Digital health provider Adherium is set to list on the ASX tomorrow, bringing "smart" medicine to the market. Let's take a deeper look at the upcoming IPO and the Austrlian healthcare system.
How wasteful is Australia’s healthcare system? Relative to the scale of our economy, the nation’s expenditures on healthcare compare favourably to international peers. It accounts for 9.5 per cent of Gross Domestic Product, below the OECD average of 12 per cent, and 16 per cent for North America. However the nation has not been immune from a trend of increasing healthcare spend versus GDP which has plagued developed countries over the past decade apart from a handful of OECD members.
Sub optimal medicine use is estimated to account for approximately $500billion of avoidable healthcare expenditures around the world. To a small degree, sub optimal medicine use incorporates overuse of antibiotics and prescription errors, although non adherence by patients is the major driver.
The coming listing of Adherium aims to address sub optimal medicine use in chronic disease. The technology company has developed the ‘Smartinhaler platform’ which incorporates a range of medical devices and integrated software. Founded in 2001, the Company’s ‘SmartTouch’ device for asthmatics is approved for sale in the US, EU, Australia and New Zealand.
Initial marketing has focused on demonstrating the technology’s efficacy via clinical projects and partnerships with major inhaler manufacturers. The strategy has piqued industry interest, with sales rising 20 fold during FY15, delivering revenue of $2.9million. Proceeds from Adherium’s Initial Public Offer are scheduled to support marketing of the ‘Smartinhaler platform’ and development of new products that could leverage the technology.
Primary risks surround Adherium’s ongoing capital demands. Existing sales are promising but not yet sufficient to eliminate the Company’s reliance on external funding. However with one of Adherium’s existing commercial partners – AstraZeneca committing to invest US$3million in the IPO, the opportunity to expand marketing further ‘downstream’ appears significant.
Company: Adherium Ltd
ASX Code: ADR
Shares on Offer: 70million
Listing Price: $0.50
Market Capitalisation: $70million
Listing Date: August 26th
Author: Tim Morris
Aug 25, 2015
Having studied Commerce and Science at the University of New South Wales, Tim began his career in an analytical capacity with Wise-owl. Tim has conducted over 500 corporate valuations and appraisals, specialising in pre revenue assets and emerging markets. For the last five years, his Equity Capital Market insights have been featured as part of a weekly column in The Australian and regularly features on Sky News, CNBC, ABC and Bloomberg TV.