In this Hardman Talks, Keith Hiscock sits down with Dr Martin Hall, Head of Life Sciences at Hardman & Co.
2023 was a difficult year for small life sciences companies (pharmaceutical, biotech, medtech, diagnostics, healthcare), largely because it was apparent that several companies were in need of additional working capital, causing share prices to be marked down in anticipation of equity raises. 2024 has started much the same. At the time of writing, 21 life sciences companies have announced capital increases, raising £174m, and there are at least 10 other companies known to be in need of cash over the coming months.
It is well known that this is a capital intensive industry, so what has changed? When Martin started as an analyst 36 years ago, there were many more institutional investors and nearly all had either a specialist healthcare team or a specialist small cap team. Extensive consolidation within the investment community, increased regulation and risk assessment within pension funds, and a vast increase in wealth being invested has resulted in a small number of groups with enormous funds under management. Consequently, their interest in small cap companies has evaporated, preferring to use alternative investment funds for their exposure to this space. Only a handful of institutional investors still have specialist healthcare analysts, so when a small cap life sciences company needs a capital increase, its options with the institutional investors are very limited.
As a result, companies have sought alternative sources of funding, which has often resulted in a disaster for existing shareholders. Companies have undergone a trade sale at a minimal valuation, delisted and returned to private hands, moved their listings to the US, or, sadly, gone bust. Small life sciences companies desperately need more support. Unless there is a significant change within UK institutional investors, the life sciences sector will disappear.
Watch the interview now to find out more, and read Martin’s Healthcare Index report for more detail.
