicocconone, more than 50 fluorophores from Epicoccum nigrum have been isolated by Fluorotechnics, and the firm is exploring future uses for them. In all, the company has more than 20 products that it anticipates commercially releasing through 2011.

“We believe the Fluorotechnics product portfolio credibly addresses several global market segments, which in aggregate, currently amount to in excess of US$2 billion annually.”

Veal did not provide many details about the planned product launches, saying only that they will be “in our core markets of proteomics and electrophoresis, and in particular, will strengthen our position as a supplier of fluorescence-based and -related products.”
For the firm’s fiscal 2009, which began in July, the company is forecasting revenues of Aus$7.5 million. In a report prepared by corporate research firm Objective Capital and included in Fluorotechnics’ prospectus, Fluorotechnics is expected to generate Aus$18 million in revenue by 2010.
For the six months ended Dec. 31, 2007, Fluorotechnics posted receipts of Aus$225,000 and a loss of Aus$859,000. It had cash and cash equivalents of Aus$470,000, total assets of Aus$1.8 million, and total liabilities of Aus$517,000.
In February, the company raised about Aus$1 million in private equity.
“We believe the Fluorotechnics product portfolio credibly addresses several global market segments, which in aggregate currently amount to in excess of $2 billion annually,” Objective Capital said.
Commenting on the proteomics research products market, which Fluorotechnics will be targeting in the near term, Objective Capital said annual growth rates have risen in the high single digits to low double digits.
“Advances in systems biology, with its heavy demand for large amounts of protein and gene information, [are] the main impetus that will continue to drive an above-trend market growth for some time to come,” the research firm said.
Competitors in the fluorescent research tools market cited by Fluorotechnics include GE Healthcare, Invitrogen, Sigma-Aldrich, and PerkinElmer. Also operating in the space are a number of smaller niche players that produce “commodity fluorophores” that tend to be low-margin products and have no intellectual-property protection.
The company said that no other firm, however, has “the same combined suite of advantages as Fluorotechnics in protein detection,” and despite the dominance of a few large players, smaller players can succeed in the space “because they can either provide solutions that are innovative and solve problems that the larger companies are ignoring or are less costly solutions to the everyday problems of research.”
Fluorotechnics’ products, it said, address three markets: research tools, diagnostics, and industrial applications.
According to the company, the total addressable market for its research tool-directed products is about $1.5 billion, and its products target a diagnostics market that reached $500 million in 2007 and is projected to grow to $600 million by 2010.
Its products for industrial applications target a market estimated at $120 million in 2007.
Ramping Up
Founded in 2002 by Veal, who had been a professor of microbiology at Macquarie University, and Rick Taylor, a mergers-and-acquisitions tax expert, Fluorotechnics has been one of scores of backwater companies occupying the proteomics space. During the past year, however, it has aggressively moved to raise its profile and expand its footprint.
In addition to the pending GelCo acquisition, Fluorotechnics bought German electrophoresis consumables and equipment firm ETC Elektrophoresis Technik in November [See PM 11/15/07]. It also has added executives to its sales and marketing staff and entered into agreements with sales, marketing, and distribution partners to increase its reach in several markets including France and various locations in Asia, such as Japan and China.
Two additions to the company’s board were made in June: John Fletcher, the retired CEO of Australian retail company Coles Group, and David Weber, former president and CEO of Eksigent Technologies.
In seeking to join the ranks of the publicly traded companies, Fluorotechnics is looking to join an exclusive list of proteomics-related firms to have completed an IPO in recent years.
One such firm, Fluidigm, which does some proteomics business, was expected to complete its IPO this week. During the summer, microarray firm AutoGenomics filed for an IPO to raise as much as $86.3 million [See PM 07/31/08]. The offering is pending.
But earlier this year, BG Medicine pulled its IPO citing adverse market conditions. And in 2006, Caprion Pharmaceuticals withdrew its intended IPO, also citing adverse market conditions [See PM 08/03/06]. It then spun out its proteomics operations when it merged with Ecopia BioSciences to form Thallion Pharmaceuticals [See PM 01/11/07].
Indeed, investors have had a cool reception to IPOs recently. According to a PricewaterhouseCoopers survey, the number of IPOs by Australian companies during the first half of 2008 dropped to 21 from 33 during the comparable year-ago period. The amount raised by offerings during the first half of this year was Aus$334 million, or 7.4 percent of the Aus$4.5 billon raised during the same period a year ago.
In the report, Greg Keys, a partner in PricewaterhouseCoopers Corporate Finance, said the market is seeing a “reduction in investor appetite for equities and a substantial contraction in financial liquidity,” driving down the demand for IPOs. As a result, many companies are either delaying or canceling planned offerings until market conditions improve or investor appetite returns.
Especially in light of the current turbulence in the broader global financial markets, Fluorotechnics’ offering on the surface may seem ill-timed. However, Veal told ProteoMonitor this week that Fluorotechics “would prefer to list toward the bottom of the cycle rather than the top.”
In discussions with potential institutional investors before lodging its prospectus, Veal said the company had received “a very good reception and [had] already secured institutional investors for a substantial portion of the shares on offer.”
In its prospectus, Fluorotechnics cites a “pent-up demand for Fluorotechnics products,” as one factor for its offering. Its sales and marketing team has identified a customer base of 950, has “qualified” a number of them, and estimates that the potential revenue from this pool of customers to exceed Aus$10 million annually.

The company also said that because few regulatory hurdles exist for its products, it can commercialize its portfolio rapidly. In addition, “barriers to customer conversion are low as the investment in testing Fluorotechnics products is small and involves a straightforward substitution for a competitor or legacy product, thus the standard workflow remains largely unaffected,” it said. 

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