BioWorld International Correspondent
Basilea Pharmaceutica AG raised gross proceeds of CHF205.8 million (US$161.2 million) in Europe's second significant biotechnology initial public offering of 2004. The Basel, Switzerland, drug development company sold 28.5 percent of its equity, or 2.1 million shares, priced at CHF98 per share, having initially set a price range of CHF90 to CHF115.
Its shares opened at CHF113 Thursday, the first day of trading on the main market of the Swiss Stock Exchange, but then fell back during a heavy sell-off to close at CHF101. Some 650,000 shares changed hands on the opening day.
Credit Suisse First Boston LLC and Morgan Stanley & Co. Inc., both of New York, acted as joint global coordinators and bookrunners for the offering, while Swissfirst Bank AG, of Zurich, was co-lead manager. Basilea now has approximately 7.4 million shares outstanding, which will rise to approximately 7.7 million shares if an overallotment option of 315,000 shares is exercised.
Basilea raised CHF206 million when it was spun out of Basel-based F. Hoffmann-La Roche Ltd. in 2000 with Roche's entire antibacterial and antifungal portfolios and part of its dermatology portfolio. It now has two products that have completed Phase II trials and a third that has completed a Phase I trial. Roche retains options either to co-develop or in-license drug candidates within 30 days of receiving a Phase II data package.
Several Swiss industry analysts contacted by BioWorld International in advance of the IPO had taken a skeptical position. "The problem we have is the valuation," one analyst, who declined to be named, said. The market for antibiotics is coming under pressure as governments, led by the U.S. and France, seek to limit ex-hospital use of anti-infectives, while several hospital drugs are coming off patent, the analyst said. Moreover, it is not yet clear whether Roche will take its option on BAL5788, a cephalosporin in development for complicated skin and skin-structure infections, while another drug candidate, BAL4079, in development for chronic hand dermatitis, likely is to face stiff competition from Elidel, marketed by Novartis AG, also of Basel. "Under these kinds of assumptions, we would value the company at CHF60 per share," the analyst said.
"It did seem to me to be richly priced," Richard Jarvis, analyst at the London office of Geneva-based Pictet & Cie, told BioWorld International after the offering. "My concern is there is a lot of risk with this company at present.
"We have the big decision to come from Roche in the near future, and it is not yet clear what way that will go," Jarvis said. "If the Roche decision goes well, then we'll see some upside." If not, he added, it could create a perception that a big pharma player did not consider the BAL5788 data sufficiently compelling to warrant investment. "There may be opportunities to get into Basilea - which does look like an interesting company - cheaper than the IPO price," Jarvis said.
The other IPO in Europe this year came from Ark Therapeutics Ltd., a London-based company that raised about US$102 million in its debut on the London Stock Exchange.