Washington Editor

Editor's Note: This is part three of a three-part series on biotechnology development in Flanders, Belgium. Parts one and two ran in the preceding two issues.

GHENT, Belgium - Located in what some call the heart of the continent, and certainly within close proximity to the European Union's capital city of Brussels, Belgium, many of Flanders' biotech companies are physically positioned to take advantage of the international business crossroads the region has become.

Brussels, beside being the country's capital city, is situated within 300 miles of about two-thirds of Europe's purchasing power.

To that end, many area biotech companies take advantage of a range of financing vehicles, from private funding to government support, as well as public markets and mergers, to move their business plans forward. The variety is reflective of the multinational flavor that permeates the region.

Recently, initial public offerings were recorded by a pair of Flemish biotech companies, Devgen NV and Galapagos NV, despite numerous current hurdles for listing in Europe.

Devgen, a Zwijnaarde-based company with agricultural and human therapeutic programs, sold 4 million shares at €7.50, raising gross proceeds of €30 million (US$36.2 million) in the over-subscribed offering. Its shares are trading on the Euronext market, through the Brussels exchange. The company said the fresh funds would help it accelerate development of its crop protection products, as well as its preclinical drug candidates for metabolic diseases such as diabetes, obesity and arrhythmia. It was founded in 1997.

Devgen's offering followed the lead of Galapagos, which sought public money for its growing needs after moving last year beyond a service business and entering the drug development space.

"With that decision came the need for substantial amounts of capital," explained CEO Onno van de Stolpe. Eyeing public funding as a quicker means to money than seeking another private financing, Mechelen-based Galapagos decided to go public at the end of last year and priced its stock last month.

The company raised €20 million in the offering, selling its shares at €7 apiece, and since then the stock's value has moved slightly above that price. It represented the first biotech IPO on the Euronext exchange since 2001, and the company's private investors expressed confidence in the plan - they agreed to a two-year lock-up of the 5.9 million shares they held prior to the IPO. The shares are trading on exchanges in Brussels and Amsterdam, the Netherlands.

Despite risk-averse market conditions, van de Stolpe pointed to Galapagos' hybrid business model as a positive asset - its research is focused on identifying and validating targets through genomic information and internally carrying some targets forward while partnering others. Moving ahead, he said the company would "invest heavily in the development of our own drugs," thereby increasing its burn.

Galapagos was established in 1999 as a joint venture between a neighboring business, Tibotec BVBA, and a Dutch company, Crucell NV. Those companies initially invested €10 million in Galapagos, which three years later raised another €23 million.

Van de Stolpe, who conceded that European public markets aren't receptive to biotech companies because they have yet to see a European Amgen Inc. or Genentech Inc., nevertheless predicted that such enthusiasm "will come over time."

Among Belgium's established public biotech companies is one of its oldest, Innogenetics NV, which has a market capitalization of nearly €400 million. Similar to Devgen and Galapagos, the Zwijnaarde company has a dual business model - it earns revenue by selling specialty diagnostics while also developing a therapeutic pipeline for infectious diseases. Also among Belgium's public biotech companies is Barrier Therapeutics Inc., which is listed on the Nasdaq exchange courtesy of its headquarters in Princeton, N.J. The dermatology-focused firm maintains research and development operations in Geel.

For private companies, having multinational investors is important "not only because you want their money," explained Mark Vaeck, the CEO of Ablynx NV, "but also because you want access to their networks."

His three-year-old company, based in the Zwijnaarde suburb of Ghent, has raised €33 million from European and American investors. Ablynx also receives a good deal of local support as it operates within an incubator facility managed by the Flanders Interuniversity Institute for Biotechnology (VIB), which is located on a site owned by the Flemish government.

Another privately held biotech business located in Zwijnaarde, CropDesign NV, also has had success in raising funds from European and American investors. To date, the agricultural biotech firm has brought in €46 million through three rounds of financing.

"It's good to have diverse investors," echoed Johan Cardoen, CEO of the seven-year-old company that was formed as a spinout from the VIB. CropDesign also continues to receive local government support, as several of its programs are supported by the Institute for the Promotion of Innovation Through Science and Technology in Flanders.

There also is the merger and acquisition route, which has paid off for Tibotec. Three years ago, that Mechelen company and its sister business, Virco BVBA, were bought by Johnson & Johnson, of New Brunswick, N.J.

With the backing of the multinational business of J&J, Tibotec has advanced its lead protease inhibitor, TMC114, through pivotal development and to the cusp of regulatory filings in the U.S. and Europe. Statistically significant findings from two Phase IIb studies have shown that the drug lowers the viral load in HIV patients, living up to its billing in overcoming resistance.

Other HIV products moving forward in the company's pipeline are a non-nucleoside reverse transcriptase inhibitor and a nucleotide-competitive reverse transcriptase inhibitor, as well as programs for other infectious diseases such as tuberculosis.