Well, by now, the cat is out of the bag… and we know that Adherium successfully raised $35m in an oversubscribed share offer, and will list on the ASX (subject to regulator approval) on the 26th of August. It’s sort of nice to see our brethren from across the Tasman come up with something innovative and interesting for a change. I was sort of worried were were going to just be stuck with Neuren. As somewhat of a romantic at heart, I am personally a big fan of any story that involves an asthmatic engineer toiling (wheezing?) away for about 15 years, scraping less than $10m in cash to put together a 510(k)-cleared product – a “Smartinhaler” – and getting the sort of traction that this baby digital health company seems to have. We need more of those stories and great to have some fresh entrepreneurial blood moving the needle (even if the board is, as usual, not quite so fresh).
Don’t get me wrong, I am intrinsically a skeptic. The eHealth world is littered with failed medication adherence solutions and devices. The main issue is always “who pays”? With the majority of respiratory medicines either generic or nearly so, nobody wants to sacrifice margin on unit sales unless it 1) it truly differentiates against competition and 2) drives sales volume because prescription adherence not only has a positive health impact, but a very positive pharma revenue impact as well. As such, this is probably the differentiation in Adherium’s business model, and why it is worth a look. The company cares far more about pharma using their devices as a revenue “boosting” strategy than it does convincing payors that a new gizmo yields pharmacoeconomic benefit, and the success of this strategy is somewhat evidenced by their relationship with AstraZeneca.
The AstraZeneca relationship itself hasn’t yet yielded a huge quantity of revenue, but it has potential and from the prospectus seems to put the company on decent footing for a long-term partnership. Frankly, I am all for companies building early strategic partnerships, which is certainly evidenced here, even if it is not clear what the fiscal impact will be. I was less enthusiastic about AZ’s participation in an IPO offering because it may make future business development perceptually more challenging. It’s a slightly odd selling point in a prospectus – no doubt intended to bolster retail enthusiasm for what is a fairly large financing by ASX standards. Ok, fair enough. Considering Benitec’s lackluster performance with NASDAQ this past week, it’s reassuring to see that a quality offering, albeit still fairly early stage, has the potential to bring in the moolah. Moreover, it is my understanding that a significant part of Adherence’s book came from overseas (not just New Zealand), further mocking the expense and distraction of flitting across the Pacific for a few extra NASDAQ bucks a la Novogen, Benitec and Prima.
In my last post, I talked about Revolution and I have written extensively about the potential for the ASX to be a leading global bioscience cluster, but only if we focus on quality and clinical impact. With very little inspiring news flow since AirXpanders, it’s great to see an interesting and innovative offering. I’ll be watching to see whether Adherium turns out to be a revolution or not, but in principle it can be a significant added value to inhaled drugs and the roll-out of a successful adherence IT platform will only increase the potential opportunity to manage other types of medicines as well (already somewhat evident in Adherium’s product offerings). Certainly this company is far from being another ResApp or an iSonea – thank goodness. There is no doubt that the company has a big job ahead, and the prospectus was a bit “lite” on competitive analysis in my opinion, but there is plenty of room for multiple players to validate this significant unmet need and this company has a good shot.