EU IPO rush to follow US?

October has seen a rush by US biotechnology companies to list on the stock markets, bringing to an end an Initial Public Offering (IPO) drought lasting 18 months. Is Europe destined to follow?

Almost certainly, but after a delay and not in the same scale as has occurred in the USA, said Andrew Greene of UK-based venture capital firm Merlin Biosciences in an interview with DrugResearcher.com.

Greene said that the situation for biotech in the USA has been ripe for another IPO window for some time. Changes at the US Food and Drug Administration, including the recent appointment of a more industry-friendly Commissioner, have boosted confidence, and enough time has elapsed since the huge correction in biotech stock prices in 2001 for optimism to have returned.

In addition, the FDA has started to ramp up its approval of new drugs, after a period in which approval rates declined, and the hope is that the European Medicines Evaluation Agency will take the US lead and follow suit. And the backlog of companies who were thwarted in their IPO plans, along with significant pressure from their owners, has also played its part.

"The fundamentals of the industry on both sides of the Atlantic are strong,​ noted Greene, but European biotech is more fragmented and there will be fewer, more selective IPOs in this region. Any activity here is unlikely to take place before the New Year, he said.

Front runners​

Greene believes that there are three companies (all in the Merlin Biosciences stable) that fulfil the criteria for a successful IPO, i.e. they have a strong management team and track record, a product or technology (ideally already in the clinic) that addresses a global, large market and a sound business plan.

One is Ark Therapeutics, a specialist in vascular diseases and cancer which has five products in the clinic, including a drug for cancer-related wasting in Phase III development. This spread makes it less vulnerable to the failure of one particular project.

Also in the frame is Cyclacel, which has a cyclin-dependent kinase inhibitor in Phase II trials for breast and lung cancer and a broad platform of technologies in RNAi functional genomics, chemogenomics and clinical biomarker technologies.

The last of three tipped by Greene is Microscience, a vaccines specialist with six products in development and three already in the clinic.

The fact that all these three companies are based in the UK is no accident, as Greene believes this market will likely be the first to see some IPO activity. This is partly because the UK market has more late-stage biotechnology companies, but also because the equity market is bigger than elsewhere in Europe, he suggested.

One other possibility is Sweden's Biovitrum, which benefits from a strong pipeline and a ready stream of revenues from process development and contract manufacturing services for biopharmaceuticals, as well as a recent deal with Amgen that could net it up to $612 million. The company was spun out of Pharmacia and claims to offer both the maturity and experience of a big pharma company with the entrepreneurial culture of a biotech.

Other companies that have exited the big pharma stable and are candidates for IPO include French osteoporosis specialist Proskelia, formerly part of Aventis and Swiss antibiotic developer Basilea, once part of Roche.

That said, the timing and scale of the IPO rush in Europe will likely depend on how successful it has been in the USA. And initial signs are not overly encouraging.

The first US company to go, drug delivery specialist Acusphere, is currently trading at around $10, well below its IPO price of $14. And the second company out of the traps - Advancis Pharmaceuticals which focuses on pulsatile antibiotic therapy - is more than a dollar off its IPO price of $10.