BioWorld International Correspondent

LONDON - Microscience Ltd. pulled its £40 million (US$74.5 million) initial public offering on London's Alternative Investment Market after refusing to compromise on a £120 million to £140 million valuation.

Potential investors failed to bite, despite the fact that £10 million of the £40 million the vaccines company was looking for already was committed by its venture capital backers.

The Wokingham, UK-based company said that "current market sentiment would not support a valuation that reflects the potential" of the company's pipeline and capability.

Microscience has five vaccines in development, with the lead product, an oral typhoid vaccine, ready to enter Phase III work. As yet, none of the products are partnered, as Microscience has pursued a strategy of retaining as much value as possible.

A spokesman for Microscience said that market conditions have deteriorated since the funding was launched in May, and the sticking point was the valuation. "They wanted to get to a certain number and were not able to get there," he said.

Microscience's decision demonstrates that it remains a buyer's market. Two other companies that floated on AIM in the past month were forced to reduce their valuations. Vectura Group plc, of Chippenham, UK, succeeded in raising £20 million, but reduced its valuation from a target of £85 million to £60 million; London-based Norwood Immunology Ltd. set out to raise £14 million, giving it a market capitalization of £115 million, but came away with £5 million and a market capitalization of £46 million.

Two other UK companies, Evolutec Ltd., of Oxford, and Cyclacel Group plc, of Dundee, are in the throes of going public. A spokesman for Evolutec said the company still is meeting institutional investors. There has been good reception to date, and it is expected to close the deal by the end of July.

Microscience now will put together another private funding round. The £10 million pledged by Advent Venture Partners, Apax Partners, JP Morgan Partners and Merlin BioSciences remains on the table. Microscience's spokesman said it wasn't clear how much more the company would look for.

"The company is in a good position because it has four supportive shareholders who are prepared to see it stay private," he said.

To date, Microscience has raised £40 million, including £25.5 million in a February 2002 financing.

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