Bloomberg News

Paris Is Europe Health IPO Hub With Most Sales in 20 Years

March 28, 2012

DBV Technologies production equipment. Source: DBV Technologies SA

DBV Technologies production equipment. Source: DBV Technologies SA

France’s fourth health-related company to sell shares in an initial public offering this year starts trading in Paris tomorrow, bringing the first quarter’s tally to the most in at least two decades.

Unlike the U.K., Germany and Switzerland, which have seen a drought of such stock sales, French biotechnology or medical companies are lining up to issue stock thanks to a pool of dedicated health-care funds, an accessible market for small stocks and tax breaks that have spawned such startups. DBV Technologies SA (DBV), which is developing peanut and milk allergy treatments with patches rather than injections, priced its sale of 4.57 million shares today.

“France is one of the rare countries where you can still get biotech and med-tech IPOs done,” says Christian Finan, who heads equity capital markets at Bryan, Garnier & Co. in Paris, an underwriter of health-care IPOs. “Investors here have an appetite for these assets and are willing to look at them even in a difficult IPO environment if they are of quality.”

This year, Adocia SAS (ADOC), which has an accord with Eli Lilly & Co. to develop and market so-called ultra-rapid insulin; EOS Imaging SA (EOSI), a maker of devices for three-dimensional views of the body, and Intrasense SAS (ALINS), a medical-imaging software maker, raised about 70 million euros ($93 million). Their lackluster stock performance isn’t deterring others.

SuperSonic Imagine, a maker of ultrasound imaging machines, and Vexim SA, a French producer of implants to treat vertebral fractures of the spine, are among companies considering IPOs.

French Momentum

Four out of the five IPOs in France in the first quarter were by health-related companies. Societe Generale SA (GLE), Dexia SA and Gilbert Dupont are among the lead managers of the sales.

Overall, the French health IPO record has been promising. Of the 10 such IPOs in France in 2010 and 2011, only Tekka, a dental-implant maker, has fallen sharply, trading 71 percent below its IPO price. Shares of Carmat SAS (ALCAR), which is developing an artificial heart, have more than quintupled. Novagali Pharma SA was last year acquired by Japan’s Santen Pharmaceutical Co.

“Momentum has clearly been picking up in France in the biotech and med-tech sectors,” says Andre Choulika, founder and chief executive officer of Paris-based Cellectis (ALCLS) SA, a DNA researcher. “It’s not the same in other European countries.”

The companies have benefited from tax breaks for corporate research expenses, with the main fiscal measure seen by French entrepreneurs as key to the funding of innovation in biotech in a 2011 Ernst & Young LLP survey, says Franck Sebag, a Paris- based partner for the accounting firm.

“France has had pretty strong-willed policies for companies investing in innovation,” says Sebag. “This de facto helps biotech companies.”

Dedicated Funds

France also has health-care venture funds such as Paris- based Sofinnova Partners, an investor in DBV Technologies, and Edmond de Rothschild Investment Partners, which owns a stake in EOS Imaging. Societe Generale, Bryan Garnier and Invest Securities have been building their health-care coverage.

The 2005 creation of NYSE Alternext for small and medium- sized businesses with easier requirements for biotech and medical-device companies facilitated trading of their shares.

In the U.K., investors burned by a drop in shares of companies such as Renovo Group Plc (RNVO) and Antisoma Plc (ASM) may be wary of biotech companies.

Renovo, a developer of skin treatments that went public in 2006, today trades 93 percent below its June 2007 peak levels. Antisoma, which develops cancer treatments, closed at a high of 256.49 pence on March 7, 2000. It now trades at 1.75 pence.

‘No Interest’

Cellectis’s Choulika said he is struck by the lack of interest in the U.K. and in other European countries. “Our roadshows in the U.K. raise no interest,” he said. “There’s more interest for Cellectis in the U.S. There is some interest in Switzerland, a bit in Scandinavian countries, but interest is very limited in Germany and almost non-existent in the U.K.”

There have been no health-related IPOs this year in Germany or Switzerland and one in the U.K.

Truffle Capital, a venture-capital firm based in Paris, brought three companies to market in 2010, including Carmat.

“People were telling us we were crazy, that these IPOs would not be successful, that it was impossible to do IPOs in France,” recalls Philippe Pouletty, the co-founder of Truffle Capital. “They were wrong.”

Shaky equity markets shouldn’t deter a company from tapping the market if its business plan is sound, the management good and historical shareholders are willing to invest, he said.

‘Yes, We Can’

“You cannot remain seated on a chair, waiting to see whether things will get better, if markets will start rising again,” he says. “You have to say, ‘Yes, we can.’”

DBV sold shares at 8.86 euros each, the bottom of the range that the company had sought. The stock begins trading tomorrow.

There are about 300 French biotech and med-tech companies, said Choulika, who also heads France Biotech, an industry association. Some of them would be “good IPO candidates,” he said, citing Cerenis Therapeutics SA as an example.

Based in Toulouse, France, and Ann Arbor, Michigan, Cerenis’s main product candidate is a compound that may treat heart disease and high cholesterol. Jean-Louis Dasseux, its founder and CEO, said in an interview last year he may consider funding options including an IPO in 2013.

Vexim is close to a decision on an IPO in April, Truffle Capital’s Pouletty has said. The firm owns a majority stake in Vexim, which is based in Balma, France.

SuperSonic Imagine is “working” on its own IPO plans, Jacques Souquet, the company’s founder and CEO, said in a March 14 interview. He declined to give any details.

Glut Worries

“I hope the momentum won’t break because too many companies opt for an IPO without being ready for it,” Choulika says.

The size of the offers in France remains unimpressive, said Kristelle Kerforn, a director of health-care mergers and acquisitions at Credit Agricole Corporate & Investment Bank.

“We’re talking of relatively small amounts of money,” Kerforn says. “We don’t expect a very active market.”

Still, there’s plenty of interest out there, said Remi Soula, head of business development and scientific adviser at Adocia, the developer of experimental diabetes treatments.

“French people always had an obsession for innovation, but for years TGV trains or Rafale airplanes were the rage,” he said. “They seem more passionate about life sciences these days. We’re really benefiting from that.”

To contact the reporter on this story: Albertina Torsoli in Paris at atorsoli@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net


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