Lombard joins the Nasdaq gold rush
Between Lombard Medical Technologies’ launch of its Aorfix aneurysm graft on the US market and the fact that US exchanges are showing an astonishing rate of growth, the group’s move to file for an IPO on Nasdaq makes a lot of sense. Suggestions that it could raise as much as $70m only add to the rationale.
The implications for Lombard's shareholders on the other side of the Atlantic are interesting too. UK investors have not seen an exit opportunity like this for some years, and many will surely sell if the IPO is even mildly successful. The company must hope that interest from potential US shareholders will compensate for its earlier backers who take the money and run.
One of the companies Lombard is trying to ape is GW Pharmaceuticals, which met with extraordinary success when it listed on Nasdaq in May (GW’s Nasdaq glory provides a blueprint for European biotech, October 8, 2013). Unlike GW, which maintained its UK listing on the Aim index, Lombard intends to delist from Aim and move solely to America.
Lombard’s decision to desert Aim is a smart one, Canaccord Genuity analyst Julie Simmonds tells EP Vantage. “It’s a pretty interesting market for this type of thing in the US at the minute and Lombard are absolutely at the point where they’re going to be of interest to US investors. The story is they’re US-centric now – it makes more sense for them to be listed there than here.” She adds that maintaining a dual listing “just makes it more complicated”.
But if moving to the US is more advantageous than staying on Aim, it is also more expensive. Asked if Lombard has enough cash to deal with the quarterly reporting requirements necessitated by a Nasdaq listing, Ms Simmonds replied, “It will do following the listing. They will be raising money which will be more than sufficient to cover the listing requirements.
“They haven’t said how much but I would be surprised if it’s less than $40m. It may well be significantly above that.” She added that similar deals for similar size companies have been worth $40-70m.
Ms Simmonds believes that, if UK shareholders do take their chance to jump ship, interest from Stateside investors is sufficient to make up the shortfall. “If you look at similar companies in the US at this sort of stage, the valuation is significantly above where Lombard is. I don’t think it will be a huge issue.”
She says that US investors were interested in Lombard even before the company started looking at a Nasdaq listing, “which given Lombard’s size and the fact that it’s [Aim-listed] is quite unusual”.
Lombard has always looked good on paper but has had a number of missteps. Aorfix finally gained FDA approval nearly a year ago for use in a larger patient population than any other device, but was only launched in November. The approval took a rather longer time than it should have; initially slated for early 2012, it was delayed when the FDA requested further information on the device in May that year.
But the technology is sound, and demand is strong – Lombard expects US demand to grow at around 7% annually over the next five years. When Aorfix was approved, Simon Hubbert, Lombard’s chief executive, told EP Vantage that the company wanted to remain independent, rejecting even partnership opportunities (EP Vantage interview – Lombard goes it alone, February 18, 2013). The strategy could yet pay off.