Swiss biotechs squeeze through as European IPO window closes

Two Swiss drug developers have set out their stalls this month to test the market's remaining appetite for biotechnology IPOs, buoyed by the success of Swiss rivals and renewed investor interest in the battered drugs sector.

While there is interest in shares in small and innovative drug developers, the success of the offerings by Basel-based firms Arpida and Speedel depends on getting the valuation right in what remains a tough market, analysts said.

Karl Keegan, an analyst at Canaccord Capital in London, said that Arpida and Speedel were likely to be among the last firms to float before a window for biotech offerings closes, after a string of recent IPOs by other European biotech firms.

"The window is closing and the companies will do well to get out, but valuation will be the key," Keegan said.

Sam Fazeli of Nomura agreed, noting that both candidates were well financed in any case, leaving them the luxury of being able to retreat from the market if demand is not there.

"The issue that they have to deal with is not whether the window is open or not but what valuation they are willing to accept to allow the IPO to squeeze through," he said.

Antibiotics maker Arpida hopes its initial public offering (IPO) will value it at US$300 million while Speedel, a specialist in cardiovascular drugs, said it hoped to list its shares by the end of May.

Tough market

However, analysts noted that the market post-flotation remained tough, with shares in other recent new listings failing to live up to their initial promise.

"The recent spate of European IPOs have not been exciting and they are trading below their issue price," Fazeli said.

Several European biotech firms have floated so far this year, including Germany's Paion, Austria's Intercell and Britain's Ardana.

With Speedel and Arpida joining anti-infectives maker Basilea, hypertension specialist Actelion and Europe's biggest biotech, Serono, the Swiss biotech sector looks to be gaining momentum.

According to a recent report by Ernst & Young, there were 133 pure biotech companies in Switzerland at the end of 2004, giving it the highest density of biotechs in relation to population in the world.

Just under 200 million Swiss francs (AUD$216 million) in venture capital was poured into the sector in 2004.