IHT: Europe's biotech 'immigrants' to America - by Andrew Pollock

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Europe's biotech 'immigrants' to America - by Andrew Pollock

The United States has long been the world leader in biotechnology. But when it comes to spinning science into start-ups, other countries have caught up. Europe now has 1,613 biotech companies, compared with 1,415 in the United States, according to Ernst & Young. The European companies, however, are typically smaller than their U.S. counterparts. More crucially, they often lack the capital to get beyond the early stages of research and development. Last year, biotechnology companies raised only $3.3 billion in Europe, compared with $16 billion in the United States, according to BioCentury, an industry newsletter. U.S. companies also spend on average three times as much on R&D and have access to 10 times as much debt financing as their European counterparts, according to a report released last month by EuropaBio, a trade group based in Brussels. Compared with Europe, it is also much easier for public companies in the United States to raise additional money through secondary stock offerings or by issuing debt.

Thus the wave of immigrant companies, like BioVex, which was formerly based in Oxford, England, but now has its headquarters in Cambridge, Massachusetts. Although its scientists remain in Britain, BioVex recently used its American base to file for an initial public stock offering on Nasdaq. Some of the foreign companies intent on a Nasdaq listing have sidestepped an IPO by doing a reverse merger with an American company that has already gone public - in some cases, a biotechnology company that has foundered. That is what Cyclacel did. It agreed last December to be nominally acquired by Xcyte of Seattle, although Cyclacel is now the name of the company. The maneuver enabled Cyclacel to take advantage of Xcyte's Nasdaq listing by raising an additional $45 million in April through a private placement of stock and warrants.Similarly, IDM, a French drug developer, used a reverse merger to acquire the Nasdaq listing of Epimmune. IDM is now based in Irvine, California, although its research operation and most of its employees remain in France.The German company Micromet now has a Nasdaq listing and a U.S. headquarters, after reverse-merging with Cancervax, of Carlsbad, California. Most of its operations are still back in the home country. Note: EU-Digest: Clever thinking by European biotech companies to use American capital to finance European research. Is this the global economy at work or just another example that the EU needs to look at a more liberal policy when it comes to freeing up European investment capital for research?