PARIS ¿ A week after concluding an important licensing agreement with the Belgian company Solvay Pharmaceut-icals, Meristem Therapeutics, a leader in the extraction of therapeutic proteins from plants, launched an IPO on the Nouveau Marchi of the Euronext stock exchange in Paris through which it expects to raise at least EUR54 million (US$46 million).

Meristem, of Clermont-Ferrand, would issue 2,275,000 new shares, equivalent to 37.7 percent of its post-IPO equity. Ninety percent of the new shares are being offered to institutions in France and elsewhere (but not in the United States), while the other 10 percent are reserved for private investors in France. In addition, the underwriters are being offered an overallotment option of 341,250 new shares, representing 15 percent of the total offer. The issue is being managed by Cridit Lyonnais, of Paris, and London-based WestLB Panmure.

The offering is priced at between EUR22 and EUR25.50 (US$18.90 to US$21.90). The definitive price will be fixed on July 10 and trading in the shares will start the following day. At a midway price of EUR23.75, the IPO would generate EUR54 million, not counting the greenshoe, which would swell the total take by EUR8.1 million to EUR62.1 million. It would value the company at about EUR151 million (US$130 million).

The largest shareholder at present is the French seed company Limagrain, of Clermont-Ferrand, Meristem¿s progenitor, which retains a stake of just over 30 percent, closely followed by Banexi, the venture capital subsidiary of BNP Paribas, of Paris, with just under 30 percent, and London-based 3i, with around 13 percent. Following the IPO, the holdings of Limagrain and Banexi will be reduced to about 19 percent and that of 3i to about 8 percent.

Meristem Therapeutics was created in 1998 when Limagrain spun off its molecular ¿pharming¿ and plant engineering activities into a separate business. In three funding rounds since then, the company has raised a total of EUR25 million (EUR9 million in January 1999, EUR10 million in June 2000 and EUR6 million in September 2000).

At the launch of the IPO, finance director David Manson said that nearly half the funds raised (EUR25 million to EUR26 million) would be used to develop additional production facilities in the United States and Europe. Meristem¿s pilot extraction/purification plant in Clermont-Ferrand has the capacity to produce 20 kilos a year of pharmaceutical-grade recombinant proteins from plants, and the company intends to build a second pilot facility in the U.S. with a capacity of 30 kilos/year, which is due to be operational by the end of 2002. It also is planning to develop an industrial-scale plant in France in a joint venture with the pharmaceutical company bioMirieux Pierre Fabre, which will give it production capacity of 400 kilos/year by 2003-04, and further developments will boost that to 2 tons/year by 2006.

A further EUR20 million is earmarked for acquisitions, including in the U.S., where Meristem has a two-year option to take over Goodwin Biotechnology Inc., of Plantation, Fla., under the terms of the partnership agreement signed in April. Manson told BioWorld International that it would cost no more than EUR10 million to acquire Goodwin and that Meristem was looking for other acquisitions in the U.S. He also said that the company would choose between Iowa and Virginia for the location of its American plant, having received ¿very attractive proposals¿ from elected officials in both states.

Meristem is to use the balance of the funds raised (about EUR5 million) for developing its production technology and financing in-house drug discovery and development programs with the aim of taking products as far as the regulatory filing stage.

Manson bluntly acknowledged that Meristem was losing money at the moment and said it would not move into profit until 2004-05, although he maintained that ¿cash flow is under control.¿ In the year to June 30, the company expects to post a net loss of EUR7.2 million (US$6.2 million) on a turnover of EUR4.9 million. After recording net losses of EUR7.1 million in both 2002-03 and 2003-04, a profit of EUR6.1 million is forecast for 2004-05. Revenues are expected to more than double to EUR52.1 million that year from EUR20.8 million in 2003-04, EUR14.9 million in 2002-03 and EUR9.5 million in 2001-02.

Manson said that his revenue and earnings forecasts for 2004-05 assumed that Meristem¿s lead product, gastric lipase, will be on the market by 2004. That now depends on Solvay Pharmaceuticals, to which Meristem has just granted an exclusive license for lipase in the treatment of digestive troubles associated with cystic fibrosis (see BioWorld International, June 20, 2001). But Manson said that, even if Solvay failed to meet that deadline, Meristem¿s move into profitability would only be ¿delayed.¿

CEO Bertrand Merot stressed that Meristem¿s ¿breakthrough technology¿ was protected by 13 families of patents and that its future revenues were underpinned by its retention of the drug master file and by its conclusion of exclusive contracts for the supply of the active principle during the entire commercial life of drugs produced from its proteins. As well as supplying gastric lipase to Solvay, Meristem provides the active principle for the anticancer drug Taxotere marketed by the Franco-German company Aventis.

Meristem has two other products under development that could generate substantial future revenues. One is human lactoferrin, a protein secreted in mother¿s milk that protects against infections, which is due to enter Phase I clinical trials later this year and Phase IIa trials in the first half of 2002. The other is human serum-albumin, a protein used in skin repair and reparative surgery, which Merot said could be on the market by 2007. In addition, it is developing b interferon-1a for the treatment of multiple sclerosis and hepatitis C, as well as monoclonal antibodies for use in the treatment of cancers, autoimmune diseases and organ implant rejection.

Notwithstanding the unfavorable market environment in France, which forced a more established French biotechnology company, Cerep, to abandon its planned capital increase, Merot displayed a bullish optimism: ¿Despite current market conditions, which are said to be difficult, we are confident that we¿ll succeed. A good sailor makes his own wind.¿

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