Choosing to survive

Building sustainable biotech businesses when investors are playing hard to get is forcing European CEOs to think about making some hard choices. For some that means surrendering their independence, for others it means thinking about emigrating, while the braver ones are looking to tough it out by keeping a tight grip on costs.

Last week, two European companies with flagship potential - Arakis Ltd. and Glycart Biotechnology AG - decided instead to be acquired, frustrated by the reluctance of the markets to provide what they saw as fair valuations.

On the face of it, Arakis (Cambridge, U.K.) could be seen as being in fairly ruddy health. Its reprofiling strategy had produced a development pipeline that is less risky than most biotechs, it had about £30 million ($52.6 million) in the bank and a share in one of this year's most significant biotech-pharma deals. The company's management was clearly ambitious and looking to grow a potential European bellwether.

Word on the street, however, was that the markets were unlikely to support the £100 million-plus ($175.2 million-plus) pre-money IPO valuation that the company wanted.

This rumored reticence had less to do with what the company had on offer than with the prevailing market. Many of the European IPOs that have gotten away this year have struggled to get the valuations they sought and most are under water since flotation (see "European IPOs").

Fortunately for Arakis, Sosei Co. Ltd. (Tokyo: 4565, Tokyo, Japan) provided it with an alternative, even if few could have anticipated a takeover by a Japanese biotech using paper on the Tokyo stock exchange.

Until now, Sosei has been very focused on providing non-Japanese companies access to the closed shop that is the labyrinthine Japanese health system, while at the same time looking for new indications for Japanese products outside of Japan. This has enabled Sosei to go public in Japan and support a market cap of ¥34.2 billion ($304.2 million) as of last Friday, but it falls short of CEO Shinichi

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