Life Sciences Outlook 2012 Dutch biotech companies ... - NautaDutilh

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36 the fact that several interviewees confirm that management regularly (but sometimes privately) harbour such ambitions, as this would allow to them to keep their jobs, remain involved with the company they have helped build up from the ground, and bask in the glory associated with an IPO. Perhaps this low score is because the nature of IPOs in biotech has changed: “Takeovers and IPOs are not mutually exclusive. IPOs are currently financing events, not exit events anymore,” says the CEO of a biotech company. Perhaps this low score is also prompted by the idea among the majority of respondents that, currently, an IPO is not even a realistic option in the first place. No less than 75% think an IPO in 2012 is not worth considering for Netherlands biotech companies. The main reason for this is undoubtedly the ongoing general crisis in the financial markets, but there are other reasons as well. These are discussed below. In our interviews, the reason cited first and foremost is the current market sentiment, the Ziggo IPO and the announced IPO of Douwe Egberts notwithstanding. “You need to have market momentum in order to get generalist investors, who usually provide the bulk of the money in a successful IPO, to participate in higher-risk investments,” says a banker. So unless a biotech company “resembles a cookie factory in its product, sales and financial outlook “, entrance to the public markets is barred. “An IPO for a classic product-development, midstage biotech company today? Just can’t get it done!” declares a partner of a venture capital fund. Several factors, apart from the high-risk profile of biotech companies, make an IPO even more difficult for them than for other high-tech companies: • The past decade has seen many biotech stocks whose price went down after their initial listing. This has made investors wary of participating in new IPOs in the sector. • Valuation of the IPO may be too high, for instance if the last financing round was relatively high. Investment banks hungry to get a key role in the IPO process may also be too optimistic on valuation in the pitching phase, reducing their valuation when they get more information after having secured their role. • The often highly technical nature of biotech products requires a buy side that is able to appreciate their potential and risks. In a bookbuilding process, a number of specialized investors must usually be on board first before the bigger, general investors follow. Such a base of specialist biotech investors is lacking in Europe, according to some interviewees: “On the buy side, there is frightfully little knowledge of the sector”, says one. In the US, there are many specialist biotech fund managers, but they hardly ever deliver the goods: “Management are easily persuaded by their bankers to embark on a road show to the US, but I have never seen US investors take part in a European IPO.” • Again in contrast to the US, the market in Europe for biotech stocks is not very deep. This creates the very real risk of ending up in a vicious circle of reduced coverage from analysts, lower liquidity, funds that want to divest and lower stock prices. To prevent this, biotech companies that can’t report their earnings every quarter need to use their shares actively or, as a banker we interviewed advises his listed biotech clients: “In the absence of cash flow, you need a news flow.”
“IPOs are currently financing events, not exit events anymore.” CEO of biotech company Life Sciences Outlook 2012 Dutch biotech companies: from start-up to exit 37
Page 1: Life Sciences Outlook 2012 Dutch bi
Page 5 and 6: Table of contents. Preface 3 Introd
Page 7: will flow through the Netherlands O
Page 10 and 11: Academic institutes as the Petri di
Page 12 and 13: “You don’t start a biotech comp
Page 14 and 15: Best practice in life sciences tech
Page 16 and 17: The role of government “One thing
Page 19 and 20: 2. Investing. At the point that a s
Page 21 and 22: “We also have ourselves to blame,
Page 23 and 24: “Life sciences are far more diffi
Page 25: The evolving relationship between m
Page 28 and 29: A lack of ambition or healthy reali
Page 30 and 31: The term ‘strategic alliance’ i
Page 33 and 34: 4. Exit strategy. The last stage in
Page 35: In each case, a decision will have
Page 39 and 40: The technical IPO or even a hybrid
Page 41 and 42: However, the government could becom
Page 43 and 44: Galapagos NV: Onno van de Stolpe (C
Page 45 and 46: About Niaba. The Netherlands Biotec
Page 47 and 48: The Netherlands The Netherlands Joh
Page 49 and 50: The Netherlands Belgium Bart van Ke
Page 51 and 52: Disclaimer. This publication contai
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Life Sciences Outlook 2012 Dutch biotech companies ... - NautaDutilh

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