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12:00 AM
Jul 30, 2001
 |  BioCentury  |  Finance

Neuer Markt or bust?

Germany's biotech stocks have been trapped in the Neuer Markt meltdown since the end of July last year, with 10 biotech listings tracked by BioCentury falling some 70% in aggregate through last week. The meltdown, in which the Nemax 50 Index has plunged 80%, combined with media talk earlier this year of fraud involving high-profile blowups of stocks outside the biotech space, has led some market watchers to question the sustainability of the high tech exchange.

Indeed, even though the growth stock exchange in its early years touted its criteria for ensuring the quality of its listings, the Deutsche Boerse now is moving to tighter listing rules that will purge the wreckage. The parent exchange has announced that starting Oct. 1, the new market will delist penny stocks and insolvent companies (see BioCentury, July 23).

Deutche Boerse spokesperson Candice Adam told Ebb & Flow "the move was to further strengthen the Neuer Market requlatory environment to ensure investor confidence and transparency in the market."

At least in the short term, listed German biotech companies have little recourse, with multiple constraints that stop them from leaving the exchange. And private companies searching for capital may have little choice but to try for IPOs elsewhere.

"The whiff of corruption and fraud on the Neuer Markt has certainly put pressure on all the listed companies," said Mirko Scherer, CFO of GPC Biotech AG (NMarkt:GPC, Munich, Germany). "The state of the Neuer Markt is clearly not helping any listed companies and confidence is suffering, with fund managers moving away from the market, especially foreign funds."

"Institutional investors are becoming more critical of companies and have reshuffled their portfolios to sell off some 10-15% of their Neuer Markt investments," said Daan Ellens, CEO of vaccine play Rhein Biotech N.V. (NMarkt:RBO, Maastricht, the Netherlands).

But Peer Schatz, CFO of supply service company

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