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Analysis

Why a former €98m company's poor fortunes could prove painful for Ireland's stock exchange

Paul O’Donoghue takes a look at HealthBeacon’s rollercoaster journey.

THE IRISH STOCK exchange has been hit by a series of high-profile departures in the last year or so, with the most recent body blow being the departure of the country’s two biggest public companies, CRH and Smurfit Kappa.

New listings have dried up. No Irish companies have completed an IPO (initial public offering) so far this year, or the year before.

Davy and Goodbody have both recently announced they will cut staff amid the downturn in new listings, while investment company Zurich is closing its Irish equity fund.

One of the rare bright spots – excuse the preemptive pun – was HealthBeacon’s IPO in December 2021.

The company was one of the 40 or so businesses which have completed Euronext’s ‘IPO Ready’ scheme, a six-month programme detailing the listing process for businesses.

It was hoped that many graduates of the initiative, started in 2015, would go public within three to five years.

So far, HealthBeacon has been the only one. In December 2021 it raised €25m in a move which valued the firm at €98 million.

The Dublin-based company is focused on medical technology, with its flagship product being a ‘Smart Bin’ for people who self-inject at home.

Aimed at those suffering from conditions such as diabetes, the product ensures patients keep on track with their medication routine.

Its IPO was hailed as a “milestone” for the Irish exchange, with hopes that it could pave the way for other medium-sized businesses to follow suit.

Jim Joyce, HealthBeacon’s CEO and co-founder, was shortlisted for Business & Finance magazine’s ‘business person of the year’ award, while the IPO was named as one of the ‘Deals of the Year’ by trade publication Finance Dublin.

Investors were also optimistic. HealthBeacon’s share price soon rose to €6.24, bringing its value to over €100 million at a time when it had revenues of under €1 million.

This was likely down to the company’s ambitious targets. HealthBeacon said it expected to sell 100,000 of its smart bins by the end of 2023.

The pitch was one of exponential growth, with the company’s IPO prospectus highlighting a potential market of almost €10 billion in recurring revenue from the millions of Americans and Europeans who self-inject to treat their conditions.

However, investors have faced disaster since. The company’s share price has fallen to €0.19 as of the time of writing, a drop of just over 95%.

Joyce has departed as CEO, while sales targets for this year were cut amid as the company looks to get costs under control.

Sales warning

The problems first became apparent around the middle of last year.

In July HealthBeacon announced that supply issues meant it would hit its 100,000 sales target in early 2024, instead of the end of 2023.

This triggered an almost immediate fall in its share price to €2.80, with the price continuing to dip lower for the rest of the year.

A key priority for the firm is reaching deals so that its smart bins are sold throughout US pharmacies, something Joyce said the firm was making good headway on.

The stock rebounded somewhat to almost €2 by July 2023, before HealthBeacon issued another sales warning in September.

The scale was alarming. While it had previously expected to be recording annual sales in the ‘mid-teen millions’ by the end of 2023, revenues this year will instead be just over €3m.

HealthBeacon said it was still confident it could hit €17m in annual recurring revenue by the end of 2024. However, it added that it would need to raise €11 million to fund its costs before hitting a breakeven point in the middle of 2025.

This is significantly more than the company is now worth – its market valuation has dropped to less than €4 million as of the time of writing.

HealthBeacon could still turn things around, but whether it will get the chance to do so will now likely come down to whether investors are willing to keep backing the firm.

In terms of the wider impact of the company’s troubles, there will likely be concern it could serve to deter other similar companies from going down the IPO route.

Speaking to the Sunday Times shortly after the company’s flotation, Joyce was asked if the firm might have been better placed to wait to realise some of its potential before listing.

“The sweet spot is the phase we’re at right now. If you wait too long, you’re going to get bought out,” he argued.

It was a fair point. While Ireland has a good startup ecosystem, it has struggled to bring many of those firms from promising early or mid-stage businesses to true international scale.

While going public is not right for every company, for many ambitious firms, the local stock market traditionally provided a reliable way to access the funds needed to go big.

This is also the vision of the Irish market which Euronext has been pushing.

As more established firms have looked to the US for access to more liquidity and bigger valuations, Euronext Dublin wants replacements.

This is the obvious aim of its IPO ready programme – to have a stream of listings from solid indigenous businesses on the cusp of something more.

A report published last week, commissioned by Euronext Dublin and stockbrokers, found the Irish exchange provides a major benefit to the economy and called for government supports.

These included scrapping stamp duty on the trading of shares and tax incentives for retail investors to put money into public companies.

While these could be a boost, the long-term success of the equity exchange will likely rest on how new listings perform.

HealthBeacon appeared to represent the future. It is why its troubles could prove to be so painful for the wider market.