Take Heart: European Investors Regain Appetite for IPOS

Philippe Pouletty, a French trained medical doctor and general partner at Paris-based Truffle Capital has reason to look especially cheerful these days. Carmat, a company building an entirely artificial human heart, is planning an initial public offering in June – the  third company in Pouletty’s portfolio to go public in as many months. Though no one expects 2010 to look like 1999 the market for IPOs – particularly in biotech – appears to be open once again.

“You just need to say ‘let’s go’ and then do it,” says Pouletty. “A lot of investors say the market is not good and complain that it costs a lot of money to go public, ” he says. “They prefer to wait for a window, but by the time they decide it is often too late.”

 Acceptance of biotech IPOS worldwide is greater now than it has been over the last 24 months. So is the climate for IPOs in general.  “A lot more companies are going public, period,” says Jack Plunkett, head of Plunkett Research, a market research firm in Houston, Texas, which, among other things, publishs a biotech industry almanac. The reopening of the public markets for biotech companies after a long slump  means they are once again being seen as “valuable potential growth companies,” he says.

There were only six biotech IPOS in 2008, one in the US, three in Europe and two in the rest of the world. The number jumped to 10 across the globe in 2009, though there was only one in Europe, Belgium’s Movetis.

The European number is expected to significantly rise this year. Six months in there have been 14 biotech IPOS in 2010, three of them in Europe, says David Thomas, director of industry research at Inside BIO Industry Analysis, the research arm of BIO, a U.S. group representing more than 1,200 biotechnology companies, academic institutions, state biotechnology centers and related organizations  in some 30 countries.

Thomas points out that three of the four biotech IPOS in Europe since January 2009 have been in France. Two of them were in April.  Both are backed by Truffle Capital, the Paris-based private equity firm Pouletty co-founded.

French biotech company Neovacs listed on the Alternext market of the NYSE-Euronext on April 21, after lowering its capital raising to €11 million  instead of the €20 million it had been seeking.

Neovacs, which counts both Truffle Capital and Novartis Venture Funds among its investors, is is a spin-off from Pierre & Marie Curie University in Paris and was founded in 1993 by Professor Daniel Zagury, one of  France’s most eminent immunologists. The company, first French biotech company to go public since 2007,  aims to become a key player in the treatment of autoimmune and inflammatory diseases, as well as certain cancers. The company is a leader in the field of active immunotherapy against human cytokines, using a new approach based on therapeutics called Kinoids.

Neovacs’ portfolio currently consists of three drug candidates intended for the treatment of autoimmune and inflammatory diseases, and in the case of one, certain cancers. The target indications cover a broad market, including rheumatoid arthritis, Crohn’s disease, lupus, psoriasis, lupus, age-related macular degeneration  and various types of cancer. The potential market for the company’s leading TNFα-Kinoid product is estimated to be over $16 billion.

 Another of Neovac’s drug candidates is intended to treat lupus, a disease that affects up to three million patients within the world’s seven largest pharmaceutical markets. Even if use of this type of therapeutic were to be limited to patients with the most severe form of lupus, Neovacs estimates the market could be as much as $5 billion per year.

 A third drug candidate has been tested in animal models of cancer and age-related macular degeneration.

 On April 27, six days after taking Neovacs Public, Deinove, another biotech company backed by Truffle Capital, listed on the Alternext Exchange, raising €12.1 million. Deinove is aiming to create breakthrough technologies in biofuel production, green chemistry and research of new antibiotics. Founded by Miroslav Radman, director of evolutive and medical molecular genetics at Inserm, France’s National Medical Research Institute, Denoive’s top priority program is the development of a new type of industrial biofuel production process based on biomass digestion and fermentation using Deinococcus bacteria.

Deinococci bacteria, which first appeared on earth some 3 billion years ago,  are very robust and display one of the broadest biodiversities in the living world, according to the company. Over billions of years of evolution in hostile geological and climatic environments, the Deinococci have borrowed a number of genomic fragments and powerful metabolic properties from other organisms . One of the natural propertie acquired by the Deinococci is the capacity to degrade otherwise resistant, major components of biomass and ferment them into ethanol.

Deinove”s second development program aims at developing applications of Deinococci in the field of green chemistry and in the production of organic acids used in the petrochemical, pharmaceutical, cosmetics and  food industries.

Deinove also discovered that several Deinococci strains in its library produce antibiotics and antifungal agents. The dramatic increase in antibiotic resistance is creating a need – and a market – for new therapeutics.

Carmat, the Truffle Capital-backed company scheduled to go public in June, is building an artificial human heart. The company, co-founded by renowned French heart surgeon Alain Carpentier, is leveraging the aerospace industry’s expertise in modeling, stress testing, miniaturization and design for severe environments as well as the latest advances in software, medicine, biology and materials science. The medtech firm aims to raise €15 million through its NYSE EuroNext listing.

To be sure,  the exits of Truffle Capital’s companies  are in the tens rather than hundreds of millions of dollars.  But the first two did relatively well and Pouletty says he is optimistic that Carmat will meet its target. “You can dream about doing a Google sized IPO but it won’t happen in biotech,” says Pouletty. “It is the step in the life of a company and not the end of the road.” If Pouletty’s optimism catches on, going public may once again  be part of the roadmap for European companies.




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