XStream Systems plans IPO and listing on Nasdaq

Pharmaceutical authentication specialist XStream Systems is planning an initial public offering that it hopes could add around $37.5m to its coffers, according to a dossier filed yesterday with the US Securities & Exchange Commission (SEC).

XStream is offering 2.5 million shares at a price of $15 per share, and will apply for a listing on the Nasdaq. The company's only marketed product at the moment is the XT250 system (pictured), which is based on energy-dispersive X-ray diffraction and can be used to detect, identify and verify materials without destroying the sample under test.

The company said it wants to use "a significant portion of the net proceeds of this offering to finance research and product development as a part of our growth strategy." It will also use the money for working capital and to pay off some debt, as well as to fund the development of additional products.

In its prospectus, XStream Systems says it is well positioned to take advantage of anticipated growth within an emerging authentication and detection industry, citing the increase in counterfeiting and adulteration in the pharmaceutical industry, growing corporate demand for counterfeit drug detection solutions and the proliferation of pharmaceutical product sales from Internet, amongst other factors.

The prospectus notes that revenues in 2008 were $439,000, up from $135,000 in the prior year, and the company posted a net loss of $2.86m. Revenues for the six months ended June 30, 2009, amounted to $179,000.

The document notes that pharmaceutical manufacturer Pfizer and wholesaler AmerisourceBergen are already evaluating its XT250 authentication machine in pilot programmes.

Meanwhile, it says letters of intent have been signed by logistics specialist SwissLog Healthcare Solutions and Eastman Kodak with a view to collaborating on the development of screening and security solutions.

Meanwhile, the firm says it is "directing our strategic joint venture efforts to produce applications which we anticipate will combine non-destructive penetrating capability with forensic analysis."

While most of its efforts to date have been in the USA, the prospectus also notes that significant opportunities lie in Europe, the Middle East, Africa, and Southeast Asia.

"We anticipate using some of the funds raised through this public offering to pursue non-US opportunities."