BioWorld International Correspondent

MUNICH, Germany - The initial public offering window for biotechnology companies in Germany might have opened. Epigenomics AG, of Berlin, is planning to sell 4.6 million new shares, or 29 percent of the company, on the Frankfurt Stock Exchange.

Shares will be offered between €11.90 and €14.50, which would raise between €55 million and €67 million. The offer period began on July 5, and the company expects the first day of trading to be July 16. Epigenomics is the fourth IPO in Germany this year, and the first biotechnology IPO in more than two years.

Using a DNA methylation platform, Epigenomics is developing tests for diagnosing prostate, colon or breast cancers; a test for staging prostate cancer; and a test to predict the probability of relapses in women treated with tamoxifen, the standard breast care treatment.

Methylation is a natural process that occurs when a methyl group binds to cytosine, and turns off individual genes. By measuring differences in methylation patterns between healthy and diseased tissue, a change in gene activity that could trigger diseases is detected. Epigenomics has developed an industrial process to read and interpret methylation patterns.

"Our fundamental technological risk has been overcome," said Alexander Olek, Epigenomics' CEO. "The successful developments that we have undertaken mean that the technical risk is not there anymore, and this helps all of our other products in the pipeline." That positive assessment was the key reason Olek gave for offering shares to the public.

"Our data are based on hundreds of patients," Olek added, "putting us in many ways far in advance of a [drug] development company with a product in Phase II clinical testing."

Operationally, life as a public company would not be a tremendous change for Epigenomics, Olek said. "We have kept our books as strictly a public firm for several years already, and we are also already very transparent for investors," he said.

Olek said that the proceeds of the offering would be devoted to product development.

Oliver Schacht, Epigenomics' chief financial officer, said the earliest date that the company expects royalties is in 2006, but with 2007 or 2008 being more likely. Both Olek and Schacht repeatedly declined to speculate on when the company would break even. However, Schacht said that the money raised in the public offering should be sufficient to finance the company until it reaches profitability.

Epigenomics has an agreement with Roche Diagnostics covering a range of cancer molecular diagnostics and pharmacodiagnostic products. Roche obtained worldwide marketing rights to several products aimed at the early detection, molecular classification and treatment response of tumors. In return, Epigenomics received an up-front payment, contributions to research and funding, as well as potential milestone payments totaling up to €100 million, and royalties.

Olek said Epigenomics likely is to announce partnerships with other pharmaceutical and diagnostic companies this year, although not in the size of the Roche partnership. The alliances would each focus on a single product. Over the longer term, he expects Epigenomics to retain more rights to its products, but said Epigenomics did not plan to build its own sales force.

"Long-term, we would probably work together with a larger diagnostic company to sell our products," Olek said.

The company examined a public offering on the Nasdaq exchange, but concluded that the listing and the additional requirements would have been too expensive for an offering of their size. Also, the company would have had to become a U.S. corporation, rather than a German one.

The IPO is being led by Morgan Stanley Bank AG, with Lehman Brothers International (Europe) and DZ Bank AG as additional managers.

Epigenomics would trade on the prime standard segment of the Frankfurt Stock Exchange under the symbol "ECX."

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