Convergence considers IPO after GSK spin-off, as European biotech revives
LONDON (Reuters) - Convergence Pharmaceuticals, a specialist pain drug company spun off from GlaxoSmithKline, is preparing for a possible stock market listing as British biotech companies enjoy a revival of interest from investors.
The European sector has been slow to catch up with its U.S. peers, which have seen a renaissance in the past two years, but since allergy drug developer Circassia raised 200 million pounds ($335 million) in March - the biggest London market debut in years for a biotech company - the wider industry's fortunes have turned.
Now Convergence Pharmaceuticals, which was created in 2010 following GSK's decision to exit certain areas of neuroscience, says it could raise between 50 million and 100 million pounds in another substantial initial public offering (IPO).
Chief Executive Clive Dix said on Monday that listings in London and New York were under consideration, with a potential flotation most likely to take place early next year as the group readies its most advanced drug for final-stage clinical testing.
"We are now starting to talk to advisers about the state of the FTSE and Nasdaq markets for biotech and are considering seriously floating the company," Dix said in an interview. "We'd probably be looking to go out early next year."
A further funding round from venture capital investors, who have already put up $35.4 million, is a fallback option if the window for biotech IPO fund-raisings closes before then, he added.
Convergence's backers include Apposite Capital, New Leaf and SV Life Sciences. GSK also retains an 18 percent stake in Convergence.
The company has been encouraged to look at an IPO following successful mid-stage clinical trial results showing its experimental drug CNV1014802 reduced pain by 55 percent in patients with trigeminal neuralgia (TGN), a rare and severe form of facial pain.
Convergence received orphan-drug designation from the U.S. Food and Drug Administration last year for the drug in TGN and Dix believes it has potential in several other conditions as well. The firm also has several other products in development.
Dix, an industry veteran, said the success of Circassia had been a spur to emerging healthcare companies and their backers in Britain.
Firms raising money in Europe rely more heavily on generalist and small-cap investment funds - many of which have little appetite for early-stage biotech businesses - making Europe a tougher place to raise funds than the United States, where an experienced pool of specialized funds understand the sector's complexities and long development timelines.
"(Circassia) has given us more confidence and I think it has given the sector more confidence too," Dix said. "I think we are seeing a proper recovery now. This isn't just hype. There are lots of very good small company start-ups and spin-outs."
Separately, another British biotech business called Abzena, which provides services and technologies to biotechnology and pharmaceutical companies, said on Monday it intended to launch an IPO on London's AIM market, formerly the Alternative Investment Market. Cenkos is acting as its adviser and broker.
Abzena's investors include Imperial Innovations, which has a stake of 26.2 percent worth 11.1 million pounds at the end of January, making the group worth 42.4 million at that time.
In another fillip for European biotech investors, Actelion said its experimental heart and lung drug Selexipag met its primary goal in a late-stage study, boosting its shares more than 14 percent.($1 = 0.5956 British Pounds)
(Editing by Sophie Walker)