Mixed picture for UK biotech deals

UK biotech ProStrakan began pre-marketing for its IPO on May 19, but the storm that has challenged biotech IPOs this year led in the same week to the cancellation of the IPO of Renovo, another UK biotech, on the day that it was due to price.

ProStrakan’s main backer is Warburg Pincus, with a 44% stake. Renovo’s largest investors are Atlas and HealthCap, with a combined 45%.

Bankers hope ProStrakan can succeed where others have failed by highlighting the significant difference between it and those that came before – namely revenues. The company plans to raise £50m–£70m and research valuations suggest it could achieve a market capitalisation of £250m to £300m.

The offer is expected to pre-market for two weeks but might have a slightly shorter bookbuild closing in either the week of June 6 or June 13. Morgan Stanley is bookrunner, with CSFB and Code Securities completing the syndicate.

Eyebrows were raised in the market at the move by ProStrakan, as it came the day after the abandonment of the IPO of Renovo, which was expected to be for about £75m of new money. The bookrunner on that deal was Goldman Sachs, while Lehman Brothers was a joint lead.

Choppy market conditions in recent weeks have left investors nervous of putting money into a sector that is frequently seen as more of a gamble than most.

“The feedback was that the whole of the biotech sector is very sensitive, and that if you are going to pull your horns in, then it will be on these deals,” said one banker close to the IPO.

Others who had previously reported good interest in the Renovo story in spite of the poor performance of the sector would not rule out the chances of the deal returning within a matter of weeks for another attempt at an IPO once some stability had returned to the markets.