Image by HowardLake via Flickr
En castellano más abajo
[Note: MAB
stands from Mercado Alternativo Bursátil – Stock Exchange Alternative Market-
similar to Alternext. Monoclonal antibodies are quite important as well, but
not for all biotechs ;-)]
We are
living hard times in the biotech industry. Nowadays, it is becoming
increasingly difficult to get money for almost every industry and, specially,
for biotech companies. Credit crunch started two or three years ago and it is
still present.
We can
start this post reviewing the more popular financing ways for biotechs:
- Grants
- Private investors
- Angel investors
- Venture capitalists
- Bank loans
- Going public
Talking
about grants, Governments in EU are facing public debt problems thus reducing
expenses is capital for them. Spain
and other countries have suffered a reduction in the amount of public funds
available for grants, despite of the efforts of the Science Minister in this
respect.
Capital is
really conservative. When the economic forecast are, as we can see these days,
uncertain investors prefer to put their money in safe places awaiting for a
more clear vision on economy evolution. Private and angel investors are being
very cautious before putting a dime in a new venture.
Venture
capitalists are overwhelmed with towers of biotech business plan begging for
money. In other words, competition is higher than never to get an investment in
biotech which is taking down the companies’ valuation artificially. I read
contradictory news about the VCs’ investment trend in last year and a half. Sometimes
it’s been said that VCs are increasing their investments in biotech but, on my
experience, that’s not true, at least in Europe.
I don’t even think about going to the US
to ask for investments in Europe…
Bank loans.
I think that the readers of this blog don’t need any explanation. Simply, this
is not an option nowadays for a biotech firm. It never was but now, that is
more true than ever.
We just
have one option available out of six: Going Public.
Really?
Well, that appears to be the case. And this is not an easy option, especially
for small emerging biotechs that are condemned to struggle in the competitive
landscape of private investors and VCs…
Up to now,
there are two Spanish biotech companies listed at MAB: Ab-Biotics and NeuronBiopharma. Good for them! Becoming a listed company is a strategic decision
with many drawbacks as regulation is hard (but not as hard as it is for other "traditional" markets). Information should be
provided to market regularly and the companies incur in extra expenses to accomplish
all of the requirements inherent to being traded.
However, we
cannot forget the added benefits: a traded company is required to be
transparent for investors, what could attract new ones, and new funding
strategies could be on place (PIPEs, selling newly-issued, discounted shares to
existing shareholders, ATM strategy…).
As a
conclusion, going public does not only permit the company to raise funds in the IPO, but also gives the company access to new fundraising tools unavailable
to private companies. In my view, it is time for biotechs in Spain to start
thinking on going public and being traded on the MAB as an alternative financing source.
Definitions:
PIPE (Private
Investment in Public Equities): typically in a PIPE transaction, a small group
of private investors led by a hedge fund and the firm's original venture
capital (VC) backers purchase shares in a publicly held biotech that is often
young and struggling to attract the attention of Wall Street analysts and large
institutional investors like mutual funds and pension funds. I took the definition form Nice PIPEs at Nature Bioentrepreneur
ATM (At The
Market): ATMs involve selling shares into the market in small chunks, and while
they can’t be used to raise a boatload of money, they can avoid the discounts
and warrants that can make registered direct offerings and PIPEs unattractive. I found this definition here: BiotechFundraising Options for Those With No Options
Las empresas gestoras de capital riesgo están abrumadas con torres de planes de negocio biotecnológicos mendigando dinero. En otras palabras, la competencia para lograr fondos se ha vuelto más competida que nunca, lo que está llevando a la baja la valoración de las biotecnológicas artificialmente. Llevo año y medio leyendo noticias contradictorias sobre la inversión de capital riesgo. A veces se ha dicho que la inversión de capital riesgo en biotecnología se está incrementando pero, en mi experiencia, esto no es cierto, al menos en Europa. Ni se me pasa por la cabeza ir a EE.UU. para pedir dinero para inversiones en Europa…
Préstamos bancarios. Pienso que los lectores de este blog no
necesitan ninguna explicación. Sencillamente, ésta no es una opción. Nunca lo
ha sido, en realidad, pero ahora es más cierto que nunca.
En fin, que nos queda una sola opción de seis: salir a bolsa.
¿De verdad? Bueno, parece que esa es la situación, que no es
fácil especialmente para biotecnológicas emergentes que están condenadas a
luchar por inversores privados y capital riesgo…
Hasta el momento, hay dos empresas biotecnológicas españolas
que cotizan el MAB: Ab-Biotics y Neuron Biopharma. Bien por ellas. Ser empresa
cotizada es una decisión estratégica con muchos inconvenientes ya que la
regulación es dura (aunque no tanto como para otros mercados “tradicionales”). Se
debe informar regularmente al mercado y las empresas incurren en gastos
adicionales para cumplir con todas las obligaciones inherentes a ser cotizadas.
Sin embargo, no podemos olvidar los beneficios añadidos: una compañía cotizada
es más transparente, lo que puede animar a nuevos inversores y, sobre todo, se
pueden acceder a nuevas estrategias de financiación (PIPEs, venta de nuevas
acciones descontadas a los actuales inversores, estrategia “at the market”,…)
Como conclusión, salir a bolsa no solo permite a la empresa levantar
fondos en la oferta inicial de acciones, también permite acceder a nuevos
instrumentos financieros no disponibles para empresas no cotizadas. Quizá es el
momento de comenzar a plantearse la salida a bolsa para las biotecnológicas
españolas… Y por eso es tan importante potenciar el MAB e incentivar a las empresas, ¡más que la financiación pública!
What are the costs for regulatory compliance of a public company in Spain? In the US it's extraordinary - to the point where maintaining this compliance is sometimes a reason *not* to go public.
ResponderEliminarAnd so they are in Spain but, in my experience, it worth going public, it's rewarding and it makes easier to get more money. In any case, the problem in Spain is that it is very difficult to get access to other funding alternatives. VCs are reluctant to invest in biotech because their exit is not clear. IPO is a clear exit. If MAB work as we wish getting funds could be some easier.
ResponderEliminar