Usually this time of year, the who’s who of the Life Sciences’ world have their eyes firmly on the US with the annual meeting of the American Society of Clinical Oncology (ASCO). Chicago becomes a battleground for over 30,000 doctors and scientists jostling with companies vying and hoping to get their clinical data in front of the right people.
In an extraordinary turn of events it would appear London has taken centre stage for the time being in the global biotech domain. Investors in the space do not bat an eyelid at European biotech companies looking for pastures new across the pond in search of their optimal valuation. However, the first for a long time to break ranks and go against the flow came in the form of a Californian biotech company, Verseon. The company chose London’s AIM to IPO instead of New York’s booming biotech market where they raised an impressive £65m to advance their proprietary computational drug discovery platform to design novel potential therapeutics for various diseases.
Initially, the UK market viewed this as an anomaly, only to see Boston-based healthcare technology company, PureTech, target London’s main market for a potential $160m IPO. PureTech boasts a strong team with the notable addition of ex Sanofi CEO Chris Viehbacher. Their business model will be focused towards commercialising early-stage life science technology businesses – a model well known here in the UK with the presence of groups such as IP Group and Imperial Innovations.
The rise in interest from foreign healthcare companies in London markets inevitably triggers the notorious scepticism that is currently rife with UK investors when it comes to oversees companies. “They are only trying to IPO here because they can’t attract funds in their home country” is an all too familiar comment from UK investors. In the US Life Sciences context, such an argument is simplistic and does a disservice to the individual value proposition of the company in question. When we look at the biotech bubble in the US – it has largely been dominated by sector giants such as Gilead Sciences, Amgen, Biogen and Celgene to name but a few and have all experienced share price rises across the past year of up to 75% and their valuations are all well north of $1bn. The bubble in the US has clearly been for the chosen view and created quite a graveyard for the many companies sub $1bn in market value. Quite contrary to the myth that the US biotech bubble favours everyone.
The UK is experiencing quite a different reception to companies in the sector. As opposed to the US – the UK’s strong sentiment towards biotech companies is all encompassing. From AIM’s Motif Bio’s successful IPO earlier this year raising £12.8m right up to the main market’s Circassia raising £275m to finance its next two acquisitions and wildly tipped to be “the next Shire”. However, unlike previous bubbles it hasn’t all been started by sell side over-exuberance. The recent buy-side hysteria perhaps most notably led by Woodford Investment Management in April raising £800m for their investment trust focused towards long term early stage investing in the sector. In addition, Imperial Innovations recently led a £6m series A funding round for Auspherix, an early stage anti-infectives company from Australia that further supports the argument that the recent UK Institutional support for the sector is drawing international attention from all corners of the globe.
It is clear we can no longer compare the UK and US on a “like for like” basis in the small cap biotech sector due to the non-existence of one in the US. The danger now is creating a valuation void of similar stage companies within the UK itself. It remains one of the only sectors where investors pray their companies don’t ever make any money as their valuation will be adjusted accordingly. Whilst the recent interest in the sector is very much welcoming, whether the surge in patient capital works in a historically impatient sector remains to be seen.
Article provided by Hybridan