UK biotech investor Evans joins OGS bid war
By Mark Potter
LONDON, April 1 (Reuters) - British biotech investor Chris Evans said on Tuesday he planned to join the bid battle for Oxford GlycoSciences Plc (LSE: OGS.L - news) , fuelling hopes that venture capital firms might help drive consolidation in the stricken sector.
An industry source told Reuters that Evans and business partner Alan Goodman would offer between 107 million and 114 million pounds ($169-180 million) for OGS, trumping a 101.4 million pound bid from Britain's biggest biotech firm Celltech Group Plc .
Evans said the bid was part of a plan to revitalise Britain's biotech industry through mergers and acquisitions, and said his Merlin Biosciences fund planned to complete more than 10 deals this year involving both listed and unlisted firms.
"Our sector needs to wake up and smell the coffee," he said in a telephone interview.
"Small loss-making biotech companies who don't have anything close to market -- I think that business model is dead in the City of London (LSE: CIN.L - news) for the next five to six years. Institutions want a much lower-risk business model," he said.
Biotech firms across the world have been laid low by the bursting of the technology bubble as investors ditch the promise of future riches in favour of short-term returns.
Analysts have long been calling for the sector to consolidate, with some firms starting to run out of cash and fund-raising almost impossible in depressed equity markets.
But deals have been kept to a trickle, at least in part because chief executives have been reluctant to cede control of their businesses, many of which they founded.
"We're going to bang heads together and get very tough with anyone who gets in our way," Evans said.
Evans also said his Merlin fund had agreed to buy stem cell company ReNeuron Holdings Plc (LSE: REN.L - news) for 3.6 million pounds in the first public-to-private deal in the British biotech sector's 20-year history.
Investors welcomed both that deal and the move on OGS.
"To some extent one wants to breathe a sigh of relief and say 'Hooray at last the VCs (venture capitalists) are getting involved' because they are probably the only people with the fire power to help sort the sector out," said Andy Clarke, a fund manager at Reaborne who specialises in biotech stocks.
Evans, who founded one of the businesses that went on to form Celltech (LSE: CCH.L - news - msgs) , said he and Goodman had around 300 million pounds in their funds and were already in talks with other listed and unlisted companies about possible deals.
VENTURE CAPITAL
Evans declined to comment on how much he would bid for Oxford GlycoSciences (OGS), but said the offer would be "full" and was confident of winning Britain's first biotech bid battle.
Cambridge Antibody Technology Group Plc started the fight in January with an all-share bid for OGS. Its bid was topped a month later by Celltech, and while a slide in CAT's shares has blunted its challenge, OGS has said an international pharmaceutical company and a U.S. biotech firm have requested information which could lead to further offers.
Celltech has said it would not pursue OGS if a deal would dilute earnings for shareholders, which analysts think would be the case if it paid more than about 110 million pounds.
Celltech, which recently bought a 10 percent stake in OGS to strengthen its hand in a bidding war, said on Tuesday that shareholders owning a further four percent of OGS had accepted its bid, and extended its offer to April 15.
OGS's biggest asset is its cash pile, which stood at 136 million pounds at December 31. Analysts said Merlin was likely to use the money to invest in its existing portfolio of companies such as Ark Therapeutics, which pulled a planned flotation last year because of sliding equity markets.
Analysts said that with about a third of European biotech firms trading with a market value below their cash reserves, other healthcare-focused venture capital firms such as Atlas and Apax could follow Evans' lead.
"It's very difficult for VCs to justify investing in private companies at valuations which are a premium to net cash when you've got so many quoted companies trading below cash," said Samir Devani, an industry analyst at Altium Capital.
Analysts suggested KS Biomedix Holdings Plc , Vernalis Group Plc (LSE: VER.L - news) and M.L. Laboratories Plc as three firms likely to be on venture capitalist radar screens... |
