Flerie makes its way to the stock market via InDex
The chess pieces have long been in place for Flerie Invest, and now the specialist investor will enter the stock market through reverse acquisition by InDex Pharmaceuticals.
– This is an important step in our plan to create a new model for life science investments, says Flerie CEO Ted Fjällman.
After discontinuing the development of cobitolimod, InDex Pharmaceuticals has been working on getting a good solution for its shareholders. Now the door is opening through a reverse acquisition of specialist investor Flerie Invest, which is thus entering the stock market. The transaction consists of a non-cash issue, where Flerie’s owners will ultimately hold approximately 91.9 per cent of the combined company.
Since its inception in 2011, Flerie has been an active investor in life science; Today it has a portfolio consisting of 29 companies. The investment model is based on active ownership, where the portfolio companies are supported by experienced company builders, a large network within the ecosystem and by each other.
– All the companies we invest in become part of the Flerie family, which means that they all know each other. We strongly believe that you learn the most from the ones in the same boat, says Ted Fjällman to BioStock.
Synergies and long-term ownership
– In addition, we are constantly trying to create synergies between our companies, through different types of collaborations. Perhaps the clearest example of this is our investment in NorthX Biologics, where we are building up a completely new contract manufacturer that can, among other things, support our portfolio companies with their services.
Another key component of the model is the long-term investment horizon.
– A challenge with investing in many biotech companies is the long development time. It is very difficult for many venture capital investors to hold the companies until the right time, when they reach partner agreements or the market, and the real upside is realised. The short-termism means that many people drop out at the wrong time.
Has plenty of patience
Flerie’s model has yielded good returns since its inception. In the current transaction with InDex Pharmaceuticals, Flerie’s portfolio is valued at just over SEK 3 billion and, according to Fjällman, 42 per cent comes from value development in the companies.
– We have an average internal rate of return or an IRR value increase of 14 per cent per year. Over the years, we have made several exits, and it does not take that many of them for us to do well. You might feel that things are slow some years when we don’t have an exit or other forms of value increase. But it doesn’t matter when you then have a super good result other years. It is important to be patient.
Strengthening cash position to accelerate development
Stepping into the stock market, the specialist investor will also take the opportunity to raise SEK 520 million in an issue that is aimed at some of InDex’s larger owners, as well as new investors: The Fourth Swedish National Pension Fund, HBM Healthcare Investments, Linc and the SEB Foundation. As stated in the press release on May 20th, the possibilities of raising additional capital in connection with the IPO are also being investigated.
On the one hand, the money is needed for the company to meet the liquidity requirements for a listing on Nasdaq Stockholm, and, on the other hand, to continue value creation in the portfolio.
– We see many opportunities for our portfolio companies to accelerate development. It has been a few tough years for many biotech companies, where high interest rates mean that generalist investors are not as attracted to high-risk companies.
Focus on existing portfolio
The tough environment has meant that many biotech companies have been forced to pull the handbrake and focus resources on their main projects, something that according to Fjällman has been absolutely right.
– From the biotech companies’perspective, the last few years have been really tough. We have advised our CEOs to focus on the business and to put projects they cannot afford on hold. At the same time, we see that there is more to gain from these platforms, and we want to try to achieve an acceleration in the main projects.
The company’s own portfolio is not the only place where Fjällman sees potential. But even though there are good opportunities elsewhere, the existing holdings are still going to Flerie’s main focus going forward.
– We are happy with our 29 companies, and we will stick with, around 30 companies in the portfolio. It depends a lot on how our team is structured, where our model revolves a lot around us being able to be active in our companies.
A good time to invest in the sector
The current model was built by Fjällman together with founder Thomas Eldered and Carl-Johan Spak in 2020, and it was not until the end of 2021 that the real capital deployment started.
– We were lucky to avoid the hyped period 2019 – 2021. Once we started investing, valuations had come down a bit. Since we started deploying our capital, we have been able to invest at very good valuations.
– I still think the values are very good. Now is a good time to invest in the sector.
