Newly-listed iX Biopharma Ltd (SGX: 42C) has officially started trading on the Catalist board today. At the time of writing (3:20 pm), its shares are exchanging hands at S$0.59 each, some 28% higher than the listing price of S$0.46. For those who had missed the IPO itself, is iX Biopharma still worth a look now after its sharp jump? It’s a tough call to make, but here are four things you need to know about iX Biopharma which may help you better understand what the company’s all about and thus make a better-informed investing decision. 1. The business The aptly-named iX…
Newly-listed iX Biopharma Ltd (SGX: 42C) has officially started trading on the Catalist board today. At the time of writing (3:20 pm), its shares are exchanging hands at S$0.59 each, some 28% higher than the listing price of S$0.46.
For those who had missed the IPO itself, is iX Biopharma still worth a look now after its sharp jump? It’s a tough call to make, but here are four things you need to know about iX Biopharma which may help you better understand what the company’s all about and thus make a better-informed investing decision.
1. The business
The aptly-named iX Biopharma is a pharmaceutical company that’s developing and manufacturing drugs for pain management and the treatment of male erectile dysfunction.
Besides having three drugs under development currently – namely Wafermine, Wafernyl and PheoniX – the company also has a profitable chemical analysis business.
The chemical analysis segment conducts its business mainly in a testing laboratory located in Croydon, Victoria, Australia. iX Biopharma had acquired the chemical analysis business in 2014 and the segment provides both project- and contract-based chemical analysis services for third parties as well as for the company’s own products.
2. Company’s still making losses
Due to the high development costs for its three aforementioned drugs, iX Biopharma is still a loss-making company. For FY2014 (fiscal year ended 30 June 2014), the company recorded a loss of S$3.03 million, down from losses of S$1.80 million and S$1.15 million in FY2013 and FY2012, respectively.
Interestingly, iX Biopharma did not even have a revenue stream to speak of in FY2013 and FY2012. In fact, some 87% of the net proceeds of S$27.6 million from iX Biopharma’s IPO will be used to fund the clinical trials for the development of Wafermine, Wafernyl, and PheoniX.
3. It’s a pricey share
In FY2014, iX Biopharma only had total equity of S$12.8 million. Even after accounting for the net proceeds from the IPO, the company’s net asset value will still be around 7.1 Singapore cents only, which is a far cry from the IPO price of S$0.46 per share.
Investors who are looking for bargains may find iX Biopharma hard to stomach given that the firm’s being listed at 6.5 times its book value despite it being a loss-making entity without a proper operational track record.
4. Be aware of the hit-and-miss nature of what’s at stake
So what can investors expect when investing in a company like iX Biopharma?
The ideal scenario for the investor would be the company obtaining the relevant regulatory approvals for all three of its drugs that are under development. That will then be followed by the successful production, distribution, and marketing of the drugs into the global pharmaceutical market.
If the drugs turn out to be a success, iX Biopharma might become a strong cash generating pharmaceutical business.
But, since the company’s drugs are currently still under development and are undergoing clinical trials, there’s a chance that all or some of the drugs will not even clear the regulatory hurdles, much less cross the production, distribution, and marketing bridge.
If this unfortunate scenario happens for all three of iX Biopharma’s drugs in question, investors in the company are likely to lose all or most of their investment. Investors may even have to be ready to pony up more cash in the form of rights issues (or see their stakes get diluted through private placements) to help the company raise cash to fund further drug development to create a viable product.
There is certainly a possibility for iX Biopharma to be a highly successful business in the future. But, investors would need to make a careful assessment of the odds that the company’s drugs would be a success.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim does not own any companies mentioned above.