London & the Continent

Stifling an equity culture

OXFORD - If the focus of the U.S. equity markets this year has been on the positive effects of the human genome project and the unprecedented fundraising activity, in Europe the key issue has been consolidation of its fragmented markets.

The second quarter may have provided a sense of respite, as European biotechs pulled in $1.2 billion in the quarter, more than triple the $368.1 million raised in the first quarter. Indeed, as the funding frenzy in the U.S. finally cooled, the European take amounted to 26 percent of the global total of $4.6 billion raised by biotech companies in the second quarter. This compared to Europe's miniscule 3 percent of the first quarter's global take of $15.8 billion.

Europe's second-quarter numbers were buoyed by very big IPOs, including $140.4 million raised by cardiovascular play Actelion Ltd. (SWX:ATLN, Allschwil, Switzerland), $117.4 million pulled in by MediGene AG (NMarkt:MDG, Martinsreid, Germany), which is developing cardiovascular and cancer therapeutics, and a $115.9 million deal by sequencing and analysis company Pyrosequencing AB (Uppsala, Sweden).

Nevertheless, with Europe now claiming at least as many entrepreneurial life science companies as the U.S., an 8 percent share of the global fundraising pie so far this year does not look like much. Thus Europe still desperately needs to create a single pan-European stock exchange with deep pockets if its biotech companies and their backers are to prosper. And the sooner the better. This was the stark warning issued by bankers at the recent BioEquity 2000 meeting in Munich.

However, while representatives from the stock exchanges agreed that demand for such a single platform existed, they are still playing a cat-and-mouse game to see who will be the last one standing.

Roadblocks to liquidity

"Currently, European investment bankers, lawyers, and other advisors have to have a knowledge of a number of different stock exchange regulations, increasing costs and extending timetables," noted David Porter, head of healthcare, corporate finance at Nomura International plc. James Macmillan-Scott, chief executive at Close Brothers Technology Group, also lamented that