No headlong rush, but biotechs still aiming for market

Biotech newcomers have been a rare event on the Australian bourse in the past six months.

After the rush of local companies onto the market 18 months ago, the current environment exudes an almost deathly quiet and begs the question - what are they up to?

But according to fund managers, we should be preparing for several new entries at the quality end of the market this year, with about eight companies said to be planning floats.

Rothschild Bioscience Managers associate director Brigitte Smith said her organisation was expecting a good year for biotech IPOs.

"I think there's been private equity investment in life science for a number of years and so these companies are now coming to fruition," Ms Smith said.

"There has been a lot of private investment going in over the past three or four years, so in light of that fact there are some strong companies with strong management teams and good pipelines that will be looking to list in the next six to 18 months."

Likewise BioTech Capital managing director Harry Karelis said a relatively flat market was keeping so-called blue-sky companies from seeking initial public offerings.

"I think you see a raft of floats when the markets are quite bubbly and hot, and it's not at the moment, so I think therefore that you will see a more measured approach to IPOs," Karelis said.

"So in that sense I think there won't be a wave of smallish biotech floats in this environment but more of the high-quality ones towards the end of the year.

"These are the ones that have been backed by institutes and venture capitalist groups for several years."

Possibilities

Among the names thrown into the ring for possible IPOs this year have been genomic and drug discovery group Cerylid Bioscience, anti-inflammatory drug researcher Impraxis Pharmaceuticals, kinase and anti-clot group Thrombogenix, instruments developer Proteome Systems, biopharmaceutical company Alchemia and nasal flu vaccine company BioDiem.

Also mooted have been Queensland companies Xenome and CBio, although both have denied they had any plans to float.

The only definite float in the sector is vision sciences company Iatia, which opened its $5 million IPO on February 22 and plans to float by April 5, while BioDiem, Impraxis Pharmaceuticals and Cryosite have revealed plans are underway to also list this year.

Impraxis chief executive officer Dr Alan Robertson said the company was currently undertaking a pre-IPO capital raising of up to $10 million to position itself for a float in late 2002.

Robertson said that while the public listing dollar target had not been set, he expected it to be in the tens of millions.

The money is earmarked to further develop a program that includes anti-inflammatory drugs for multiple sclerosis (currently in the toxicology phase), rheumatoid arthritis (animal studies), cystic fibrosis (late phase II) and chronic obstructive pulmonary disease (phase II).

Impraxis also has a phase III project involving a system that allows people with asthma to better monitor their steroid therapies.

Another Melbourne group, BioDiem, also has plans to join the ASX Health and Biotechnology index by August.

Chief executive officer Tom Williams said the amount to be raised would probably range from $10 million to $15 million and would be used to develop new projects separate to its nasal flu spray, now marketed by Merck Sharpe Dohme.

Williams said BioDiem had licensed an anti-microbial compound and tissue resolution agent from the St Petersburg Institute of Experimental Medicine, which it planned to develop through institutions and contract research organisations.

Early stages

"These are in the early stages," Williams said. "We are going to be doing pre-clinical work on them with the goal of getting them into clinical trials in two to two and a half years."

While none ruled out the possibility of listing on the ASX, most of the rumoured companies maintained they were yet to determine their capital raising plans for the coming year.

Cerylid Biosciences' director of genomics Dr Matthijs Smith said listing was only one of the fund-raising options the company was considering.

"I think a company in our position would be looking at that, but I'd be uncomfortable saying we are because the planning is not that solid," Smith said

"We are in a position where we'd potentially IPO in the next few years."

Smith said the speed of Cerylid's cash burn in its R&D program and its desire to ramp up its internal drug discovery work meant capital raising in some form would be needed.

"In the end it will depend on the market, our cash needs, the value since our last capital raising and what our shareholders want," he said.

At Thrombogenix, an IPO was unlikely unless "the market goes mad" and a strong multiple was in the offing.

Chief executive Dr Ross Murdoch said that while "it's always a potential, from my point of view I would think it's unlikely."

Murdoch said the company, which is finalising a name change to Kinacia, was still working out its fundraising strategy for the year and that a round of private capital would be the first option.

"Where that rumour (of Thrombogenix listing) started, I think, was that people asked me what our strategy was to take the company forward," he said. "I said that all companies think about IPO-ing, and that we hadn't decided whether we would go for the ASX or Nasdaq - although we would need some form of capital raising at the end of the year.

"Too many Australian companies IPO too early, and we certainly have the quality of research and would be able to attract public funding, but we are not out there saying we will list."

Similarly, Alchemia laboratory and human resources manager Dr John Gehrmann said the company could float if the scenario was right.

"At this point in time it is highly unlikely that we will go for a public listing, even though we're constantly looking at that market," Gehrmann said.

"We're just not ready to go at this point in time.

"That doesn't mean that we might not, if everything is right, but at this point in time the answer is no."

Gehrmann said it was more likely Alchemia would seek an IPO in 2003, with the board currently examining whether the company needed a capital raising.

Another potential starter in 2003 was Proteome Systems, which is currently undertaking a $20 million pre-IPO fund-raising to help move its suite of 50 products - comprising proteomics instruments, kits and gels - on to the market.

Chief financial officer George Favotto said the raising was expected to be finished by June, with an IPO a consideration for the following year.