Neovacs raises €10 million In First French Biotech IPO In Two Years

Neovacs floats on the Alternext beginning April 21, following tough year for the country's biotech sector.

French biotech company Neovacs has raised €10 million ($13.5 million) in the first biotech initial public offering in France in two years - about half the amount it initially sought.

Neovacs is the first IPO for a European biotech in 2010 and only the fifth in western markets. Its struggles are indicative of the tough financing market for traditional biotechs.

The Paris-based company had initially planned to raise €20 million by selling 3.8 million shares at €5.2-6.00 per share, but announced lowered ambitions on April 9. Neovacs finally priced its offering of 2,084,636 shares at €4.80 per share, the low end of its range. Shares in the Paris-based company will begin trading on the Alternext exchange of NYSE Euronext Paris on April 21.

Just under 80 percent of the new shares went to institutional investors, with the remainder going to individual shareholders, representing a total of 16.2 percent of Neovacs' capital. Key investors in the company continue to be Truffle Capital, Novartis Venture Fund and OTC Asset Management, all of whom invested in the IPO.

The funds raised will be used to accelerate the development of Neovacs's two lead products that are in clinical trials, TNFalpha-Kinoid for rheumatoid arthritis and INFalpha-Kinoid for lupus. Longer-term, the company will look for partners to help develop the compounds, it said.

Neovacs was founded as a spin out from the Pierre & Marie Curie University in Paris. Its "active immunotherapy" products aim to induce a polyclonal antibody response to cytokines like alpha-interferon and tumor necrosis factor, which are over-expressed in certain diseases.

Its products consist of inactivated cytokines linked to carrier proteins, which induce an anticytokine immune response when injected. Current treatments, which rely on passive immunotherapy with monoclonal antibodies, are injected every few weeks, but Neovacs hopes that its products will have to be administered only three to four times a year.

The biotech's lead product, TNFalpha-Kinoid, is being evaluated in a Phase II trial taking place in France, Belgium and Switzerland in rheumatoid arthritis patients who have developed resistance to anti-TNF monoclonal antibodies, which currently dominate the field. The trial is being funded with a €7.9 million grant from the French innovation agency, Oseo. A Phase II trial of in Crohn's disease is also expected to start in the middle of this year.

Neovacs' second product, IFNalpha-Kinoid, has recently entered a Phase I/II study for the treatment of lupus, with the first data expected from the trial in early 2011. An over-production of alpha-interferon is a feature of lupus, the company notes. A third product candidate, VEGF-K, is in preclinical development and has potential in the treatment of cancer.

Tough Year For French Biotech

Despite the small amount of capital raised, company executives insisted that the listing could suggest interest for other companies with plans for a flotation. "Neovacs managed to attract plenty of investor interest, and when set against today's generally difficult stock market climate for biotech companies, the success of the IPO is outstanding," the company said.

But the past two years have been tough for the global biotech industry and the trend seems to be continuing in 2010. Only five biotechs had IPOs in 2010 as of April 16, and of those, all took haircuts ranging from 25 percent below the range of its midpoint estimated pricing for Ironwood, to 50 percent for Anthera Pharmaceuticals (Also see "Anthera Takes A "Haircut" And Delays Its Planned Initial Stock Offering" - Pink Sheet, 24 Feb, 2010.).

Most recently, Tengion, a regenerative medicine company, went public on April 9, at $5 a share, or 44 percent below the midpoint of its original pricing range. It also raised 25 percent less money than it had hoped for, a total of only $30 million. Aveo, which has a renal cell cancer drug in Phase III, took a 36 percent haircut when it went public in March.

VC financing was not easier, including for the French biotech sector. A recent "Panorama" survey by the trade association, France Biotech, found that the venture capital firms continued to take an interest in the country's sector, but the value of their transactions markedly declined.

The VCs took part in 17 seed and series A funding rounds for French biotech companies in 2009, a similar number to the 18 investments they made in 2008.

However, the total amount of money the VCs invested in such early-stage French biotech companies - €65 million - was less than half what they spent in 2008. A third of the€ 65 million went to seed and series A fundings, and €43 million were distributed to second and third-round funding.

There were no IPOs in the French biotech sector during 2009, but four public companies managed to raise €122 million in secondary financings during the year - Cellectis raised €22 million, ExonHit Therapeutics raised €15.6 million, NicOx raised€ 94.6 million, and Innate Pharma raised €24.3 million.

- John Davis (j.davis @elsevier.com)