Ebb & Flow

When MediciNova went public on the Osaka Securities Exchange in early 2005, the San Diego biotech was hoping both to tap into the then-frothy biotech IPO market in Japan, and to take advantage of its Japanese roots - the company was formed in 2000 as a majority-owned subsidiary of Tanabe. Indeed, MediciNova (Osaka:4875) raised a whopping $130 million in the IPO and was valued at $380.6 million, even though it was only in Phase II testing.

From there, the company expected that its listing, Japanese management and deals with Japanese pharma companies would prompt Japanese investors to view it as a Japanese company, while U.S. investors would view it as a U.S. company. As it turned out, just the opposite happened - investors in both countries viewed MediciNova as a foreign investment.

Moreover, said CFO Shintaro Asako, "a lot of U.S. mutual funds that invest in biotech have restrictions on the types of securities in which they can invest, including no foreign stocks. Even though we're in the U.S., we were classified as a foreign market stock."

To make matters worse, Japanese exuberance for biotech waned. "Japanese investors are used to seeing a company make profits and are used to calculating a valuation based on cash flow or EPS," said Asako. "Very few people in Japan know how to value a biotech based on its technology. The attitude is: 'you're losing $30-$40 million, why should I own you this year?'"

Consequently, MediciNova has seen its valuation in Osaka slip to $111.8 million as of Friday.

Last week, MediciNova took a step to remedy the situation by listing its shares on NASDAQ under the symbol MNOV. "We've done all the investor relations outreach and figured out that people want to own a U.S.-listed stock," said Asako. "Listing in the U.S. should create a reasonable market valuation for our company - right now we're a Phase III company trading at cash."

MNOV didn't raise any money in the listing, but it has more than $100 million in the bank. Its late-stage compounds include MN-001, which is in Phase III testing to treat bronchial asthma, and MN-305,

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