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European biotechs need a strong home public market to support growth

Oct 04, 2017 Tags: Business development Investment

No one questions the strength of science and technology that is discovered and developed in Europe. It is fertile ground that has raised a vibrant wave of startup companies in biotechnology and medical technologies.

Up to a third of the companies acquired in life sciences globally have their roots in Europe. And shareholders in European companies have been rewarded with lucrative exits.

Taken in isolation, Europe offers a stable ecosystem where young biotech and medtech companies can grow to a maturity, reaching an inflection point of valuation that makes them attractive, either to an established company for an acquisition, or to investors for an initial public offering (IPOs).

Yet Europe is not alone, faces global competition, and looking across the Atlantic finds its public marketplaces lagging behind the richness and robustness of the American public markets for biotech and medtech.

Since 2012 the funding raised by  European biotechs on the Euronext exchanges in Brussels, Amsterdam and Paris averages around EUR 25 million, which compares to USD 54 million for similar companies going public on the New York stock exchanges.

Following up with those companies, the market cap increases hover around a factor of two in Europe where it is two and a half in the US.

“We are doing alright in Europe,” says Olivier Litzka, from Edmond de Rothschild Investment Partners.

Yet he asks if Europe cannot do better.  At BIO-Europe® 2017 in Berlin, Litzka will lead a panel discussion on “Building the future of the European public market” on Monday afternoon.

Olivier Litzka, Edmond de Rothschild Investment Partners

Joining him for a discussion of ways Europe’s public markets can be strengthened will be: Ulrica Slåne Bjerke, Founder and CIO at Arctic Fund Management; Oscar Izeboud, the Managing Director at NIBC Bank; Frederic Martineau, the Business Development and Client Coverage Manager in France for the Euronext stock exchange; Simon Moroney, the CEO for MorphoSys, a German biotechnology company; and Peter Rahmer, Managing Director at The Trout Group LLC.

According to Litzka, “If we look at the whole environment for talent, founders, management, ideas, innovation and venture capital funding, we see the machine is working very well in Europe. And it has provided some interesting exits, where money has flowed back to investors, so that is the good news.”

Where the US holds a clear advantage, he says, is with the valuations for biotech and medtech IPOs, and the liquidity for shareholders.

“We need to reinforce and strengthen the home market for European companies in Life Sciences,” he says.

“Public markets for biotech in Europe are flourishing at the moment. How can they go even better? We have seen the start of something like a critical mass forming with some interesting new listings. How can this be further encouraged?” he asks.

When a European biotech or medtech company reaches a point where it is attractive to industry, when there is a offer on the table to buy the company, shareholders are likely to take that offer, rather than list the company on one of Europe’s public markets, he says.

Yet where a private company does not want to be acquired, when it wants to grow independently, its investors need to see that European markets will also value the company with capitalizations that reflect its performance and its value.

“How can we create the great returns that will encourage this company? How can we encourage more money to flow into the public markets in Europe, and how do we stimulate the public to invest specifically in biotech and medtech companies? These are key questions, and the members of the panel for this session have the experience and expertise to shape some answers,” Litzka says.