DUBLIN, Ireland - The Swedish biopharmaceutical company Karo Bio AB aims to raise up to SEK119 million in an initial public offering (IPO).

The Huddinge-based company applied for a listing on the O-List of the Stockholm Stock Exchange. Aros Securities and Handelsbanken Markets, both of Stockholm, are acting as advisors for the flotation.

The move is designed to broaden Karo Bio's analytic coverage and attract new shareholders. In all, around SEK200 million of the company's stock will change hands, said CEO Per Olof Martensson.

Two current shareholders, Scios Inc., of Mountain View, Calif., and the principals associated with San Francisco-based Serra Pharmaceuticals, which Karo Bio acquired in 1996, are disposing of some of their stock.

Karo Bio's new shareholders will hold about 25 percent of its equity after the listing.

Investor feedback has been “very good,“ Martensson said. “I think there is growing knowledge [in Sweden] about this sector,“ he added.

Investor awareness of biotechnology in Sweden has lagged behind that of the U.S. and the U.K., he said, but he detects growing interest among the investment community this year, evidenced by an increasing amount of analytic coverage.

Karo Bio specializes in preclinical drug development based on its knowledge of the 3-D structures of nuclear hormone receptors. It aims to develop lead compounds with selective binding affinities for a range of nuclear receptor subtypes.

Merck, Bristol-Myers Sign Major Pacts

Karo Bio entered into two major alliances last year, which are potentially worth a combined US$120 million, plus royalties. It is developing drug treatments and diagnostics for conditions affected by estrogen receptors, such as osteoporosis, breast cancer and postmenopausal conditions, with Merck & Co. Inc., of Whitehouse Station, N.J. (See BioWorld International, Nov. 5, 1997, p. 1.).

It is also developing treatments for metabolic disorders, such as hypercholesterolemia and obesity, based on the beta subtype of thyroid hormone receptor, in collaboration with Bristol-Myers Squibb Co., of New York. (See BioWorld International, Oct. 15, 1997 p. 1.)

Karo Bio has two additional research programs for which it has yet to secure partners: one based on glucocorticoid receptors, which are implicated in inflammatory disease and in Type II diabetes; and the other on orphan receptors.

According to a recent financial statement from the company, Karo Bio achieved revenues of SEK75 million last year, up from SEK29 million in 1996. Its net loss was SEK7.7 million.

It currently holds around SEK120 million in cash and cash equivalents, Martensson said. The additional money from the IPO will allow it to continue funding expansion of its chemistry laboratories, to seek new technology acquisition opportunities and to strengthen its strategic cash reserves. He ruled out any company acquisitions.

Martensson, who served as CEO from 1991 until early 1997, was reappointed to the position last month. He acted as Karo Bio's chairman during most of 1997, while Anders Lonner, formerly of Astra Pharmaceuticals, was CEO.

Karo Bio parted company with Lonner late last year. Bertil Hallsten, formerly of SE-Banken, is Karo Bio's chaiman. *

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