More on this in todays AFR: Why $3b Aussie darling Telix needs to grow wings
If Telix wants to truly mix it with the big players, it needs to be closer to those that can fund it.
Wall Street beckons for tearaway Australian biotech Telix Pharmaceuticals, one of the ASX’s best-performed companies over the past five years, and it is hard to see how the company’s board can resist.
The $3 billion Telix needs access to a bigger pool of biotech investors if it is to graduate from niche Aussie business success story to a serious global player that can compete with the big pharmaceutical companies coming for its patch.
Make no mistake, the ASX has been a terrific home since it floated as a $128 million tiddler in November 2017. But if Telix is to develop its pipeline of cancer treatments and truly hit the big time, it will need access to more investors and deeper capital markets.
So, while Telix’s chief executive and significant shareholder Christian Behrenbruch is warming up those US investors at JPMorgan’s annual healthcare conference in San Francisco this week, back home his investors are urging the board not to dawdle.
The fish is too big for its tank.
“It has to go,” says Platinum Asset Management’s Bianca Ogden. “It will not be easy, but I think they can pull it off.”
Ogden is a specialist biotech investor who runs one of Australia’s biggest biotech funds. She was there at Telix’s 65¢ a share IPO, remains invested today, and says US markets are the natural home for a company of Telix’s scale and potential.
And it makes sense to go now, while the iron is hot.
Big drug makers, worried about their patents rolling off and the need to continually top up their pipelines of new drugs, are looking around for longer-listing adjacent businesses with more significant barriers to entry.
One of those is radiopharmaceuticals, which have been around for 20 years or more and have improved to the stage where they are being used to diagnose and treat cancers.
Radiopharma and its use in oncology is North Melbourne-headquartered Telix’s patch. The company has done well developing and commercialising its first product, Illuccix, which is used to detect and diagnose prostate cancer.
Illuccix received FDA approval in March 2022; Telix quickly got boots on the ground and recorded $502.5 million in revenue last year.
IFM Investors’ small-caps fund manager Rikki Bannan, who pitched Telix at the Sohn Hearts & Minds conference in November, reckons Illuccix has quickly picked up about 35 per cent of its market.
Telix has plenty of room to grow by selling more Illuccix to test for prostate cancer, and get into other diagnostic products for kidney and brain tumours.
But there is a much bigger potential prize; therapeutics, which are used to treat cancers and represent the bigger, stickier and more profitable part of the value chain.
That’s where investors want to see Telix go.
“We’ve been pushing Telix to build that pipeline,” Ogden says, adding it is about positioning the business for where it will be in five years. Telix is going down that path, and the R&D program features heavily in its presentation to investors this week.
But building such a pipeline of treatments does not come cheap, and would require significant investment in manufacturing, sales, supply chains and the like.
And that is why Telix needs to go to the US capital markets, according to Ogden, to be closer to the institutional investors who are looking at these sorts of radiopharma deals and companies every day.
Australia’s small biotech community has done a good job getting Telix to where it is, but its eyes may soon be bigger than the market’s stomach.
Telix is making the right noises. It held an analyst day in New York last July, announced it was considering a Nasdaq listing last week, and was addressing US and global investors at JPMorgan’s healthcare conference this week.
Investment bank Jefferies is advising on the potential Nasdaq debut. Telix declined to comment on the potential listing.
If going to the US is to happen, it makes sense to try to do it now while the iron is hot and some recent pharma deals are fresh in investors’ minds.
Bristol Myers Squibb, a $US105 billion ($157 billion) giant, for example, just snapped up RayzeBio, a clinical stage developer of radiopharma therapeutics with a bunch of potential cancer treatments in trials, for $US4.1 billion.
The world’s biggest drug company, Eli Lilly, also just bought Point Biopharma to get into cancer therapies for $US1.4 billion.
Should Telix push ahead with that US listing and add a spot on the Nasdaq to its home on the ASX, the question will quickly to turn to capital. Will it raise capital as part of the deal and, if so, how much?
In theory, Telix could ask some of its investors to switch their ASX-listed stock to the Nasdaq American Depository Shares and allow the US listing to slowly grow that way.
In practice, it is hard to see how that would create a liquid listing, similar to gaming group Light & Wonder’s move to the ASX boards last year.
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