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1. sergui Le 31/12/2007 à 12:45
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   Credit squeeze casts cloud over biotech By Salamander Davoudi Published: December 31 2007 01:20 | Last updated: December 31 2007 01:20 “Fewer pounds, far fewer deals.” This is how one analyst sums up the biotechnology sector following the dearth of initial public offerings this year and a lack of notable deals in the second half. In 2006, there were 11 IPOs in the sector but this year has seen only four. The financing environment for cash-strapped biotechs, analysts say, could not be more challenging given the turbulence in the credit markets. “It has been a very difficult year, even more difficult than a year ago,” says William Powlett Smith, a partner at Ernst & Young. “This credit crunch has frozen a lot of decisions; people are thinking about other priorities. It is not a good climate to raise money by IPO or by other means.” Observers say changes in appetite for risk mean that fund managers’ interest in biotech has waned. Their scepticism towards the sector is being stoked further by the large number of underperforming biotech stocks on Aim, London’s junior market. Shares in many of these companies have drifted downwards, in contrast with those on the main market, which have experienced far less volatility. The specialist investor base has also shrunk because returns have been so mixed. Apax no longer invests in biotechnology stocks, while Schroder Ventures largely focuses on US investments. Many of the companies that achieved a listing over the past 18 months have not been pure biotechnology companies. Instead, the new arrivals on the stock market have tended to be medical technology groups, which have business models that promise to deliver profits far more quickly. Of the companies that listed this year, Neuro-pharm, which is developing treatments for the central nervous system, and Northwest Biotherapeutics, which is promising the world’s first therapeutic vaccine for brain cancer, were pure biotech companies. Over the past six months, these two companies have seen their share prices rise by one per cent and 25 per cent respectively. Early-stage biotech companies are riskier and require more capital to move products through development. In the UK, such firms need to return to investors on a regular basis to raise extra funding. Figures compiled by Nomura Code show many UK biotechs have enough cash to last about a year, but many will need to refinance within 18 months. Navid Malik, an analyst at Collins Stewart, says: “I see a lot of private companies and small plcs struggling to address their funding needs. “Liquidity has dried up. Fund managers are too scared to deploy cash. Venture capitalists are locked up and facing a credit issue themselves. Pressure is building.” The first half of the year saw more activity, with a series of large commercial deals including biotech companies Renovo – co-founded by Mark Ferguson – Oxford Biomedica and Antisoma, and the European markets have proved very healthy. Last month, Ablynx, the Belgian biotech company, listed on Euronext raising €75m (£55.5m). But the “buy case” for the UK biotechnology sector is being hampered by an increasingly conservative regulation. Industry executives say the US Food and Drug Administration is proving too risk-averse, delaying the approval of new medicines by requesting extended late-stage clinical trials on larger groups of patients for longer periods. This has been even more the case since the withdrawal of Vioxx, Merck’s painkiller, in 2004. “This is scaring investors,” says Mr Malik. If the large numbers of small start-up companies are to gain access to the capital markets, experts say, they will need to diversify. “I am telling every company to... think about what they can do to strategically position themselves and create critical mass,” says Mr Malik. “If they don’t manage this successfully they will have to merge,” says David Wilson, chief executive of Pi per Jaffray, the US bank. Copyright The Financial Times Limited 2007

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