An IPO remains an exciting, utterly transformative and perhaps daunting prospect. It’s also very expensive. You’ll see loads of corporate finance and PR people plus more of your account than is wise and even more lawyers. They all want validated facts. Somehow in the fee driven frenzy, the small issue of what the company actually does and how the investors will make money vanishes. Worth getting a professional sceptic to test what you have and advise on getting the business ready? Usually, analyst get brought in late, too late for anything other than a quick and dirty write up. It’s not expensive to bring Analyst Hire in to do it early and get it right. Less time with lawyers later really makes sense.
How we helped
We did an in-depth audit on a potential IPO candidate with a complex business structure and several bought in projects. The original broker had accepted management assumptions leading to a high value estimate and optimistic timelines to profit but the first funding failed to get away. For a second broker., we challenged the core assumptions based on a more detailed review of the science, clinical background, competition and company data. Positively, we suggested a refocussing of the R&D effort with better disclosure of core data to support the case at a more realistic value range.
Analyst Hire is not part of the broking team. It’s not part of corporate finance. So we offer an expert realty check on the checklist – and more. It all depends on the situation.
- Clear explanation of what the company does. Not the “vision” but what happens day to day, what a customer actually buys. Surprisingly, this often gets overlooked.
- What disease are you treating? Medicine is a big area and lots of products are very niche.
- Do you know the epidemiology? Is it a prevalence or an incidence market? Is it a one off “cure” or a chronic (repeat use) treatment? How robust are the numbers: data is often limited especially in the US market.
- What is the science behind it – we like science! Strong science reduces risk and increases value.
- Do you have all references as PDFs in one file ready for analysts and the lawyers. And proper references, not just “Smith and Jones (2014) unless you have a working hyperlink.
- What data do you have? Is it limited preclinical or peer reviewed clinical data. More good data = less risk = more value. Is the data based on realistic clinical dosing?
- Realistic timelines on trials and development phases. Because of discounting, delays really hit valuations, so everyone assume the projects run fast with no delays. Good luck.
- What competition – the pharma industry has lots of databases to track competitors. Is your trial on clinicaltrials.gov – and is it up to date? If not, why not?
- Are you likely to be first second or third or are you a fourth-generation attacker of an established market? Medical inertia can be substantial delaying sales ramp ups.
- Pricing – does it fit with use pattern, benefits delivered and competition? Are there extra medical costs and procedures to use the product?
- Is US remuneration set up? If not, could take a year or more to get sales. Is the price realistic. If it is part of a treatment, is there a set CPT code remuneration? What is it?
- What are your costs? Too low and you might miss the opportunity, too high and it could be a struggle to fund. Many UK, European and Scandinavian companies are undercapitalised.
- Patents – a good summary report helps with key patent numbers (we do read them). There are regulatory protections as well.
- Royalties if a product is licensed in, you clear guidance even if the deal is confidential.
- Deals – investors like deals as someone expert (we hope) has put cash (we think) your way. But a poor partner in a weak deal can kill a strong project. Chinese deals are hard to assess.
- Returns – just because you can generate a big number in Excel does not mean it’s realistic.
