BioWorld International Correspondent
LONDON - A government-sponsored report recommended relaxing the application of pre-emption rights to improve access to capital for research-stage biotechnology and other high-tech companies.
At present in the UK consent is required from shareholders for issues of more than 5 percent of share capital. The report concludes the 5 percent benchmark should stand, but it should be possible for cash-hungry companies to negotiate higher limits with their shareholders on an individual basis.
The government commissioned the report in September after the biotechnology industry said it should be singled out as a special case, and asked to increase the pre-emption rights limit from 5 percent to 20 percent, bringing it in line with the limits set by the New York Stock Exchange and Nasdaq.
The BioIndustry Association (BIA) argued that it takes time to comply with the requirement to tell shareholders of fund raisings more than the 5 percent limit, during which a funding window may close, and the share price will be depressed because the announcement is public.
While the report agreed with that analysis, it said the problem affects only a small proportion of the total number of listed companies.
"The solutions amount to evolution not revolution," it concluded.
"It is extremely positive that the report has confirmed there is an issue with the current pre-emption guidelines for UK companies," said Aisling Burnand, chief executive of BIA.
Burnand welcomed the conclusion that applying pre-emption rights should be a matter between companies and their shareholders.
"The BIA will be encouraging our member companies to develop sensible plans and to discuss them directly with their shareholders," she said.
Retention of the 5 percent limit is not surprising given that the 14-strong advisory group that contributed to the report was heavily weighted toward institutional investors. Only one member, John Aston, chief financial officer of Cambridge Antibody Technology Group plc, represented the biotechnology industry.