Back in 2002 the only way for Markku Jalkanen’s company, Biotie, to survive prevailing market turmoil was to undergo a complex three-way merger to build scale. 13 years on, now as chief executive of Faron Pharmaceuticals, he will be hoping for better luck as he looks to raise £10m ($15m) in a flotation on Aim next month.
It is good news for the UK that Faron, a Finnish company, should pick Aim, as is that not one but two biotechs announced IPO plans in London today: the other, Shield Therapeutics, is looking to raise £110m. Faron should enjoy better liquidity in London versus Helsinki, though the fundamental risk of its lead project remains undiminished.
The risk is twofold: the target is acute respiratory distress syndrome, a condition that has failed to provide any pharma successes so far; and Faron’s lead asset, Traumakine, comprises interferon-beta 1a, a drug widely used for treating multiple sclerosis as Biogen’s Avonex or Merck KGaA’s Rebif.
Should Traumakine reach the market, Faron will thus have to rely on use patents and the upholding of rules against off-label use to prevent Avonex and Rebif being used in acute respiratory distress syndrome (ARDS).
Still, there is scientific rationale behind its approach. A trial of Traumakine, published in The Lancet no less, cited the importance of CD73 – an enzyme whose production is stimulated by interferon-beta 1a – in maintaining endothelial barrier function; this barrier is important as pulmonary vascular leakage occurs early in ARDS, the scientists wrote.
The paper reported the results of Traumakine’s phase I/II study, which showed that the project increased the number of CD73-positive vessels in lung culture fourfold on day one and by 14·times by day four. Moreover, by day 28 8% of 37 patients on Traumakine had died, versus 32% of 59 control patients, resulting in a statistically significant reduction in 28-day mortality (p=0.01).
While CD73 has some relevance in cancer immunotherapy, and Faron’s pipeline also includes a preclinical anti-clever-1 MAb with potential in solid tumours, it is on the strength of Traumakine that Faron is going to the market. The IPO funds are to support a 300-patient pivotal study, due to begin in the fourth quarter.
“Statistically significant 28-day reduction in mortality would allow [an EU] conditional marketing application ... as further placebo-controlled studies become unethical,” Faron told EP Vantage.
“FDA advice is being sought on a small US phase II safety study, and will further be sought after data from the first EU phase III to clarify the need for, and structure of, a third US phase III trial to obtain a BLA and possible 12 years’ US data exclusivity.”
The target market for ARDS reportedly numbers 190,000 patients in the US and 170,000 patients in Europe. The condition can be caused by sepsis, pneumonia or workplace inhalation of toxins, but current treatment is broadly limited to mechanical intervention.
One of the most obvious therapeutic answers, use of a lung surfactant, has failed to get off the ground. Curosurf is available specifically for use in pre-term infants, while another surfactant, Discovery Labs’ Surfaxin, was voluntarily pulled from the market after the US FDA raised questions about product specifications.
If Faron manages to float in October – a month is a long time in the current market – it will join Hutchinson China Meditech as a non-UK biotech seeking fame and fortune on London’s junior exchange. Meanwhile, Shield’s £110m main market float, if it comes off, would put the speciality player in the top five London biotech IPOs.
|Life science IPOs on the London stock exchange|
|Company||Cash raised (£m)||Market||Year||Notes|
|Pharmstandard||276.1||Main market||2007||Russian company|
|Circassia Pharmaceuticals||200.0||Main market||2014|
|Hikma Pharmaceuticals||148.8||Main market||2005||Jordanian company|
|Eastpharma||120.2||Main market||2007||Turkish generics company|
|Pharmagene||40.7||Main market||2000||Acquired by Asterand in 2006|
|Prostrakan||40.0||Main market||2005||Acquired by Kyowa Hakko Kirin in 2011|
|Hutchinson China Meditech||40.0||Aim||2006||Chinese company|
|XTL Biopharmaceuticals||35.6||Main market||2000||Israeli company|
|Oxford Asymmetry International||33.3||Main market||1998||Merged with Evotec in 2000|
“We believe an IPO on Aim is the best option ... as it gives companies access to significant growth capital and liquidity, as well as a diverse and committed base of investors seeking companies with growth potential,” Faron said.
The company was founded by Mr Jalkanen in 2007, after he left Biotie in 2002 when that group, strengthened by its merger with Central Pharma and Carbion, floated on Nasdaq Helsinki. Biotie completed a Nasdaq ADR listing in June partly to overcome lack of liquidity – a problem Mr Jalkanen will be hoping to avoid, courtesy of London.