Washington Editor

JERSEY CITY, N.J. - There are a range of reasons that the London Stock Exchange's AIM market could be a destination of choice for U.S. biotech companies seeking a public listing.

That was the message from a number of speakers who addressed AIM's recent overall growth, especially relative to the Nasdaq market, during the Biotechnology Industry Organization's VentureForum East meeting being held here this week. All agreed that AIM is attractive to small companies because investors increasingly are putting money into the relatively new exchange, which began operations in 1995 as the Alternative Investment Market of the LSE. Last year alone, 519 companies listed on AIM.

AIM's value generally has grown year after year, but particularly in the last two years. That's significant for biotech companies, most of which are classified as small businesses and seeking new investors.

"There's institutional interest in this market [for biotech firms]," David Vogel, a partner at the international law firm Dechert LLP and the head of its AIM practice, told BioWorld Today. "It's not totally formed yet, but it's growing. We believe there's potential."

At present, biotech and pharmaceutical companies account for about 4 percent of the more than 1,500 firms with AIM listings, he said. Of note, most companies on the exchange are valued at less than $100 million, meaning that among AIM investors, "there's much less emphasis" on market cap, said David Schulman, another Dechert partner and the co-head of its European Life Sciences Practice. "Effectively, they're accommodating another round of financing, but without heavy dilution."

In comparison, a Nasdaq listing might spur less institutional investor interest and lead to a tepid exit for existing backers. "Nasdaq is broken for small companies," said John Brady, the CEO of a U.S. company that gained an AIM listing two years ago, Plant Health Care plc in Pittsburgh. In particular, he said that modestly capitalized firms would "fight to get analyst coverage" with Nasdaq listings. "There is no market for a $50 million market cap company on Nasdaq." But in contrast, AIM is "made for small companies," Brady said. "There's a void, and AIM has filled that gap for small companies."

Schulman said he has seen companies abandon their Nasdaq listings in favor of AIM, which last year hosted 76 initial public offerings from overseas companies, a significant fraction of the exchange's total 335 IPOs.

Another benefit is a "more flexible regulatory environment," Vogel said. Firms that file to go public on AIM are not required to have a trading record, nor is there a minimum amount of shares mandated for public holding, among other advantages.

Also of note, there are no compliance issues related to the Sarbanes-Oxley Act, which many in the biotech sector have decried as overly burdensome and costly to small companies. However, both Vogel and Schulman stressed to BioWorld Today that avoiding those particular SEC regulations should hardly be a driving factor for companies contemplating an AIM listing.

An additional advantage for floating shares on the AIM is the relatively short period of time it takes to consummate the deal. That duration was estimated to be four months, said Tim Worlledge, the corporate finance director for Evolution Securities Ltd. in London. He added that any firm considering the AIM exchange should have products that appeal to European markets. Similar to other markets, those seeking a listing on AIM would do well to have a broad pipeline and portfolio validated by partnerships. Worlledge recommended that companies interested in AIM listings should travel to London and make contacts to establish inroads with investors. They also should meet with analysts who will get the word out.

"There is an increasing appetite in London for overseas companies," Vogel said, concluding that AIM represents "an appropriate option" for biotech businesses and their venture capital investors seeking exit strategies.

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