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12:00 AM
Nov 08, 2004
 |  BioCentury  |  Finance

Ebb & Flow

The acquisition of French neurology and cancer play Synt:em by Sonus (SNUS) led some sector watchers to wonder if U.S. banks are seeking European asset opportunities. They may well be, but in this particular case the companies instigated the deal, according to Tucker Kelly of Adams Harkness, which advised Synt:em on the deal. "The deal was very much company driven," Kelly told Ebb & Flow.

All the same, Kelly noted, "part of our strategy is to look in Europe for companies and assets that can be put together with U.S. companies. There are very good products, technologies and people in Europe that can often be developed faster and better in the U.S."

SNUS is acquiring Synt:em for an initial payment of about $10 million in stock. Synt:em shareholders are eligible for two additional stock payments, each worth about $10 million, upon Synt:em's product candidates reaching Phase I (see B4).

On its own account, SNUS is in Phase II in ovarian cancer with its Tocosol forumulation of paclitaxel.

Exit poll

Ravi Mehrotra, head of European biotech research at CS First Boston, lately has probably talked to as many investors as anyone on the planet, and he reports that the mood is one of cautious optimism for next year.

Mehrotra has been on the road talking to 200 U.S. and European investors, of whom 80% are in healthcare and the remainder are generalists. "There was definitely a hint of optimism out there and they genuinely want to be investing in biotech," he said. "The outlook for 2005 is certainly interesting to good."

This is a different story from the past three years, when Mehrotra found many healthcare investors were not looking for exposure to biotech. "Now they are all saying they do need exposure," he said.

These institutional investors are under pressure to outperform the benchmarks, and as Mehrotra pointed out, "the reality is that unless you have overweight risk compared to your benchmark, you can't beat the benchmark."

Given that these investors are looking for the cream of the sector, Mehrotra is advocating two picks in Europe: One is profitable cardiovascular and pulmonary company Actelion (SWX:ATLN) as having the best risk/reward profile of a European biotech. His other pick is autoimmune, respiratory and neurology play UCB (Euronext:UCB), which recently completed its acquisition of Celltech.

"UCB is an interesting company in that no one is focusing on it. Out of the 200 funds we saw, less than 20 had actually made an investment decision on the stock," said Mehrotra. "Effectively UCB is a second Serono just appearing with a sort of $7 billion IPO. People were genuinely interested but really had not looked at the company."

Mehrotra said investors also were interested in cancer and genomics company GPC (FSE:GPC; GPCG); vaccine play Acambis (LSE:ACM; ACAM); and drug delivery play SkyePharma (LSE:SKP; SKYE).

NUVO riche

Now that Amgen has ceded worldwide rights for Alfimeprase to Nuvelo, NUVO finds itself on the hook for all the costs associated with developing the...

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