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Telix Pharmaceuticals Ltd share price rockets 21% on IPO debut

The Telix Pharmaceuticals Ltd (ASX: TLX) share price rocketed 21% to $0.79 as it made its debut on the ASX this morning. Telix is an unprofitable biotech that recently completed an oversubscribed initial public offer (IPO), and its applications were scaled back by 60% due to demand. This will lead to shareholders getting many fewer shares than they’d intended, which may lead to risks if you are aiming to sell in the next few days. Check your allocation before selling.

Telix Pharmaceuticals is conducting research into targeted radiation solutions for treating cancer, and is run by well-regarded CEO Dr Christian Behrenbruch, who also owns 12.5% of the company. Behrenbruch is perhaps most widely known in the investment community for his work on asxlongtail.com, a website aimed at ‘demystifying ASX life sciences’. He also has an extensive pedigree in the medical industry.

Is Telix a buy?

Telix is one of the only unprofitable biotech companies I would consider owning shares in, and that’s primarily because of the rep of the CEO. This is the guy that was recently quoted in The Australian as saying that a third of Australian biotechs are outstanding, a third are mediocre and wouldn’t survive anywhere else, and a third are ‘basically fraudulent’.

However, all things considered, I think that Telix is probably unsuitable for the vast majority of investors. It is unprofitable, and its business of medical research is both high risk, costly, and can be very drawn out. CSL Limited (ASX: CSL), it is not. While management thinks they may be able to commercialise a treatment in the next few years, Telix could have quite a way to go to justify today’s market capitalisation.

I will be looking at the company more closely in the future, but I think it is a sound suggestion to say that if you do invest, invest only a small amount of your portfolio, be prepared for steep losses and possible capital raisings in the future, and aim to hold for at least 5 years.

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Motley Fool contributor Sean O'Neill has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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