Public markets still open to European biotech; IPO total tops $1.5B, so far

Print 21 July 2015
Cormac Sheridan / BioWorld

DUBLIN – Cell therapy firm Reneuron plc’s forthcoming £68.4 million (US$106 million) capital increase is further evidence of the continued buoyancy of the public funding environment for European biotech companies.

The Guildford, UK-based firm has secured firm commitments for a placing of about 1.4 million shares, priced a 5 pence per share, a slight premium to the prevailing share price before the deal was disclosed. Shareholder approval for the deal will be sought in a vote on Aug. 21, but that seems to be a formality. The company’s stock (LONDON:RENE) hit 6 pence, a rise of 23 percent on the previous close of 4.88 pence, during trading Friday.

Across Europe, companies are raising cash, through IPOs and through secondary offerings, at a rate not seen since the turn of the century. The year 2000 remains the high watermark for public financing of European biotechnology. The sector raised €2.95 billion (US$3.3 billion) in IPOs that year and another €2.447 billion in follow-on and other offerings, according to Ernst & Young’s Annual European Life Sciences Report 2001.

If the present momentum continues – although the unfolding Eurozone crisis could well derail it – the sector has a good shot of topping that figure. By the end of last week – just past the half-year mark – European firms had taken in about $1.582 billion in IPOs. Firms that were already listed have raised more than $750 million more in secondary offerings. (The totals exclude the $65.8 million that Verseon Corp., of Fremont, Calif., raised in an IPO in London on the Alternative Investment Market (AIM), as well as the aggregate $1.8 billion raised in IPOs by three investment funds – Malin plc in Dublin, Puretech Health plc and Woodford Patient Capital in London – much of which will flow into biotech companies.)

For European biotech, Nasdaq remains the most welcoming environment. Nine companies – most of which were already listed on their respective home exchanges – raised $993 million in aggregate. The most recent was cell therapy firm Celyad SA, of Mont Saint Guibert, Belgium, which took in $100 million, and anticalin developer Pieris Pharmaceuticals AG, of Freising, Germany, which grossed $25 million in an IPO it priced on June 30.

In Europe, the most active market was the Euronext exchange, which is spread across Paris, Brussels and Amsterdam. Companies raised €439 million (US$491 million) in nine deals, the most recent being Kiadis Pharma BV, of Amsterdam, which took in €32.7 million, and Mithra Pharmaceuticals SA, which raised €72.3 million in Brussels.

Privately held European firms are growing more wary of making their public debuts on Nasdaq, said Paul Tomasic, managing director and European head of health care at RBC Capital Markets in London. “I’ve noticed a marked change in the last month or two in board discussions,” he told BioWorld Today. “Six months ago, most companies that could go to the U.S. were saying, ‘Let’s go U.S.’” But doing so generally requires an expensive pre-IPO crossover round. And the listing requirements are more onerous and more costly.

VITAL BACKSTOPS

Germany, however, remains firmly closed to new entrants. Euronext or Nasdaq remain the best bet for German firms. “None is considering Frankfurt, which is a pity but it is, to a certain extent, a homemade problem,” Enno Spillner, CEO of 4SC AG, told BioWorld Today.

Planegg, Germany-based 4SC and another long-established listed firm, Medigene AG, recently took in €29 million and €46.4 million, respectively. 4SC’s transaction also involved an additional €6 million debt-to-equity conversion. The local environment remains difficult, however.

“Most of our funds came from the U.S. We got some specialists on board,” Medigene’s chief financial officer, Peter Llewelyn-Davies, told BioWorld Today. “There are a lot of generalists in Germany, and they look at the total risk of their business model,” he said.

“They have a totally different view of biotechnology,” Spillner agreed. “They’re basically setting up filters which don’t suit German biotechnology,” he told BioWorld Today.

In addition to the U.S., Martinsried-based Medigene tapped into investors in the UK and other European countries to fund its new cancer immunotherapy strategy, which is based around its 2014 acquisition of Trianta Immunotherapies GmbH. Participation from Germany itself was low.

4SC’s capital increase had a different dynamic. It has the long-term support of Santo Holding AG, an investment vehicle of the billionaire Strüngmann brothers, who are backing the company’s strategy of pursuing a conditional European approval in cutaneous T-cell lymphoma for histone deacetylase inhibitor resminostat.

The Strüngmanns and Dietmar Hopp, the software entrepreneur, have been vital backstops for German biotechnology since the Eurozone crisis began in 2008. “If there hadn’t been Dieveni Hopp and the Strüngmanns, private financing would have dried up,” Spillner said.

Even their resources are not bottomless, however. German biotechnology needs a hit soon, to dispel the bad taste left by the failure of previous high fliers, such as GPC Biotech.

UK investors have been scarred, too, Tomasic said. “They’ve gotten over it. In Germany, they never seem to have.”

Tomasic said he sees momentum building in the UK, which will lead to a strong flow of transactions in the next year or two. “I think it’s the buyside,” he said. The large amounts of capital raised by Chris Woodford, in particular, will exert a pull on the market. “I think eventually there’ll be an overflow into companies.”

The pull of Nasdaq is still evident, too. Among those planning a visit to Wall Street are: allergy specialist DBV Technologies SA, of Bagneux, France; gene therapy firm Gensight Biologics SA, of Paris, which is seeking $100 million; and antibiotics developer Nabriva Therapeutics AG, of Vienna, which is seeking $92 million, according to a June 18 filing.

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