Socially responsible investment manager Australian Ethical’s newest IPO activity involves funding a drug development company which is trying to ease multiple sclerosis sufferers’ pain.
Australian Ethical’s smaller companies trust is investing in drug researcher Innate Immunotherapeutics, which is aiming to raise $10-12m and if successful will capitalise around $43m, Australian Ethical portfolio manager Andy Gracey told Wealth Professional.
The company, which recently relocated from New Zealand to Australia, is mid-stage in clinical development of a multiple sclerosis therapy which has already shown promising early stage results in secondary progressive MS patients.
“What we like about this company is we’ve spoken to a number of patients already who are positive about the drug. It’s not a cure but it makes their life better, with a reduction of pain and their sleep patterns back to normal,” Gracey said.
“The company has given interesting signals in terms of ethicality, and I don’t think investors are paying a lot for the promise this drug has. It’s a different type of investing but it can be very rewarding.”
Results from the clinical trials will be out in 2016, and then the company will seek a global partner to put the drug on the market by 2020, said Gracey.
While Australian Ethical is “excited” about the drug, Innate need to raise a minimum of $10m before Ethical will put $3m in, he said.
This cautious approach is because while there is some value in investing in IPOs, the company is also wary of “opportunistic” investment bankers and vendors taking advantage of the healthy current investor appetite.
“Investors should review the rationale of the listing on the stock exchange – is the company just trying to claw some money back?”
He recommended assessing assumptions included in any forward-looking forecasts and carefully comparing these against listed peers, and said Australian Ethical ignores many IPOs because the future earnings projections appear overly ambitious.
Other IPOs the smaller companies trust is currently involved in include New Zealand renewable energy giant Meridian Energy and the Sealink Travel Group.
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