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Ready, AIM, Finance: Why Targeting Alternate Sources of Investment Capital Brings Strategic Value as Well as Cash to the Business
By BioLauncher Ltd.

Biotech companies can raise cash and create other opportunities to grow and advance their business by bringing forward their IPO plans and looking to some of the secondary equity markets. The London Stock Exchange's (LSE) Alternative Investment Market (AIM) market is an attractive target for growth companies seeking access to capital. AIM is operated by the LSE and offers companies great value for money, and a less burdensome regulatory environment than the main board.

Why AIM Finance is Smart Finance

The concept of “smart money” is well understood by management teams seeking venture capital investment. However a public offering delivers capital with “strategic capacity” that increases a business's options for growth in a number of ways.

1 - It delivers capital to the business at the IPO, but also creates a capability to undertake additional capital raisings via subsequent share issues. In 2005, Evolutec plc (AIM:EVC) raised £9.5M as a follow on financing. North American companies should note that PIPE investments are not yet offered on the London markets.

2 - It broadens the shareholder base, and provides existing investors with a fair market value for their investment. An AIM transaction makes most sense when viewed primarily as a financing event and not a liquidity event. Management teams are reporting more attractive valuations for their business from the AIM community at IPO than they are being offered by UK venture investors. A positive trend is the increase in trading volumes on AIM as appetite for AIM securities has increased, suggesting that the liquidity issues are diminishing.

3 - It provides a mechanism to incentivise employees through share options. Biotechnology businesses succeed through the commitment and excellence of their employees. The ability to offer employees traded shares differentiates the company from others at a similar stage of development.

4 - It creates the option of growing the business by acquisition. Once management teams are in possession of traded paper, the possibility to buy synergistic businesses and plug gaps in intellectual property portfolios or product pipelines becomes very real. AIM's rules on acquisitions are designed specifically to facilitate growth by acquisition which can be an excellent mechanism for achieving a foreign market entry.

5 - It raises a company's profile which increases the possibility of achieving a trade sale which is the preferred exit for many investors in the current environment. Last year BioFocus plc (AIM: GLPG) was acquired by the Dutch company Galapagos NV.

6 - A listing enhances the company's reputation amongst suppliers and potential collaborators but also within its peer group.

AIM's Cost, Regulation and Process Advantage

AIM quoted companies enjoy the benefits of a public listing within a streamlined regulatory regime resulting in substantially reduced the compliance costs. The annual fees for non-domestic equities are the same as the admission fees, currently $7524, regardless of the size of the company or the volume of shares traded.

On the LSE main market, the regulatory authority is the UK listing Authority (UKLA), which fulfils a role that is similar in some respects to the Securities and Exchange Commission (SEC) in the US. For AIM companies the regulatory authority is devolved to the company's appointed Nominated Advisor aka Nomad. The Nomad is responsible for evaluating the company's appropriateness for the market and ensuring that after listing the company remains compliant with the AIM Rules. (It should be noted that AIM listed shares are not registered with the SEC, which makes it illegal to offer to buy or sell, or make a solicitation of an offer to buy or sell the company's securities to a US person under the US Securities act of 1933.)

Any company meeting the admission criteria can join AIM. The process is designed to be straightforward. An AIM quotation typically takes about 4.5 months from project kick off to completion.

Other Considerations

To achieve an AIM listing and maintain its strategic capability thereafter, companies need communication strategies that raise the profile of the business and management in Europe. This means growth phase companies will need to access sophisticated international communications expertise that can balance the UK perspective against the business's need to build and maintain a consistent global profile.

For more information on the AIM market, please contact BioLauncher at info@biolauncher.com.