To find out about the current outlook for the AIM market, BLM spoke to Ivan Sedgwick, Director of Investments at LGB & Co.
He said that the pandemic has brought the life sector into particular focus: “COVID-19 has brought the life science sector in general, and specifically the AIM stocks, into sharp focus. Over the past month there have been some remarkable moves up- as well as some companies finally throwing in the towel.
“What has certainly happened is that investors have moved from a focus on balance sheet and funding risk and are back looking at the upside potential that some of these companies exhibit, and there are a host of them to focus on, based on IP, whether in pure science or in manufacturing knowhow.
“Over the last few years, we have seen an underlying structural weakness of the AIM market, mainly fuelled by a lack of institutional cash. This has meant that the follow-on funding that life science projects almost invariably need has been hard to come by. Quoted university IP funding vehicles have struggled to raise more cash, and therefore to deploy it. VCTs have not given much of a lead. Prices have been marked down ahead of funding.
“Managements who assumed that Big Pharma would arrive bearing bundles of cash have discovered that Big Pharma is rather averse to splashing that cash on anything short of a proven product. And that delivering proven products is more time consuming and expensive than they anticipated. And individual investors have been demoralised by the poor share price performance that all this has led to.
“Yet behind all this there are a host of companies on AIM with excellent science, many feeding off the UK’s universities’ excellent record in medical research, and staffed by a mix of experienced people with good records in the pharmaceutical industry, in life sciences venture capital, and in fundamental research. The crisis has been a powerful reminder of this.”
“Due to their strong expertise and the current landscape, some stocks to watch include: Scancell (SCLP), EKF Diagnostics (EKF), Intelligent Ultrasound (MED), Yourgene (YGEN) and Frontier IP (FIPP), and Open Orphan (ORPH). Others which may be seeing delays at the moment but should be in a good position to prosper on the other side of the crisis include Angle (AGL), and Diaceutics (DXRX).”