Proteome Systems has begun the process of filing an IPO with the Australian Stock Exchange, according to Keith Williams, the company’s CEO.
Williams told ProteoMonitor this week that the company had to take a significant cut to its original planned listing price in order to go public. The company now plans to file with an approximately AU$160 million ($110 million) listing, compared with the AU$300 million ($206 million) that it had hoped for. Consequently, the company now aims to raise AU$35 million rather than an anticipated AU$45 million in the IPO. Patersons Securities is managing the stock float.
Williams expressed confidence in the stock’s ability to succeed in the public market at the listed price. “I am pretty comfortable in terms of comparables, because many of the listed biotechs are at an early stage, [and] we have a real solid business in terms of 140 employees,” Williams told ProteoMonitor. “So in comparable terms I think it was fairly easy to get to the price we got.”
Still, Williams said an erratic growth pattern of the company’s revenues was to blame for what he admitted has been a frustrating experience with investors. The company expects revenues for 2004 to be less than the AU$21 million that the company took in last year. In 2003, the company took in AU$21 million — a sharp increase over the approximately AU$7.5 million in revenues that it had in 2002. But Williams said he did not expect revenue growth to keep up that pace, for reasons the investors might not fully understand. “Now we’re almost at the end of the next cycle, where we’ve got people who have understood what we’ve got, and they haven’t quite placed orders yet,” he said. “This year is much more challenging because we’ve been going through a growth period where we are establishing our products.” The result, he said, was “if you’re an investment banker, and you’ve seen [AU]$7.5 million, then [AU]$21 million, you’re going to be expected [to have] at least [AU$]30 the next year — and this year they’re not going to get it.”
Proteome Systems has also hit the market at a time when other listings have failed or deferred, the Sydney Morning Herald reported this week, implying that part of the blame was not on the company but rather on the market itself.
Williams said that Proteome Systems is still in a growth period despite its relative maturity compared with other Australian biotechs, because it is just two years into the marketing of its integrated system, ProteomIQ. Rather than selling front-end tools or other bits and pieces of the proteomics workflow, “we’ve learned from bitter experience that the only way to do this really is to get integrated about it, and look at an overall solution,” Williams said. So far, the company has placed systems at Charles River Proteomics Services — a joint venture it has with Charles River Laboratories (see PM 10-14-02) — as well as in Malaysia and Japan. Williams also expects to soon close a deal with “one of the biggest biotech companies in the US.” But despite some successes, “it’s taken us a fair while to build a pipeline of people who understand [the value of ProteomIQ] and, having understood, are going to get their granting buddies saying, ‘this is what we want to buy,’” he said. The result on the investment side is that since Proteome Systems is somewhere between the very immature biotechs that make up most of the market and an established company, “our problem is that we have real revenues,” he said.
Given this, “in an ideal world you’d probably wait another 12 months before you listed,” Williams said. But that’s not really an option. The main problem with waiting is that Proteome Systems in May recruited two well-known former executives of successful Australian companies — Graham Bradley and Philip Morley.
Both Bradley and Morley have ”made people a lot of money on the ASX by growing their businesses very fast,” Williams said. “So what we’ve been doing is very purposefully building that whole process, [and] I don’t think we can keep them if I say we’re not going to list.” Bradley is the former CEO of financial services company Perpetual Trustees, and Morley is the former chief financial officer for building materials company James Hardie.
Williams said that the desire to have tradable stock available for use in acquisitions that the company is considering is another driving factor toward doing the IPO now.
As for the revenue that the company does take in, “the first side is to put a bit of underpinning to the business so we don’t have a precarious cash position,” Williams said. In addition, the company will put money into its nascent discovery business, he said, as well as into aggressive marketing of its technology. Proteome Systems applying its technology to look for biomarkers for a variety of diseases.
Williams said that much will depend on what happens in the coming days, as the company finishes its prospectus and completes the offering. “We’re still in that one-minute-to-midnight phase,” he said. “I think the next couple of days are really critical to finish it off.”