PARIS - Toulouse, France-based Biovector Therapeutics SA, which is focused on drug delivery systems, is launching an initial public offering (IPO) on the Nouveau Marchi in Paris to raise 26 million euros to 30.5 million euros (FFr170.5 million to FFr200 million; US$29.7 million to US$34.8 million).

The company is offering 5 million new shares at a price of between 5.20 euros and 6.10 euros, representing 33 percent of its equity, in addition to which there is a provision for a green shoe, or overallotment, of 750,000 shares.

The final price will be announced on Feb. 18, and the listing will take effect on Feb. 22. Following the issue (and not allowing for the possible option of the green shoe), there will be six shareholders with stakes of 5 percent or more, the largest being the Canadian company BioChem Vaccins - a subsidiary of Laval, Quebec-based BioChem Pharma - with 8.3 percent (down from 12.4 percent before), and the British venture capital company 3i Group, with 7.8 percent (down from 11.6 percent).

Other main shareholders are French and British venture capitalists: Sofinova, with 5.6 percent (8.3 percent before); Groupe Atlas, with 5.4 percent (8 percent before); and Old Court and CDC Innovation, with 5.2 percent (7.8 percent before).

Staff and employees will have no more than 1 percent of the company's equity in total, but on a fully diluted basis this will rise to 14 percent. That will reduce the new shareholders' stake to 29 percent and BioChem Vaccins' holding to around 7 percent. BioChem Vaccins, which initially invested $4 million in Biovector in May 1997, has only just boosted its stake to the present level, by exercising its option to acquire a further $5 million worth of stock at FFr43 per share (although it had until 2001 to do so).

Since its creation in 1989, Biovector has raised a total of FFr247 million in three funding rounds. It had cash reserves of more than FFr100 million at the end of 1998, to be set against a prospective burn rate of FFr50 million to FFr60 million. Also, the results of clinical trials under way will be available in the second half of this year, which could give the company even stronger arguments with which to woo investors.

Research, Development Costs Rising

But the market was prepared for the IPO, since Biovector announced last September that it was planning to launch one at the earliest opportunity. Chairman Emile Loria told BioWorld International at the time that the company intended to raise "at least FFr200 million" and possibly as much as FFr300 million, once market conditions were right. He pointed out that the company's research and development programs were becoming more costly because some had reached the clinical trial stage.

In fact, Biovector will have four products in clinical development by the fourth quarter of 1999, having completed its first Phase I trial last October. The company is developing a range of proprietary drug delivery systems called biovectors, which are synthetic particles that mimic living organisms, and has patented four of these systems for the delivery of active ingredients or therapeutic genes. Altogether, the company holds seven patents in Europe (where a further five have been filed) and six in the U.S. (with 17 others filed), while it has registered 11 trademarks and applied for 23 more.

Biovector is using this technology platform mainly for developing modern vaccines in partnership with pharmaceutical companies. The products that have reached the clinical trial stage are an intranasal influenza vaccine; a therapeutic vaccine for AIDS; and two cancer vaccines - one for melanoma and one for low-grade lymphoma.

The most advanced is an influenza vaccine that uses the company's Biovector Light nasal spray delivery system. Biovector is co-developing it with BioChem Vaccins, with which it signed a collaboration agreement in May 1997, covering five vaccines altogether. Phase I trials were completed in October 1998, validating the delivery technology. Phase II trials are due to begin in 1999, but Loria does not expect to have the product on the market before 2003.

Phase II trials will begin following completion of a Phase I trial to test a new form of the vaccine using antigens produced from cellular strains. Trials conducted in 1998 used antigens cultured on eggs.

Development of the influenza vaccine became a three-way venture last December, when BioChem Pharma signed a worldwide development, production and marketing agreement with SmithKline Beecham plc, of London. It provides for SmithKline to manufacture the product for all countries except Canada and market it in all regions of the world outside North America. The two companies will be jointly responsible for the vaccine's marketing and distribution in the U.S. SmithKline will contribute to all further development costs, starting with the second Phase I trial.

The melanoma treatment uses Biovector's Lipopeptidic system, which delivers a combination of lipopeptides. Phase I/II trials are due to be carried out this year at the Institut Gustave Roussy in Villejuif, near Paris, Europe's leading cancer clinic. The low-grade lymphoma treatment is being co-developed with Biomira Inc., of Edmonton, Alberta, with which Biovector signed an agreement in September 1998.

Collaborator Sought For AIDS Drug

The AIDS treatment is a second-generation DNA-based vaccine that uses Biovector's Lipoplex delivery system. It is being developed in collaboration with three French public research establishments, and will enter Phase I trials in the fourth quarter of this year. Biovector's research and development program in this area took a leap forward last September, when it acquired the small French biotech company Peptide Immune Ligands, whose activities were focused on HIV antigens and melanoma. For development beyond Phase I trials, however, Loria said Biovector would certainly look for a partner, since Phase II/III trials of this treatment will entail heavy costs.

Biovector posted a net loss of FFr26.1 million in the first nine months of 1998, up from FFr14.6 million in the corresponding period of 1997. For 1997 as a whole, the company's loss was FFr18.6 million, down from FFr22 million in 1996. That improvement was largely due to the FFr8.7 million in research and development funding it received from BioChem Vaccins, which more than offset the increase in its research and development spending - to FFr24.9 million in 1997 from FFr17.2 million in 1996. The net loss for 1998 is likely to come out at close to FFr35 million, which would be exactly equivalent to the company's research and development outlay last year.

Biovector does not expect to be in profit before 2003 or 2004. In the meantime, Loria said, the lid would be kept on costs. The burn rate in 1999 was to be limited to a maximum of FFr5 million per month, he said.

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