London's AIM - Verseon Corporation Raises $100 Million in AIM IPO

Co-Founder and CEO Adityo Prakash said, "London's AIM has allowed us to attract blue-chip, long-term institutional investors whose outlooks fit nicely with our vision for the growth of the Company and execution of the business model.  Our drug discovery platform, a result of over 10 years of research in physics-based molecular modeling and optimization algorithms, has already produced three promising drug programs and we look forward to launching more.  The AIM IPO provides us with the cash we needed to start advancing our programs into the clinic, where our technology and business model will be put to the test.  We use computers to design cars, aircraft and buildings, yet in medicine we still use trial-and-error.  Our executive team comes from outside the biopharma industry and therefore looked at this in a new way.  Once you know how to intervene in a disease, it becomes a physics problem.  How do you get a drug to bind to the target protein like a lock-and-key?  We want to thank both our new and existing shareholders for their support and we look forward to updating the market with progress as we continue to advance and further build our drug pipeline."

Overview of Listing on London's AIM

Fremont, California-based Verseon Corporation raised $100 million in its recent IPO on the London Stock Exchange’s AIM and commanded an opening market capitalization of $460 million.

Verseon is a technology-based pharmaceutical company that employs its proprietary technology to design novel therapeutics for today’s challenging diseases.  The Company was founded in 2002, is pre-revenue and $34 million has been invested since inception.

Verseon’s proprietary drug discovery platform is the first systematic, computationally-driven solution to achieve the molecular modeling accuracy necessary for rapid and cost-effective drug discovery.  The Company generates multiple, chemically-diverse drug candidates for each discovery program and, as such, is not reliant on the success or failure of just a single drug candidate in the clinic.  Verseon’s drug discovery platform can be used to find drugs for a multitude of diseases that are now well-defined due to advances made in genomics and proteomics research over the last two decades, including the mapping of the human genome.  The platform can consistently design novel drugs that are unlikely to be found using conventional methods.  The Company is currently advancing three drug discovery programs that target medical conditions with very large markets.  Verseon initially intends to out-license drug candidates at early stages of clinical development to pharmaceutical companies.  As the business matures, it is expected that these out-licensing deals will be struck at progressively later stages of clinical development.

Verseon’s drug discovery and development process entails designing virtual, novel, drug-like, synthetic compounds, using a proprietary, computer-based molecule creation engine in numbers that are far in excess of the distinct, synthesized compounds currently in the corporate collections of today’s pharmaceutical companies.  These virtual compounds are then assessed in silico (i.e. computationally) against a disease-causing target protein by leveraging Verseon’s proprietary breakthroughs in physics-based molecular modeling of protein-drug interactions in water and sophisticated optimization algorithms that can be deployed in parallel across a large dedicated, private computing cloud.  Virtual compounds that are predicted by the platform to interact or bind strongly with the target protein can then be synthesized in the laboratory and subjected to a battery of biochemical assays for assessment of in vitro (in glass) bioactivity and further biological characterization.  Promising candidates are further characterized via in vivo (in animals) assessment of pharmacokinetics, efficacy and safety.  Further computational design facilitates lead optimization for a discovery program.  This process leads to new variants of compounds to be synthesized for laboratory assessment.  The expected end products for each discovery program are multiple, novel, chemically-diverse candidates for entry into clinical development.

In the high-tech industry, Moore’s Law predicts a doubling of computing power per unit cost every two years as new innovations drive progress and costs decline.  Conversely, the pharmaceutical industry has seen an opposite relationship between R&D spending and drug approvals.  The number of new drugs approved each year per $1 billion spent on R&D has dropped by half roughly every nine years since 1950 such that $1 billion is spent on R&D for each new approved drug.  This is due in large part to a significant bottleneck in traditional drug discovery associated with the industry’s continued reliance, for 15 or more years, on high-throughput screening to test a comparatively small pool of drug-like compounds against target proteins.  An extrapolation of the observed, declining return-on-investment is an unsustainable position for the global pharmaceutical industry, especially as many high revenue drugs continue to lose patent protection.  The Company’s platform has the potential to change this negative outlook.
 
Verseon has used its platform to build its drug portfolio, which comprises three different programs at various stages of discovery and preclinical development; anticoagulation, diabetic macular edema and oncology (solid tumor).

The development of novel anticoagulants (blood thinning drugs) is the Company’s most advanced program for the treatment of vascular disorders such as stroke prevention for atrial fibrillation patients, venous thromboembolism, which includes deep vein thrombosis and pulmonary embolism, and acute coronary syndrome.  Warfarin has dominated the oral anticoagulant drug market for many decades but shortcomings involving the need for constant monitoring and undesirable drug-drug and drug-food interactions have led to the development of novel oral anticoagulants (NOACs) such as Pradaxa, Xarelto and Eliquis, however these suffer from serious side effects mainly associated with risks of major bleeding.  The global market for NOACs in 2013 was $4 billion and is forecast to grow to $24 billion by 2019.

Degenerative diseases of the eye, and in particular the development of novel therapeutics for the treatment of diabetic macular edema (DME), is Verseon’s second most advanced program.  Conventional therapies for DME require injection directly into the eye on a regular basis.  Despite this, two therapeutic products, which are injected directly into the eye on a monthly or bi-monthly basis, control the majority of the market.  Unlike existing therapies which treat downstream symptoms of DME via anti-angiogenesis (i.e. undesired blood vessel growth), the Company has taken a different approach and is focusing on the development of plasma kallikrein inhibitors that could potentially be delivered via topical eye drops for the local ocular disruption of the kallikrein-kinin system, which is indicated in the DME pathway.  Several other companies are also pursuing plasma kallikrein inhibitors for DME treatment, however, unlike Verseon’s candidates, these currently still must be administered via injection into the eye.  The global market for DME in 2009 was $3 billion and is forecast to grow to $7 billion by 2017.

Solid tumor oncology is the Company’s third program, which is in the discovery stage, for the development of novel angiogenesis inhibitors (AGIs).  AGIs are an important part of oncology treatments for many cancers with a significant share of the oncology market.  Conventional AGIs target vascular endothelial growth factor (VEGF) or other growth-related kinases in order to restrict blood flow into a solid tumor, reducing supply of nutrients.  These drugs are often combined with other anti-cancer agents in a cancer treatment protocol, however, conventional AGIs have serious side effects, are toxic and frequently fail to prevent cancer progression once cancer cells develop resistance to such treatment.  Verseon’s drug candidates represent a new class of AGIs that do not inhibit VEGF or other growth-related kinases.

The Company’s intellectual property portfolio consists of a combination of patents and trade secrets.  Verseon has 10 patent families with issued or pending patents and several more provisional patent application.  These patents cover certain methods associated with the Company’s technology as well as composition of matter patents covering the Company’s new chemical candidates for its current drug programs.  Trade secrets form an important part of the Company’s strategy to enhance and protect its technological advantage in the industry.  Some critical features of the technology will remain trade secrets so that the patent portfolio alone will be insufficient for any competitor to reconstruct Verseon’s platform.  Additionally, the Company does not plan to license its technology, only the resulting drug molecules, which adds to the difficulties for competitors to copy or reverse-engineer the technology.

Verseon has 15 employees, the majority of whom have advanced degrees and expertise in fields such as mathematics, physics, bioinformatics, molecular modeling, medicinal chemistry, molecular biology, biochemical assay development and the design and implementation of complex mathematical and computational algorithms. The Company outsources the majority of its synthetic chemistry to India.

Historic Financial Information

Verseon was founded in 2002 and is pre-revenue.  As of the end of 2014, the Company had $128,000 of assets, $2.45 million of current liabilities, $2.02 million of long-term debt and an accumulated deficit of $33.56 million.

Key Listing Metrics

·         $100 million gross was raised, $92.25 million net of offering costs, intended to be used for:

o    Funding current drug programs to the point of out-licensing or progression into the clinic

o    Initiating additional drug programs to further build the Company’s pipeline of assets

o    Continuing development of the Company’s proprietary drug discovery platform

o    Building a new supercomputer cluster and expanding laboratory infrastructure

o    Expanding the Company’s intellectual property portfolio

o    Working capital for business development and other general corporate purposes

·         Offering costs amounted to 7.75% of the gross capital raised

o    The offering was undertaken on a ‘best efforts’ basis, as opposed to being underwritten

§  AIM Nominated Broker commission of 4%

§  Corporate finance fee of £500,000 ($760,000)

·         Five-year warrant over 0.35% of the enlarged share capital

o    Struck at a 30% premium to the IPO price

·         Opening market capitalization of $460 million

·         Dilution to existing shareholders of 21.75%

·         Free float of 30.5%

Shareholder Base
The Company had 111.5 million shares outstanding prior to the AIM IPO, issued 32.6 million new shares for cash in the IPO, issued 5.0 million shares to reestablish a majority stake in the subsidiary that was established as a vehicle to fund the research and development of the Company’s anti-coagulation program and issued 0.6 million shares to exchange convertible notes, leaving the Company with 149.7 million shares outstanding.  The table below details those who held 3% or more of the Company prior to and after the IPO, along with other holdings that are of interest.

Shareholder	Pre-IPO %	Post-IPO %
Co-Founder & CEO	28.27	21.06[1]
Co-Founder, COO & CFO	27.80	20.701
Co-Founder & VP, R&D	16.28	12.13[2]
Strategic Investor	6.00	4.47
Director, R&D	3.13	2.332
Other Historic Investors	18.52	13.782
London-based Institution (Investment Trust)	-	10.49
Other New U.K. Investors	-	8.21
Edinburgh-based Institution (Various Funds)	-	3.05
Former majority holders of one of the Company’s subsidiaries	-	3.36
Former convertible noteholders	-	0.25
Other Directors	-	0.171
Totals	100.00	100.00

As a result of the AIM IPO, the Company now has an adequate amount of capital to progress the business towards commercial success via out-licensing and/or into the clinic and further build and solidify its platform technology in the market.  The new, U.K.-based, blue-chip investors have broadened the shareholder base and provided a substantial amount of patient long-term capital, from whom, if necessary, additional capital can be raised.  The Company has adopted a Share Option plan so as to enhance its ability to attract, recruit and retain a talented workforce with equity-based incentives.

Board of Directors and Corporate Governance
The Board consists of two Executive Directors (two of the three Co-Founders), an independent Non-Executive Chairman (NEC) and two independent Non-Executive Directors (NEDs); all with solid resumes and a good blend of complementary experiences and skill sets.  The Board is divided into three classes.

Companies listed on AIM are not required to comply with the U.K. Corporate Governance Code published by the Financial Reporting Council, which is mandatory for companies listed on the Main Market of the London Stock Exchange.  AIM listed companies typically comply with, and the Company intends, in so far as is practicable given its size, stage-of-development and resources, the main provisions of the Quoted Companies Alliance’s Corporate Governance Guidelines for Smaller Quoted Companies.  The overarching principle of corporate governance on AIM is to ensure that companies are managed in an efficient, effective and entrepreneurial manner for the benefit of all shareholders over the long term.

Since the Company’s Co-Founder & CEO and the Co-Founder, COO & CFO are husband and wife and collectively own 41.76% of the Company, they entered into a Relationship Agreement with the Company.  The Relationship Agreement regulates aspects of the continuing relationship between them and the Company to ensure that the Company is capable, at all times, of carrying on its business independently and that any future transactions between them and the Company are conducted at arm’s-length and on normal commercial terms.

The Company has established an Audit Committee and a Remuneration Committee but does not believe it is necessary to establish a separate Nominations Committee since all members of the Board would be consulted on the potential appointment of a new Director.  The Audit Committee is chaired by one of the NEDs with the other NED and the NEC serving as the other members.  The Audit Committee will meet at least three times a year and otherwise as required and meet with the external auditors as necessary.  The Remuneration Committee is chaired by one of the NEDs with the NEC serving as the other member.  The Remuneration Committee will meet as and when necessary.

Accounting Considerations

Since the Company is incorporated in Delaware, and did not re-domicile into a European Economic Area country, which includes the U.K., they chose to report using U.S. GAAP.  Since all of the Company’s expenses are in U.S. Dollars, the U.S. Dollar is the functional currency and was also chosen as the reporting currency.

The U.K. Member Firm of an international accountancy network acted as Auditor and Reporting Accountant.  Since the Company’s annual audited financial statements were more than nine months old, unaudited, comparative, stub period financials were required.  In this case, stub period financials were provided to and for the nine months ended September 30^th.

An unaudited pro forma statement of net assets is never required in connection with an AIM IPO, however, one was provided in this instance, although the effect of the net proceeds from the IPO on the net assets of the Company is quite obvious.

Legal Considerations

Since the Company is not incorporated in the U.K. or one of its Crown Dependencies, the Channel Islands and the Isle of Man, but rather in Delaware, and its ‘place of central management and control’ is also outside these jurisdictions, the three most important elements of English corporate law do not automatically apply.  As is customary, the Company amended its constitutional documents for these three main differences as outlined below.

1.     Pre-emption rights (i.e. anti-dilution) – Shareholders may participate in, or the Company has to obtain approval from at least two-thirds of them for, the issuance of shares for cash of more than 10% of the then outstanding shares during any 12-month period.[3]

2.     Notifiable Interests – Shareholders are required to notify the Company of, and the Company is required to publicly announce, holdings at or above the 3% level and whenever a full percentage point is breached in either direction.

3.     Takeovers (i.e. mandatory offer) – If any party, or parties acting in concert, accumulates a holding of 30% or more, they must make a cash offer to the other shareholders at the highest price they paid for the Company’s shares during the last 12 months.

The Company relied on the safe harbor afforded by Regulation S of the U.S. Securities Act of 1933 so as to not have to file a registration statement with the U.S. SEC.  At the time of the Company’s IPO, shares subject to Reg. S (generally, those issued in the IPO for a period of one year, issued within one year prior to the IPO and/or held by affiliates) were not eligible for dematerialization and were therefore initially held and traded in certificated form.

Since the Company did not re-domicile into the U.K. or one of its Crown Dependencies, the Channel Islands and the Isle of Man, its shares that are not subject to Reg. S are not eligible for direct trading within CREST; the most common electronic system for the holding and transfer of shares in the U.K., however, at the time of the Company’s IPO, a Depository could have been appointed and Depository Interests (DIs), which represent an entitlement to shares, could have been created, allowing for the immediate trading of these non-Reg. S DIs within CREST.  Since the Company did not institute such a facility, these shares were also initially held and traded in certificated form.

Article 3(2) of the EU Regulation on Central Securities Depositories, which was published on August 28, 2014, requires that all AIM-listed shares be dematerialized and eligible for electronic trading and settlement no later than September 1, 2015.  The London Stock Exchange worked with the companies who own and manage CREST on the technology solution necessary to accommodate ‘restricted securities’.  In late August 2015, the Company announced a Restricted DI program so that all of its shares can be evidenced in CREST and are therefore eligible for electronic trading and settlement as DIs.  Shortly before the expiration of the one year Reg. S distribution compliance period on May 7, 2016, the Company intends to institute an Unrestricted DI program into which eligible certificated shares may be placed and eligible Restricted DIs may be transferred.  This should facilitate trading in the Company’s shares by eliminating regulatory burdens placed upon the seller and eliminating limitations on who may purchase the shares.

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[1]  Subject to an 18-month lock-in and customary orderly market provisions for a further 12 months.

[2]  Subject to a 12-month lock-in and customary orderly market provisions for a further 12 months.

[3]  This is the typical level at which AIM-listed companies seek an annual standing authorization from their shareholders for the issuance of additional shares for cash.  This flexibility increases the certainty and speed of small capital raises during the year and reduces transaction costs, since further communications with, and approvals from, shareholders are not required.

London's AIM - IPO Activity - 2015

38 companies completed IPOs on AIM during 2015, a 54% decrease from 2014.  Two are U.S.-based biopharma companies, one of which raised the equivalent of $100 million, the 2^nd largest IPO on AIM during 2015.

£650 million ($975 million) was raised for IPOs during 2015, a 77% decrease from 2014.  After a two year bull market for AIM IPOs, 2015 was a year for the market to digest all of the new entrants.  This is evidenced by the fact that £4.9 billion ($7.4 billion) was raised during 2015 for secondary offerings, up 51% from 2014 and the most since 2010.

UK equities' markets also faced four major political and macroeconomic headwinds during 2015; the UK General Election, a resumption of the Greek debt crisis, the continuing collapse of the energy and commodity sectors and general market volatility triggered by China and other emerging markets and the U.S. Federal Reserve.  The two political headwinds have been ameliorated; the UK General Election was definitive and positive for business and Greece has taken a more reasonable and realistic position with the EU, however, the two macroeconomic headwinds will likely linger throughout 2016.

The average and median AIM IPO during 2015 raised $26 million and $15 million, respectively, with 71% raising between $5 million and $75 million.  8 of the 38 IPOs included meaningful liquidity events for selling shareholders.  The average and median opening market caps were $83 million and $42 million, respectively, with 82% falling between $15 million and $375 million.

From a sectoral perspective, financials accounted for 24% of AIM IPOs with four of the nine being Investing Companies with TMT mandates.  Healthcare AIM IPOs accounted for 16% with five of the six coming from the biotech sub sector and none of the six generating revenue.  Consumer services also accounted for 16% and it's interesting to note the technology component; three of the six engage with consumers exclusively online.  Six industrial companies completed IPOs on AIM for a 16% share.  Pure play technology companies accounted for 13%.  Consumer goods' businesses accounted for 11% where two of the four were focused online.  Finally, the basic materials (i.e. mining) and oil and gas sectors accounted for an aggregate of 4% of AIM IPOs during 2015.

This post provides insight into each of the 38 companies; the industries and geographies in which they operate and their overall listing, financial and operating metrics.

Highlights

• 38 companies completed IPOs on AIM during 2015, a 54% decrease from 2014
• Two are U.S. biopharma companies, one raised $100 million, the 2^nd largest IPO

• £650 million ($975 million) raised for IPOs during 2015, a 77% decrease from 2014
• The 2013/14 AIM IPO bull market needed a breather to digest the new entrants
• £5 billion ($7.5 billion) raised in secondary offerings during 2015, most since 2010
• UK equities’ markets, and others, faced political and macroeconomic headwinds

• Average IPO raised £17.1 million ($25.7 million), median £9.8 million ($14.7 million)
• At a cost of 9.3% and 11.9%, respectively, of gross funds raised

• 71% of IPOs raised between £3 million and £50 million ($5 million and $75 million)

• Average opening MC of £55 million ($83 million), median £28 million ($42 million)
• 82% of MCs between £10 million and £250 million ($15 million and $375 million)

• IPO dilution of existing shareholders amounted to 29%
• Average post-IPO free float of 39%

• Average and median share price return of 16% and 5% since IPO (median date 6/3/15)
• FTSE AIM All-Share Index rose 5% during 2015 but fell 5% from 6/3 - 12/31/15

• 22 of the 38 companies generated revenues > £2 million (range £2 million - £1.1 billion)
• Median trailing pre-money revenue multiple of 1.54
• Those w/o significant revenues; investing companies, healthcare and mining/O&G

• 10 of the 38 companies earned profits > £1 million (range £2 million - £13 million)
• Median trailing pre-money P/E ratio and EBITDA multiple of 14.85 and 10.26

• Industry and geographic dispersion and financial profile of the 38 companies - pages 5 - 7
• Detailed descriptions and insights into the 38 companies - pages 8 - 10

	Number of IPOs	Gross Funds Raised (in £ millions)	Average Funds Raised (in £ millions)
2011	45	560	12
2012	45	695	15
2013	62	1,025	17
2014	82	2,818	34
2015	38	650	17
Total	272	5,748	21

The table above shows that after a two year bull market for AIM IPOs, 2015 was a year for the market to digest all of the new entrants.  This is evidenced by the fact that £4.9 billion ($7.4 billion) was raised during 2015 for secondary offerings, the most since 2010.  UK equities’ markets also faced four major political and macroeconomic headwinds during 2015; the UK General Election, a resumption of the Greek debt crisis, the continuing collapse of the energy and commodity sectors and general market volatility triggered by China and other emerging markets and the U.S. Federal Reserve.  The two political headwinds have been ameliorated; the UK General Election was definitive and positive for business and Greece has taken a more reasonable and realistic position with the EU, however, the two macroeconomic headwinds will likely linger throughout 2016.

From a sectoral perspective, financials accounted for 24% of AIM IPOs with four of the nine being Investing Companies with TMT mandates.  Healthcare accounted for 16% with five of the six coming from the biotech sub sector and none of the six generating revenue (two of the six are U.S. companies and one raised $100 million, the 2^nd largest IPO).  Consumer services also accounted for 16% and it’s interesting to note the technology component; three of the six engage with consumers exclusively online.  Six industrial companies completed IPOs on AIM for a 16% share.  Pure play technology AIM IPOs accounted for 13%.  Consumer goods’ businesses accounted for 11% where two of the four were focused online.  Finally, the basic materials (i.e. mining) and oil and gas sectors accounted for an aggregate of 4% of AIM IPOs during 2015 after accounting for an aggregate of 11%, 21%, 33% and 51% during 2014, 2013, 2012 and 2011.

The chart below provides the distribution of gross funds raised from AIM IPOs during 2015.  While there was a spike in IPOs raising between £15 million and £30 million ($23 million and $45 million), this year did not have enough activity to convey the fact that the sweet spot for AIM IPOs is between £3 million and £50 million ($5 million and $75 million).

Of the aggregate gross funds raised, 80% was for the companies and 20% was for selling shareholders, which were present in 10 of the IPOs, with eight selling a meaningful equity stake.  While the average amount of gross capital raised was £17.1 million ($25.7 million), the median was only £9.8 million ($14.7 million).

The equation in the chart below can be used to predict the cost of an AIM IPO with 88% confidence.  The 26 data points represent the gross funds raised and associated costs for the non-Investing Company IPOs that raised at least £3 million ($5 million).  Since these 26 companies raised an average of £21.55 million ($32.33 million), the expected cost would be £1.85 million ($2.78 million) or 8.6% of the gross funds raised.

The average and median offering costs for AIM IPOs amounted to 14.7% and 10.7%, respectively, of the gross funds raised, however, the average, in particular, is skewed by a handful of relatively small IPOs where the fixed costs dominate.

The chart below provides the distribution of opening market capitalizations.  The average company’s opening market capitalization was £55 million ($83 million) whereas the median was £28 million ($42 million).  The sweet spot for market capitalizations on AIM is between £10 million and £250 million ($15 million and $375 million).

The chart below illustrates the IPO dilution of existing shareholders over the last five years.  As expected, dilution decreased coming into the two year bull market for AIM IPOs in 2013 and increased coming out of the bull market in 2015.  This is due to the fact that favorable market conditions place companies in stronger negotiating positions with respect to pre-money valuations and vice versa.

The final chart in this section provides the distribution of share price returns since each company completed its AIM IPO during 2015 through the end of the year.  It should be noted that the median IPO date is June 3, 2015, therefore, the average and median returns of +16% and +5%, respectively, only represent, on average, the last 211 days of 2015.  As a point-of-reference, the FTSE AIM All-Share Index rose 5% during 2015 but fell 5% from June 3, 2015 through December 31, 2015; therefore, the relative performance of the 37 companies that completed their IPOs on AIM during 2015 and remained listed through yearend has been quite strong.  The average and median post-IPO free float for all 38 companies was 39% and 32%, respectively.

Industry and Geographic Dispersion and Revenue and Profitability Profile

Revenue and Profitability*	UK (24)	China (3)	U.S. (2)	Israel (2)	Africa (2)	Other (5)	Totals (38)
Financials (9)	1 SR & SP 2 SR 5 Neither	1 Neither					1 SR & SP   2 SR   6 Neither
Healthcare (6)	3 Neither		2 Neither			1 Neither	6 Neither
Consumer Services (6)	2 SR & SP 1 SR			1 SR & SP		2 SR & SP	5 SR & SP   1 SR
Industrials (6)	2 SR & SP 2 SR 1 Neither	1 SR & SP					3 SR & SP   2 SR   1 Neither
Technology (5)	2 SR			1 SR		1 SR 1 Neither	4 SR   1 Neither
Consumer Goods (4)	3 SR	1 SR & SP					1 SR & SP   3 SR
Basic Materials (1)					1 Neither		1 Neither
Oil & Gas (1)					1 Neither		1 Neither
Totals (38)	5 SR & SP 10 SR   9 Neither	2 SR & SP 1 Neither	2 Neither	1 SR & SP 1 SR	2 Neither	2 SR & SP 1 SR 2 Neither	10 SR & SP 12 SR 16 Neither
* Significant Revenues (SR) and Significant Profitability (SP) are defined as > £2 million and > £1 million, respectively.

AIM-listed companies are organized into 90 sub sectors, which feed into 40 sectors, which feed into 10 super sectors.  During 2015, only two super sectors, Telecommunications and Utilities, were not represented with IPOs.  The first pie chart above illustrates the relative number of AIM IPOs in each of the eight represented super sectors.  Since the classifications can be deceptive, the table at the end of this newsletter on pages 8 - 10 provides some detailed descriptions and insights into the individual companies.

From a sectoral perspective, financials accounted for 24% of AIM IPOs with four of the nine being Investing Companies with TMT mandates.  Healthcare accounted for 16% with five of the six coming from the biotech sub sector and none of the six generating revenue (two of the six are U.S. companies and one raised $100 million, the 2^nd largest IPO).  Consumer services also accounted for 16% and it’s interesting to note the technology component; three of the six engage with consumers exclusively online.  Six industrial companies completed IPOs on AIM for a 16% share.  Pure play technology companies accounted for 13%.  Consumer goods’ businesses accounted for 11% where two of the four were focused online.  Finally, the basic materials (i.e. mining) and oil and gas sectors accounted for an aggregate of 4% of AIM IPOs during 2015 after accounting for an aggregate of 11%, 21%, 33% and 51% during 2014, 2013, 2012 and 2011.

The second pie chart above shows the main country of operation for the companies that completed IPOs on AIM during 2015.  Unsurprisingly, the UK is the main place of operation for more AIM-listed companies than any other country.  Approximately 61% of the 1,044 companies listed on AIM are based in the UK.  During the depths of the global financial crisis in Europe, UK companies only accounted for 31% of AIM IPOs from 2010 - 2012.  The healing process that began in Europe in 2013, and took firm hold in the UK, triggered the start of a two year bull market for AIM IPOs with UK company participation bouncing back to expected levels, capturing 53%, 63% and 63% of AIM IPOs during 2013, 2014 and 2015, respectively.

Of the 38 companies that completed AIM IPOs during 2015, 22 (58%) generated significant revenues (i.e. > £2 million or $3 million) during their most recent financial year with the range being £2 million - £1.1 billion ($3 million - $1.7 billion).  The average trailing pre-money revenue multiple was 4.70, although this is heavily skewed by one company at 63.50 and would otherwise be 1.82, and the median was 1.54.  Of the 22 companies that generated significant revenues, 10 (45%) earned significant profits (i.e. > £1 million or $2 million), with the range being £2 million - £13 million ($3 million - $20 million).  The average trailing pre-money P/E ratio and EBITDA multiple for the 10 companies that earned significant profits was 16.14 and 10.45, respectively, and the medians were 14.85 and 10.26.

Of the 24 UK companies that completed AIM IPOs during 2015, 15 (63%) generated significant revenues during their most recent financial year.  Of these 15 companies, five (33%) earned significant profits.  The comparative metrics for 2014 were 56% and 69%, respectively, indicating that investors during 2015 wanted to see a little more commercial traction but are apparently willing to wait for significant profits.  Of the 14 companies from outside the UK that completed AIM IPOs during 2015, seven (50%) generated significant revenues.  Of these seven companies, five (71%) earned significant profits.  The comparative metrics for 2014 were 60% and 44%, respectively, leading to the opposite conclusion reached above for the UK companies.

A not insignificant number of companies (5 of 38) completed their AIM IPOs during 2015 via the ‘fast track route to AIM’, wherein their securities were traded on an AIM Designated Market (ADM) for at least the previous 18 months.  The ADM for four of the five companies was the UKLA Official List (i.e. the London Stock Exchange’s Main Market) and the other company used the Australian Securities Exchange (ASX) and remains dual listed.  The fast track route to AIM had been rare; used by only five of the 234 AIM IPOs from 2011 - 2014.  Companies utilizing the fast track route do not have to produce the typical AIM Admission Document but rather a brief, but detailed, pre-admission announcement.  The 10 ADMs are the top tier markets of the ASX, Deutsche Börse Group, Johannesburg Stock Exchange, NASDAQ, NYSE, NYSE Euronext, NASDAQ OMX Stockholm, Swiss Exchange, TMX Group and UKLA Official List.

Two of the 38 AIM IPOs during 2015 were the result of operating companies being acquired by Main Market-listed Investing Companies and simultaneously raising fresh capital on AIM.  The Investing Companies then delisted from the MM and the operating companies emerged on AIM.

Only one company that completed its IPO on AIM during 2015 migrated to AIM from the UK’s ICAP Securities & Derivatives Exchange (ISDX).  From 2011 - 2014, 21 of the 234 companies that completed IPOs on AIM were previously listed on the ISDX.

One final point to note during 2015 is that one company simultaneously completed its IPO on AIM and the Enterprise Securities Market of the Irish Stock Exchange (ESM).

Financials (9)	One is an Investing Company that intends to identify, acquire and invest in Chinese-based SMEs with technology and/or IP in the education sector that can be leveraged through the company’s existing contacts at local and international higher education institutions for the provision of online vocational training video courses for industrial workers, one is an Investing Company that intends to invest in UK and Chinese businesses or projects that are seeking to expand and/or establish themselves internationally in the media and entertainment sectors, primarily theatre production and the music industry, one is an Investing Company that intends to buy, fix and sell businesses in the European Telecommunications, Media and Technology (TMT) sector that are focused on network-based communications and/or entertainment, one is one of the UK’s leading providers and administrators of Self-Invested Personal Pensions (SIPPs) and Small Self-Administered Schemes (SSASs), one provides finance to the UK clients of insurance brokers and professional firms in order to help them spread the cost of insurance premiums and professional fees, one is a Central London-focused residential REIT that intends to acquire, develop and manage residential property assets by acquiring Special Purpose Vehicles (SPVs) with historic capital gains, providing an exit for the vendors of SPVs and attractive yields for the company’s investors, one is an Investing Company that was established to acquire and operate companies in the media sector with a focus on the UK, the U.S. and (to a lesser extent) Europe, one is an Investing Company focused on investing in UK companies and platforms which provide specialist financing and alternative asset management services to the SME and professional services sectors; financing trade and securing specialist funding throughout the supply chain to help fuel growth in these sectors and one is a UK-based hybrid estate agency that uses a combination of local property experts, technology and customer facing software for the buying, selling and letting of residential property at a fraction of the cost of traditional estate agents
Healthcare (6)	One is a UK-based drug discovery and development company focused on improving the characteristics of existing drug classes to create highly differentiated, best-in-class new drugs in the areas of cancer and infectious disease where their oncology-related drug programs encompass immuno-oncology and their anti-infective drug programs have the potential to produce one of the first new chemical classes of antibiotics in a generation, one is a U.S.-based, clinical stage biopharmaceutical company specializing in the development of novel antibiotics designed to be effective against serious and life-threatening infections caused by multidrug-resistant bacteria, one is a U.S.-based pharmaceutical company that uses its proprietary computational drug discovery platform to generate multiple, chemically-diverse, novel drug candidates for each of its drug programs by accurately modeling molecular interactions, developing sophisticated optimization algorithms and the computer integration of synthetic and medicinal chemistry knowledge, resulting in the design of novel potential therapeutics for medical conditions in anticoagulation, diabetic macular edema and oncology, one is a UK-based clinical stage drug development company focused on the treatment of cancer and neurological conditions where its core technology is a patent-protected method of stabilizing natural and synthetic versions of the naturally occurring compound sulforaphane, a known anti-cancer agent derived from broccoli and other brassica vegetables, one is a Finland-based clinical stage drug discovery and development company focused on acute organ traumas, cancer immunotherapy and vascular damage where its lead candidate has been developed to treat acute respiratory distress syndrome, a rare, severe, life threatening medical condition characterized by widespread inflammation in the lungs and one is a spin out from the University of Sheffield, UK that has two late stage drug candidates targeting diseases of cortisol deficiency; one for Congenital Adrenal Hyperplasia (CAH) in adults and the other for Adrenal Insufficiency, including CAH, in children
Consumer Services (6)	One is a leading UK automotive dealership and leasing group, one is a UK-focused, real money, bingo-led online gaming operator, one owns and operates five luxury beachfront hotels and a beachfront restaurant in Barbados, one has developed a proprietary, artificial intelligence based software platform that enables the automation and optimization of online advertising campaigns, one is the leading retailer of gasoline and premium food and hot beverages along motorways in the Republic of Ireland with a growing presence in the UK and one was a Main Market-listed Investing Company that joined AIM simultaneous with the acquisition of a digital media and analytics agency that creates multi-channel campaigns across pay-per-click, natural search, display advertising and other paid media, underpinned by proprietary analytics; however, their overall strategy is to build a network of digital companies spanning the marketing services, technology and e-commerce sectors across the UK, the U.S. and Europe wherein each company will benefit from access to the deeper resources of a strong platform of digital marketing services, technology and e-commerce businesses in key revenue/growth sectors; for example, digital strategy, analytics and insight, media planning and buying, content and creative, customer relationship management, e-commerce and user experience
Industrials (6)	One provides assistance and travel service products, such as insurance policies, via a B2B2C business model worldwide, one is the UK’s leading provider of façade access and fall arrest equipment services, lightning protection and electrical testing, high-level cleaning and specialist electrical and mechanical services, one provides gas heating appliance installation and maintenance services to residential and commercial properties and general building services, such as domestic and commercial plumbing, electrical work and general repairs across London and South East England, one is a China-based provider of air filtration and clean air technology products to the industrial, commercial and residential markets, one is a mid-sized, UK commercial law firm and one is an education group operating an online independent secondary school in the UK with a 10-year track record, 42 teachers and 516 students
Technology (5)	One is a software developer and operator of its own online brokerage that has developed a simplified trading platform for themselves and other online brokers in Europe, with expansion plans focused on Japan, China and the U.S., to provide individuals with the ability to trade binary options, one is a leading provider of satellite broadband services to consumer and business users in the UK and Europe where they intend to continue to grow the subscriber base organically and through acquisition by consolidating a fragmented market across Europe where 20 million homes and businesses are not expected to be able to access broadband speeds of more than 2 Mbps for the foreseeable future via fixed line broadband networks, falling into what is called the ‘digital divide’, one designs, develops and commercializes mobile social media applications focused solely on Myanmar; incorporating Burmese customs, characters and language to drive user acquisition through locally relevant products, acquire relevant consumer data (and allow advertisers to data mine the Burmese script content) and monetize its digital properties through the sale of advertising and digital goods, one is a UK-based designer and manufacturer of a broad range of customized radio frequency, microwave and millimeter-wave components and subsystems used in mobile wireless communication equipment, point-to-point communication systems and related defense sectors and one is a Switzerland-based security software company with a range of products for mobile devices, PCs and communications networks
Consumer Goods (4)	One is a leading Chinese producer and processor of frozen seafood, seaweed-based foods and marine snack foods for the domestic market and for export to Japan, South Korea and the U.S., one is one of the largest UK-based online retailers of musical instruments and music equipment, selling third-party and own-branded products to customers ranging from beginners to musical enthusiasts and professionals in the UK and Continental Europe through its internally-developed ecommerce platform, with multilingual, multicurrency functionality presented on custom-designed websites in 19 countries, one is one of the largest retailers of fishing tackle in the UK, catering to all types of anglers - coarse, carp, game and sea fishing - operating online and from a chain of seven retail outlets in the North of England which are designed to be ‘destination’ stores with a comprehensive range of products, knowledgeable and enthusiastic staff and an offering that includes own-branded products and one is a UK-based company that develops, produces and supplies hobby and toy products through an international network of specialist and multiple product retailers
Basic Materials (1)	This company is focused on the discovery and development of high-quality iron ore projects in Africa, initially focusing on Gabon
Oil & Gas (1)	This company is an explorer for, and proposed producer of, unconventional gas, principally coal bed methane, in Botswana where the vision is to augment the energy needs of southern African which is experiencing an energy deficit due primarily to rapid population and economic growth