BioWorld International Correspondent

LONDON - Microscience Ltd. is being acquired by U.S. company Emergent BioSolutions Inc. in an all-paper deal that values the vaccine specialist at £40 million (US$73.1 million), roughly £5 million less than the four venture capital investors have put in to date.

That ends the search for new funding that Microscience embarked on after it pulled an initial public offering in July. Back then it was looking to raise £40 million on a valuation of £120 million to £140 million. Though the precise terms were not disclosed, the venture capital investors in Microscience will own 14 percent of the enlarged company and are on a promise it will float in the U.S. in 2006.

Microscience will be renamed Emergent Europe and will continue to operate from the existing site in Wokingham, UK. It will be run by Steve Chatfield, the founding chief scientific officer of Microscience who joined Emergent in January as senior vice president of R&D.

The architect of the deal is Jonathan Pockson, former chief financial officer of Microscience. He disagreed with the planned flotation and left in February 2004 to become a consultant to Emergent before being appointed chief financial officer of the Gaithersburg, Md.-based company in March.

Rod Richards, CEO, and Ian Miscampbell, chief financial officer, are both leaving Microscience.

Pockson told BioWorld International both he and Chatfield had a long-term relationship with Emergent as a result of working on collaborations when they both were at Microscience.

"In fact the two companies were in late-stage talks to merge two years ago and then the strategy changed, with investors going after an IPO," he said. "I was against that approach."

The deal brings five clinical-stage vaccines to Emergent - against typhoid, travelers' diarrhea, hepatitis B, meningitis B and neonatal Group B streptococcus. An oral vaccine for anthrax being developed in collaboration with the U.S. Naval Medical Research Center currently is completing preclinical development. In addition, Microscience has two technology platforms: Signature Tagged Mutagenesis, for the rapid detection of virulence genes in microbes, and spi-VEC, an oral delivery system based on an attenuated Salmonella bacterium.

"This is an exciting, transformational event for both Emergent and Microscience," said Fuad El-Hibri, Emergent's CEO, who, along with his family, owns the majority of the company.

Emergent has revenues of about $100 million from BioThrax, its FDA-approved anthrax vaccine, and is highly profitable, Chatfield told BioWorld International.

It is expected that the development staff will stay in Wokingham and all vaccines will be moved ahead. "We have all the money we need for the ongoing Microscience programs. Since the IPO failed, they have not been pushed forward as they should have been. We will now go as fast as we can to catch up," Chatfield said.

Microscience was founded in 1996. The venture capital backers Advent Venture Partners, Apax Partners, JPMorgan Partners and Merlin Biosciences put in £40 million up to the attempted IPO, including £25.5 million in the last round in February 2002. Since the IPO failed, they have rounded up a further £5 million to keep the company going.