Government backs UK biotech fundraising review
pharmafile | September 8, 2004 | News story | |
UK biotechs could benefit from a rule change on share issues to help them raise funds and compete more effectively with the US sector.
Current EU laws dictate significant new share offers must be made to existing shareholders before new investors are invited to buy into the company, but the UK government is keen to see a change to help hi-tech companies, including the biotech sector.
The sector has told the government the 'pre-emption rights' are not in the interests of shareholders, and wants to see issues of up to 20% of new shares without the restrictions applying.
Paul Myners, chairman of Marks & Spencer will chair a study into the current rules and will be supported by an advisory panel with representatives from private equity, City investment institutions and high tech industries, in particular the biotech sector.
In 2002 European biotech companies raised E1.98 billion, about half the 2001 total and less than a third raised by US companies in the same year.
Meanwhile, valuations of listed biotech companies declined across the world in the same period, prompting concern about the sector's ability to finance R&D investments.
Aisling Burnand, chief executive of UK biotech industry organisation the BIA welcomed the new inquiry, which has responded to the government-industry strategy document Bioscience 2015.
"One of the recommendations included in Bioscience 2015, the most significant report in the UK bioscience sector, was a relaxation of the pre-emption guidelines. The involvement of a fresh pair of eyes in the form of Paul Myners is therefore excellent news. He is someone who understands the perspective of both companies and investors."
She added that US companies can already offer new shares of up to 20% of their share capital at a discount to the market price without needing the consent of their existing shareholders.
"Bioscience is a global business and therefore we believe that it is important that there is a level playing field financially for bioscience companies," she said.
The BIA pointed out that the top ten US bioscience companies with market capitalisations of up to $70 billion needed to raise $700 million from investors before reaching profitability, and emphasised that the scale of funding needed for late-stage development exposed them to considerable risk.
Burnand said the BIA appreciated the sensitivities involved in changing pre-emption rules, but hoped progress could be made through partnership.
"Bioscience is a sector that requires injections of cash. If these injections are not made, the economic and healthcare benefits offered by the bioscience sector will not be delivered. When it comes to pre-emption rights, one size does not fit all."
Proposals to change the current EU law were put forward by the European Commission in May 2003, but the pace of reform in European law means a relaxation could be some time away.
The UK government said its position on changes would be informed by Myners' Company Law Review.
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