BioWorld International Correspondent

LONDON - The venture capital firm Abingworth Management announced the first closing at $53 million of a new fund dedicated for quoted companies.

"We are looking at this as an extension of our VC activities. A lot of smallcap stocks have the look and feel of a private company - whether they've got a quote or not can be fairly arbitrary," Joe Anderson, manager of the BioEquities Fund, told BioWorld International.

The fund will invest in stocks that have the potential to deliver returns in a two to four year time frame, of which Anderson estimates there are 500 to 600 spread across the U.S. and Europe. He argued that while the quoted development-stage companies have high growth potential, because of market volatility, sparse coverage by analysts and pressure on institutional investors to get short-term results, they often are undervalued.

"The market is inefficient in regard to these companies, because it is chasing short-term performance. We have an opportunity because we can take a long-term view and stay with a company until it fulfills its investment potential," Anderson said. Abingworth will sell when a company reaches an endpoint - such as getting approval for a drug or doing a commercial deal - that is reflected in the share price.

"It is a good time to get involved. Basically the market has been trading sideways for the past five years - though of course no one can predict when you will get any upward movement," he said.

However, Anderson said it is not intended to use the holdings to seek seats on company boards, or to force merger and acquisition activity.

The fund has made its first investments, but Anderson said Abingworth does not intend to disclose which companies it invests in.

A second offering of shares is planned for later this year, though there is no decision yet on how much Abingworth will seek. The BioEquities fund is Abingworth's seventh life sciences fund and the first to be devoted solely to investments in public companies.

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