The listing of Neil Woodford - and InvescoPerpetual-backed Mereo Biopharma (MPH) on the Alternative Investment Market (Aim) market has pushed the number of biotech junior market floats year-to-date above the respective figure last year and may help improve sentiment in the sector.
Mereo's shares listed on 9 June and were well received by investors, partly due to its high-profile backers.
The group was founded just under a year ago when it acquired three unloved pipeline drugs from Swiss pharma giant Novartis. The company continues to be a major shareholder alongside institutional backers Invesco Perpetual and Woodford Investment Management, which together contributed £76.5m to kick start the firm in July 2015. Both investment houses also bought into a further £11.4m private placing recently and Novartis contributed another £3.5m cash injection. All in all, Mereo now has £90m of cash on the balance sheet.
Mereo is the fourth biotech or pharma company to list in London in 2016 - one more than the number that joined in the same period last year. City experts say the number could have been even greater as there are plenty of firms waiting in the wings to list on the junior market. Apparently sentiment towards the sector, which plummeted in 2014, is still in recovery mode and has put such businesses off listing their shares. Mereo's mighty fundraising could be a signal things are improving though.
Aim as a whole has also seen the number of IPOs increase so far this year and seems to be attracting some better established businesses, including Hotel Chocolat (HOTC) and Joules (JOUL), which listed last month. Mereo too, with an expected market capitalisation of around £150m, is a relatively large newly-listed biopharma company - the 10 life science companies that joined Aim in the glory year of 2014 had an average market cap of just £61m.
Denise Scots-Knight, Mereo's chief executive, has visions of become a "leading speciality biopharma company" - a claim which has no doubt been heard before, but which potentially has greater credence due to its financial supporters.
The business model is an unusual one for a pharma company of its size. Mereo plans to acquire speciality pharma drugs in the mid-stage of development, cultivate them and launch them commercially.
