IPO Launch: GBS Seeks $20 Million U.S. IPO
GBS (GBS) intends to raise $20 million in an IPO of its units of common stock and warrants, according to an S-1 registration statement.
New York, New York-based GBS was founded to develop a saliva glucose biosensor and more recently focused its efforts to repurposing its technology for a point of care diagnostic testing system for the Covid-19 virus.
The firm hopes to first launch its Covid-19 test followed by its Saliva Glucose Biosensor test and other diagnostic tests.
Management is headed by Chief Executive Officer Harry Simeonidis, who has been with the firm since 2017 and was previously General Manager of FarmaForce Limited, and ASX-listed company.
Below is a brief overview video of challenges for point of care Covid-19 testing:
GBS has received at least $20.2 million from investors including Life Science Biosensor Diagnostics Pty Ltd.
According to a 2020 market research report by Grand View Research, the global Covid-19 diagnostics market is currently an estimated $19.8 billion 2020 and is forecast to reach $24.5 billion by 2027.
This represents a forecast CAGR of 3.1% from 2021 to 2027.
Over 600 Covid-19 diagnostic tests are in development or approved for use.
A current challenge is that different testing systems produce different accuracy rates over different wait time periods.
Major competitive or other industry participants include:
- Becton, Dickinson and Company (BD)
- Abbott Laboratories (ABT)
- Mylab Discovery Solutions
- Lucence / Akribis Systems
- Roche (RHHBY)
- PerkinElmer (PKI)
- Neuberg Diagnostics
- Danaher (DHR)
- Quest Diagnostics (DGX)
- Laboratory Corporation of America (LH)
- Numerous others
Below are relevant financial results derived from the firm’s registration statement:
Source: Company registration statement
As of June 30, 2020, GBS had $427,273 in cash and $7.7 million in total liabilities.
GBS intends to raise $20 million in gross proceeds from an IPO of 1.176 million units of common stock and related warrants, offered at a proposed midpoint price of $17.00 per unit.
Assuming a successful IPO, the company’s enterprise value at IPO would approximate $188.8 million, excluding the effects of underwriter over-allotment options.
Excluding effects of underwriter options and private placement shares or restricted stock, if any, the float to outstanding shares ratio will be approximately 12%.
Management says it will use the net proceeds from the IPO as follows:
$8.60 million to obtain regulatory approvals, including completing any product development required to meet regulatory requirements and establishing manufacturing facilities with sufficient capacity for clinical evaluation and commercial scale production of the biosensor architecture including SGT;
$0.75 million to market the SGT and establish a distribution network across the APAC Region; and
$8.55 million for working capital and general corporate purposes.
Management’s presentation of the company roadshow is available here.
The sole bookrunner of the IPO is Dawson James Securities.
GBS is seeking public funding to continue development of its Covid-19 point of care testing system and other products.
The firm’s financials show no revenue from product sales as GBS has changed course from producing a diabetes testing system first to producing a Covid-19 testing system first, followed by its diabetes testing and other systems.
The market opportunity for a point of care testing system for the Covid-19 virus is large and expected to grow significantly in the years ahead.
However, GBS faces widespread competition from companies large and small in what will likely be a number of very fragmented markets.
Dawson James is the sole underwriter and there is no data on IPOs led by the firm over the last 12-month period.
As to valuation, it is difficult to find a direct comparable for the company.
GBS is a tiny firm that is thinly capitalized and seeks to play in markets where large and deep-pocketed firms with significant distribution capabilities are aiming their resources.
While I wish the company well, I don’t see this as an investable IPO...it’s an extreme long-shot.
My opinion on the IPO is to AVOID it.
Expected IPO Pricing Date: October 28, 2020
(I have no position in any stocks mentioned as of the article date, no plans to initiate any positions within the next 48 hours, and no business relationship with any company whose stock is mentioned in this article. IPO stocks can be very volatile in the days immediately after an IPO. Information provided is for educational purposes only, may be in error, incomplete or out of date, and does not constitute financial, legal, or investment advice.)
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