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12:00 AM
Jan 22, 2007
 |  BioCentury  |  Finance

Ebb & Flow

International Biotechnology Trust (LSE:IBT, London, U.K.) is on the road looking to raise up to £60 million ($118 million) in series C shares. The firm is hoping to tap into what it sees as increasingly positive sentiment towards biotech among U.K. investors.

"There is a growing belief among some institutions and high net worth individuals that biotech is the new pharma. We are hearing that they want to trim their pharma exposure and would like more access to the beta of biotech," portfolio manager Andy Smith told Ebb & Flow.

In the 12 months to Jan. 3, IBT's share price rose 39%, while its net asset value per share rose 20.5%, compared with a sterling-adjusted 11.5% decline in the NASDAQ Biotech Index. "There is an expectation among investors we have spoken to that 2007 will be a better year than 2006," said Smith.

In particular, there is growing interest in getting exposure to unquoted investments that have provided high returns on the back of M&A premiums. "We got a 9X return from GlycoFi seven months after investing $2 million of the realization we got from Eyetech," noted Smith.

In addition to GlycoFi's takeout by Merck(MRK), IBT's performance was underpinned by the acquisition of portfolio companies KuDos and Cambridge Antibody Technology by AstraZeneca (LSE:AZN; AZN), and PowderMed by Pfizer (PFE).

IBT is looking to increase the size of its closed end fund because it wants to increase the fund's liquidity - its share turnover is only £70,000 a day - which would provide more headroom to make more unquoted investments. A larger fund also would be listed in the FTSE All-Share Index, which should attract more investors.

Managed by SV Life Sciences Managers, IBT currently has £73.5 million ($144 million) under management and is able to invest up to 30% in unquoted companies. In the past year, the share of unquoted companies in the portfolio has fallen from 22% to 13%. But with a strong deal flow emanating from the SVLS network, Smith expects that to rise to 20% within the next four months.

The placing of up to 40 million shares at 150p each is scheduled to close on Feb. 2. The shares will initially be placed in a shadow portfolio of both quoted and unquoted stocks. Once 85% of the new issue is invested or in six months, whichever is earliest, the shares will be converted to ordinary IBT shares based on their respective NAVs.

Follow-ons start up

The first weeks of biotech financing in 2007 were almost entirely about venture capital, but last week public equity financing stepped squarely into the game. Three follow-on offerings priced, with two actually trading up on the news, while the other one saw its stock price trimmed.

The big winner was a $104 million offering from CNS play Vanda (VNDA), which...

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