MIDAS SHARE TIPS: Why life sciences start-up could be a wealth booster

In 2010, Andrew Craig was a 35-year-old stockbroker working in New York who felt increasingly jaundiced about Wall Street’s trappings and caricatures. He returned to the UK and wrote How To Own The World: A Plain English Guide To Thinking Globally and Investing Wisely. The book became a bestseller, making Craig a name for himself in financial circles.

But writing books doesn’t feed many mouths, so Craig took a job at WG Partners, a company in town that specializes in life sciences and biotechnology. Delving deep into this world has brought Craig into contact with a plethora of innovative and exciting companies in the UK. It also made one point abundantly clear: most struggle to get the recognition and funding they need.

The landscape has become even more difficult in the past year as investors have pulled away from life sciences and biotech companies, fearing they are too risky in the current economic climate.

Craig disagrees, so much so that he is launching the Conviction Life Sciences Company, a company that will invest in hand-picked companies in the UK and Australia.

The group, known as CLSC, plans to go public with trading starting December 16.

Shares are offered at £1 each, either directly through the company’s website or through intermediaries such as Hargreaves Lansdown, AJ Bell, Interactive Investor and Primary Bid.

The name of the company is mentioned, reflecting Craig’s belief that UK and Australian life sciences companies are materially undervalued. He is even more confident that his selection of companies will deliver substantial growth of 20 percent or more.

Life Sciences is a broad church that encompasses all types of healthcare companies, including pioneering drug developers, medical device manufacturers, smart-thinking digital health companies, and companies that test or make products for third parties.

The industry is huge, worth more than £4.5 trillion worldwide. But most of the big companies are in the US, where investors seem happier to fund life sciences companies than their counterparts in the UK and Australia.

Different perceptions have led to a substantial decoupling, with US companies often valued ten times higher than their UK counterparts.

This comparative undervaluation is ripe for change. Major investors in the US and Asia look to the UK and recognize that there are bargains to be had. That interest can be converted into share purchases or outright takeovers.

Equally important is the fact that many smaller life sciences companies are in advanced stages of development. Drugs are in a late stage of research. Devices are regulated. Commercial success is close at hand.

Many of these companies have suffered in the aftermath of the Neil Woodford debacle, making investors large and small wary of the entire biotech industry.

Woodford had sizable holdings in private companies that were difficult for him to get out of, and his fund was structured in such a way that he became a forced seller if the tide turned against him.

CLSC is very different. Due to the structure of the group, forced divestments are not necessary and the company will mainly invest in listed companies that are much easier to buy and sell. Craig also plans to invest in more than 40 companies. Some are already making money. Some will become profitable in the short term. Some appear to be on the cusp of greatness and could increase significantly in value over the next five years.

Importantly, Craig knows almost all of them from his time at WG Partners. That has given him a good understanding of the industry, a network of contacts and some close relationships with key players.

Potential investments will become clearer in the coming months, but favorites include a company that appears to have found a way to cure certain cancers using exotic fruits from the Australian rainforest.

This may sound like science fiction, but the group is already making a product that kills tumors in dogs with one or two simple injections — and human trials are underway.

Another company has developed a device that can extract live cancer cells from the body and diagnose their composition – a boon for genetic medicine.

Craig is also excited about Oxford Biomedica, which rose to fame when it started making the Covid-19 vaccine for AstraZeneca.

The group, recognized worldwide as a specialist in cell and gene therapies, has been a stock market darling during the pandemic, but shares have fallen 72 per cent to £3.75 over the past year.

Midas verdict: New entrants to the stock market have struggled this year and many IPOs have been taken off the air before they even reached the finish line. However, Conviction Life Sciences Company should make the grade.

The UK life sciences sector has been overlooked and underfunded for years, but is full of fascinating companies doing their utmost to find cures and treatments for some of the world’s most pernicious diseases.

Craig is initially hoping to raise between £50m and £100m, to more than £200m.

Having spent more than seven years in the industry and building a strong following within the investment community, his ambition seems fully within reach.

CLSC should deliver long-term rewards and help a beleaguered industry find the money it desperately needs. There may even be special dividends along the way. At £1 the shares are a buy.

To trade on: Main market ticker: CLSC Contact: clsc.uk or 020 3884 9955