MolMed cuts lonely figure on IPO road

MolMed executives have this weekend finished wiping the sweat from their brows and raising a celebratory glass of champagne, having successfully launched this year’s first substantial initial public offering in Europe.

But the fact that the final price of €2.15 a share was at the very bottom of the indicative range of €2.15-€2.75, netting the company €50.1m to spend on R&D and giving a market capitalisation of €224.6m ($340m), tells its own story.

As does the fact that Italian gene therapy company MolMed and US-based Bioheart are the only biotechnology groups that have decided to brave the current markets and float this year.

Genghis Lloyd-Harris, partner at lifesciences investment group Abingworth, believes that the paucity of IPOs in the healthcare sector is due to already risk adverse investors eschewing the high risk nature of biotechnology stocks, with their long lead times to profitability, low success rates and need for additional funding.

IPO window closes

Since the credit crunch in August only 18 companies have floated raising $965m. This compares unfavourably with the 34 companies that listed between the third quarter of 2006 and the first quarter of 2007, raising a total of $1.73bn. The total for the 2007/08 would have been even worse if it had not been for bigger companies such as Pronova Biopharma and Ablynx raising over $100m each.

The lack of IPOs is a situation that Dr Lloyd-Harris does not believe will be alleviated in the near future. “I would be surprised if we see any other floats any time soon. I think that the IPO window for biotech companies will remain closed for at least the next couple of quarters if not the next nine to 12 months.”

The difficulty of trying to make it to market has already caused some companies to abandon their float plans. In January fellow Italian company Philogen cancelled its IPO citing difficult market conditions.

Others are abandoning the markets all together and instead opting for trade sales or further rounds of private funding. Last year, Organon, Reliant Pharmaceuticals, Adnexus Therapeutics and Arrow Therapeutics all forwent listing plans and struck generous acquisition terms with big pharma.

Local hero

MolMed’s success in getting to the market and not having to resort to courting a big pharma or biotech company was perhaps helped by a little jingoism.

As an Italian company marketing to mainly Italian investors, MolMed benefited from the fact that its core shareholders included some of Italy’s most powerful families, including the Berlusconis.

The strong investor base and a little patriotism on the part of retail investors that caused this part of the float to be two times oversubscribed, has led some to argue that it would have been impossible for MolMed to float in any other market.

Given that many are still waiting to assess the full impact of the fallout of the US sub-prime market, it is unlikely that MolMed getting out of the IPO blocks can be trumpeted as a sign of recovery in the sector.

So while the executive team of MolMed may be celebrating their success, industry watchers might have a long time to wait before they hear the sound of champagne corks again.

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