Advanced Accelerator Application SA(ADR) (NASDAQ: AAAP), a radiopharmaceutical firm based in France, is planning an American Depository Receipt (ADR) IPO on Thursday, February 5. The company plans to raise $75 million and issue 5.4 million shares between $13 to $15 for a market cap of $517.6 million.

The company’s strong product pipeline may be a good play for investors looking to diversify their holdings internationally, along with those seeking biotech exposure.

AAAP, founded in 2002, focuses on developing, producing and markets molecular nuclear medicine, MNM, used in diagnostic and therapeutic products. According to its F1 filing, MNM technology uses small amounts of radioactive compounds to create digital images like positron emission tomography (PET) scans and treat disease such as cancer by using precision to seek and destroy cancer cells.

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AAAP maintains a leadership position in the MNM field in Europe through manufacturing and commercializing its portfolio of diagnostic products for clinical applications including oncology, cardiology, inflammation, neurology and infectious diseases.

The company also has experience strategically acquiring and consolidating complementary businesses and assets such as Atreus Pharmaceuticals, located in Canada.

Product Pipeline

AAAP currently has three drugs in clinical development stages both in the U.S. and Europe. The company’s first drug, Lutathera, is in the Phase 3 clinical trial stage. The drug is used in the treatment of neuroendocrine cancers. Its other two drugs, Somakit and Annexin V-128, are in the Phase 2 and 1 trials as cancer and cardiovascular treatments.

The foundation of the company’s growth has been its portfolio of six PET and one single-photo emission computed tomography (SPECT) digital imaging products. The products center on scanning the body and its organ functions at the molecular level which differs from X-rays, CT scans, and ultrasounds in targeting tumors.

The company is further building additional MND products to add to its competitive portfolio. The MNM global market is estimated at $4.1 billion in 2013 according to medical radiation analytics firm, MEDraysintell. MEDraysintell also reports that the nuclear medicine diagnostic market is positioned for 11 percent annual growth, a global trend that could grow vertically by 2030. Therapeutic applications could increase by 30 percent annually within the same time period.

A majority of the company’s product are manufactured at its 16 production sites where its PET facilities are strategically positioned close to customers. AAAP has over 300 employees throughout Europe, Canada and the U.S to support its production, sales, and marketing operation.

In its recent F1 filing, the ramped-up platform allows AAAP to obtain production and sales from partnerships with global healthcare leaders such large pharmaceutical companies GE Healthcare and Eli Lilly and Co (NYSE: LLY), allowing AAAP to manufacture MNM for these companies.

Relevant Finances

AAAP’s revenue growth has been strong, driven by acquisitions, with 2012 sales up 21 percent at $46.6 million, 2013 sales up 32 percent at $61.4 million and for 9 months ended September 30, sales grew 29 percent at $63.4 million. This growth can be attributable to AAAP’s product mix, infrastructure and new market expansion.

Despite the diverse revenue streams, the company is still reporting a current net loss is $3.09 million.

Competition

AAAP faces competition in the three areas of its product offerings: PET, SPECT, and therapeutics.

PET products have a short shelf life (around ten hours), AAAP’s competition is limited to companies that have a manufacturing facilities located near the MNM facilities. Larger healthcare companies such as IBA Molecular has 50 locations around the world as well local companies and universities.

There are also more SPECT manufacturers than PET ones in the industry. AAAP’s lead drug candidate, Lutathera, is the first of its kind but faces competition from industries leaders like Pfizer, Novartis, and Ipsen that offer other drugs and the standard chemotherapy treatments.

Conclusion

Given AAAP’s positive revenue trend, robust infrastructure, promising drug future and product pipeline, this small cap stock looks poised to have high growth potential. The company’s exposure to the healthcare and pharmaceutical industry poses a great opportunity for investors in the growing MNM field.

The company plans to use the IPO proceeds for clinical trials and R&D efforts, and expanding marketing, manufacturing, and distribution capabilities globally.

Lead underwriters for the offering include Citibank, Jefferies, and Canaccord Genuity. American depository shares (ADS) expect to price between $13 and $15 on Thursday.

Disclosure: The author holds no positions in the mentioned securities at the time of this writing.

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