Kedrion decision adds to 2008 IPO blues


It was never set up to be the saviour of the sector, but Kedrion’s IPO planned for this week offered one of the few glimmers of hope that the markets could be turning for healthcare companies. The fact that the float has now been pulled, despite the company being profitable and lower risk than classic biotech, indicates just how bad things are for small companies wishing to raise money on the public markets.

The Italian company announced late Friday that the failure to reach a reasonable valuation for the company was behind its decision to remain private. Both investors and bankers had hoped that Kedrion would follow in the footsteps of fellow Italian company Molmed and float thanks to the support of private, high wealth investors including the founding Marcucci family.

If it had gone ahead the sale of 35% of the company for as much as €224m ($358m) would have been Italy's second biggest initial public offering this year. The shares were valued at up to €12 each and many were confident that its focus in blood plasma rather than drug discovery would help it get away.

Rock bottom

The withdrawal of Kedrion now brings the number of life science companies that have successfully managed to IPO during 2008 to just five, the lowest level since 2002 after the biotech bubble burst in 2001.

Also unsurprisingly, the amount of money that companies have managed to raise is smaller as investors have flown from high risk stocks like biotechnology and healthcare in the wake of the August credit crunch.

Molmed, which raised $85.4m back in February, claims the title of being the biggest fund raising in the sector this year, followed by Ipsogen, which floated on the Alternext in Paris in June, raising $18.6m. PCI Biotech Holding, which had its IPO on the same day in Norway managed to raise $12m, but the remaining two companies including Genera Biosystems in Australia and Bioheart in the US only raised $4.78m and $5.78m respectively.

This brings the total raised this year to a rather paltry looking $126.5m, which compares badly with the $2.95bn that was raised last year. If the size and number of IPOs continues at this rate then 2008 could be one of the worst years ever for fundraising and miss the $275m raised by a total of 10 companies in 2002.

Looking for the exits

With the IPO window now looking firmly nailed shut many companies and investors are looking for alternative exit strategies that have seen a number of them abandon the markets all together and opt for trade sales or further rounds of funding, rather than risk the current markets.

Last year, Organon, Reliant Pharmaceuticals, Adnexus Therapeutics and Arrow Therapeutics all forwent listing plans and struck generous acquisition terms with big pharma.

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