BioWorld International Correspondent

Intercell AG secured Europe's largest private equity funding this year, raising about $55 million in combined third-round financing.

The first closing in July brought the company €30 million (US$35 million), with Global Life Science Ventures working as lead investor. The second closing brought in $20 million in additional funds, with MPM Capital, of Boston, as lead investor. With the completion of the round, Intercell has raised more than $100 million in private financing. (See BioWorld International, July 23, 2003.)

"We had a second closing now, because we saw the opportunity to gain MPM as a U.S.-based investor," Werner Lernthaler, chief financial officer at Intercell, told BioWorld International. "They have an excellent understanding of where the industry can and will go, and they are a great addendum to our existing investors. We're excited about their explicitly American understanding of capital markets and their strong contacts with U.S. industry."

Intercell, of Vienna, Austria, is developing vaccines against infectious diseases such as hepatitis C and Japanese encephalitis.

"We expect our Japanese encephalitis vaccine to enter Phase III testing in 2004, and we would like to drive it toward registration," Lernthaler said. "Our hepatitis C vaccine is also planned to come out of Phase II in the first half of 2004, and we would like to initiate Phase III tests if possible. We want to at least have the option of advancing our programs all the way through the clinic on our own resources. That option gives us much greater strategic freedom."

While Intercell is positioning itself to go public, the new investment means that it will not need to tap markets for additional funding for a considerable amount of time. In July, the company said that the €30 million closing would fund operations through at least 2005.

"I think it is absolutely critical to step up to public markets at some point in time, and we will try to do so," Lernthaler said. "This financing will not prevent us from doing that. On the contrary, it will demonstrate that we are trying to build the company on solid strategic grounds. We went for financing while we still had a lot of money, and [in today's markets] this turned out to be the only way to gain additional financing.

"Any public offering would have to be based on another step in the biological proof of our work," Lernthaler added. "That could be entering Phase III with the Japanese encephalitis vaccine or a breakthrough with hepatitis C. Either of these developments could come in 2004."

In addition to the two advanced programs, Intercell has a tuberculosis program that is nearing Phase I trials, along with preclinical programs on travelers' diarrhea and Group A streptococcus.

"We also want to enter into smart partnerships throughout the vaccine world," Lernthaler said. "We are definitely looking for partnerships and new cooperations over the next 12 months."

Paths to a public offering in Europe or in the U.S. would present Intercell with challenges. The Austrian exchange serves a relatively small market, and there is no clear pan-European market to place an IPO. Also, the company's American presence is limited, and a U.S. listing would require meeting demanding market requirements. "We have two people right now in the U.S.," said Lernthaler. "There are plans to grow, but to grow organically. But the strategic anchor to U.S. capital markets via MPM will be very helpful in the future, because they have institutional know-how and history with the markets."

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