HealthBeacon, Dublin’s last IPO, offers cautionary tale as market seeks new stars

As the Irish stock exchange grapples with an exodus of its biggest corporate beasts (CRH left last week, Smurfit Kappa is the departure lounge and Flutter Entertainment is likely to follow), the last company to float on the market has just made its pitch harder to find future stars.

HealthBeacon, a medtech company, raised €25 million in an initial public offering (IPO) in December 2021 in a deal that valued it at €98.4 million.

The market capitalisation has been in decline ever since, hitting a new low of just more than €10 million on Wednesday, after it issued a sales warning and announced that its chief executive and co-founder had stepped down.

It offers a cautionary tale of the inherent risks faced by small, early-stage companies in public markets.

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The flagship product of HealthBeacon, which was founded a decade ago, is a smart sharps bin for use by patients who inject medication at home.

The key goal outlined to investors at the time of the IPO was that it would have 100,000 devices in the market by the end of 2023, mainly through distribution deals with speciality pharma companies.

The company issued a warning in July last year, saying device sales targets were running behind schedule and that the 100,000 objective would not be met until March 2024 – as delays in securing computer chips temporarily held up production. The timeline was pushed out again earlier this year by a further three months.

On Tuesday, HealthBeacon shocked the market by saying it now expects its annual recurring revenues (ARR) will be running at about €3.2 million in December, down from previous estimates of a “mid-teens” million-euro figure – and that the run-rate on its ARR at the end of 2024 was now expected to be €17 million. It previously forecast a run-rate of €25 million by the middle of next year.

While the company has been successful in striking distribution deals with US speciality pharma groups, it has been caught out by the red tape involved in rolling them out. Its current timelines are running up to nine months behind previous estimates.

The market reaction was merciless – compounded by the fact that, as a small company off the radar of most asset managers, it is a very thinly traded stock. Its shares have subsequently slid more than 60 per cent – albeit amid very thin volumes.

A core attraction of public markets is the potential to raise follow-on equity as a company grows and attracts more big-name investors. HealthBeacon, which burned through more than €14 million of cash last year, says it needs to raise €11 million of fresh funding over the next 18-24 months. That’s more than its current market value. Any equity raise at these levels – even if there was market appetite – would be highly dilutive.