New UK biotech fundraising initiative declared a win-win
pharmafile | February 10, 2005 | News story | Research and Development |
Current rules which restrict how companies raise cash should be interpreted more freely to help UK biotech and other hi-tech sectors grow, a government sponsored report has said.
Paul Myners, chairman of Marks & Spencer, was asked in September to head up a review of the UK's current pre-emption rights, which oblige companies to approach existing shareholders first when making new share offers.
The UK biotech industry says it needs to attract greater investment if it is to compete internationally, particularly with US biotech which has had less difficulty in raising investment.
In 2002 European biotech companies raised E1.98 billion, about half the 2001 total, and less than a third of the amount raised by US companies in the same year.
The Myners report has now concluded that the current 5% limit on non pre-emptive right share offers should be retained as a benchmark, but that company directors and shareholders should consider making exceptions to this rule on a case by case basis.
He stressed that that the current rules should be retained but less rigidly interpreted and that more active shareholder engagement would be the key if the sector is to raise more capital.
Myners also recommended the creation of a new Pre-Emption Group with wider membership to take a more proactive approach to monitoring how the new guidance is put into practice.
Lord Sainsbury, Science and Innovation Minister, said the new report was an excellent way forward which should produce a win-win situation for companies and investors.
"The challenge is now to keep the momentum going and drive forward the report's recommendations. The bioscience industry plays a vital role in making the UK the best place for science. It stands to benefit greatly from increased flexibility which the industry and investor community can deliver by working more closely together," he said.
Aisling Burnand, chief executive of the UK BioIndustry Association (BIA) said the recommendations were excellent news for the future of the sector, and reaffirmed support for the existing safeguards for shareholders.
"The BIA absolutely endorses that: shareholders own the company and the BIA strongly supports the principles of promoting and protecting shareholder value," added Burnand.
She said the BIA also believed that direct dialogue between companies and their shareholders was the best way to decide how the rules should be applied.
"The BIA will be encouraging our member companies to develop sensible plans and to discuss them directly with their shareholders," she added.
Myners said: "There is an opportunity here for all parties to benefit – preserving the principle of shareholders' rights to pre-emption, while delivering companies the flexibility they need to raise capital in ways that are most appropriate to their particular circumstances."
He added that he was confident that the new Pre-Emption Group would bring about change "but of course the proof of the pudding will be in the eating".
The Association of British Insurers (ABI), which represents companies who account for more than 20% of investments on the London stock market, had opposed any dilution of pre-emption rights, but says it is happy with Myner's solution to the problem.
A spokesman said direct contact between companies and shareholders was very helpful in agreeing on a flexible approach to the rules.
"We strongly urge companies to take this route rather than assume their case will not be heard. Too few have done so in the past.
"The revival of the Pre-emption Group will be important in further developing awareness. We shall need to look closely at the detail, but will work constructively with its chairman and other members to ensure this gets under way quickly."
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Government backs UK biotech fundraising review
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