Monday, October 6, 1997
Ebb & Flow Focus
OXFORD - Just over five years ago, Europe's entrepreneurial
bioscience companies had very little choice if they wanted to access public
equity. It was either a case of cranking up the air miles and go for an IPO
on NASDAQ, or wait until the company could meet the stringent requirements associated
with admission to Europe's senior bourses; which would entail a very long wait.
Since then, a whole range of options has sprung up and now
aspiring companies look to be spoilt for choice. The past two years have witnessed
the emergence of London's Alternative Investment Market (AIM), the pan-European
NASDAQ clone EASDAQ, and several new junior markets created by the main exchanges
in Paris, Frankfurt, Brussels and Amsterdam, which are organizing themselves
into a pan-European network of high growth markets. Scandinavian exchanges are
also admitting bioscience stocks.
Moreover, NASDAQ looks poised to take a more aggressive position
within Europe in the coming months. The big question is: do European biotech
companies risk losing out long term because no market is able to develop a high
quality sector with enough critical mass to sustain it?
The London Stock Exchange was the first European market to
consider the needs of entrepreneurial biotech companies when exchange officials
recognized they were in danger of losing a whole new high growth sector to North
The warning bells really started ringing in 1992 when Cantab
Pharmaceuticals (LSE:CTB, NASDAQ:CNTBY; Cambridge, U.K.) announced that it needed
to raise public equity and was going to NASDAQ to do it. Soon after, British
Biotech (LSE:BBG, BBIOY; Oxford, U.K.) was able to complete a dual listing on
NASDAQ and the LSE, but only after London officials agreed to relax the listing
Indeed, probably the most significant event in the development
of the U.K. biotech sector was the relaxation in 1993 of LSE listing rules for
research-based companies, the so-called Chapter 20 rules (see A3). However,
even though the Chapter 20 rules have enabled many companies to raise public
capital, gaining a full listing remains difficult.
But if the financing environment for U.K. biotech companies
was considered bad, the situation in continental Europe had been nothing short
of disastrous. Spotting this gap in supply of equity capital, the European Venture
Capital Association announced that it would attempt to create EASDAQ as a distinct
pan-European exchange to cater to entrepreneurially managed growth companies
with international aspirations.
The EASDAQ announcement galvanized other exchanges into action.
And before EASDAQ's screens could come on, London had established AIM. And the
Paris Bourse, which originally had been in talks with the EASDAQ founders, had
not only launched Le Nouveau Marche as its own high tech high growth-focused
exchange, it was also finalizing plans for a pan-European network of new markets
backed by the main bourses.
"We are pleased that there is now growing competition to cater
for small-to-medium sized companies," said Katie Morris, chief executive at
CISCO, the London-based lobby organization for smaller companies. "Monopolistic
stock exchanges were just focusing on the large cap companies, while small companies,
particularly those in high tech areas, suffered because of their size and the
fact they were misunderstood."