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Speedel orders a float with a twist

Alice Huxley

Basel-based, Speedel Pharma, has announced plans to join the SWX Swiss Exchange.

The listing will see a new bio-pharmaceutical company specialized in treatments for heart and metabolic diseases joining the Zurich market.

Speedel, which is specialized in heart and metabolic therapies, has a current pipeline that includes two drugs moving into human clinical trials this year (Phase III) and two in early phase I, as well as several pre-clinical projects.

Its most advanced product is a treatment for hypertension, which has been back-licensed by Novartis AG and is now entering Phase III human clinical trials.

The company will be a heavyweight from the start. "Our implied valuation is slightly over SFr1 billion," said Konrad P Wirz, Speedel's CFO, in an interview with swissinfo.

Speedel is undertaking an unusual initial public offering by not issuing any new shares. Nor is it raising any new capital.

And it plans to float just slightly more than the minimum number of shares required by SWX regulations.

All this combined make it an unprecedented transaction in the Swiss market, confirmed a SWX spokesman.

Biotechnology companies are known for taking unusual measures to become public, but it is normally to raise new capital. During the post-bubble doldrums on the SWX, another young life science firm, Cytos Biotechnology AG of Schlieren, completed a reverse takeover of a publicly listed company and managed to subsequently raise a substantial amount of fresh capital for R&D.

Hypertension drug

But Speedel says it is doing this for strategic reasons. It has no immediate requirement for cash as it recently arranged a convertible loan of SFr70 million to cover the start of a Phase III trial for a hypertension drug and says it has more SFr120 million on hand.

Being public gives the company the chance to improve its position for partnering with a large pharmaceutical, according to Wirz.

The plan is to attract new institutional investors, many of whom are mandated to only invest in public traded equities and firms with a fairly large capitalization.

It also hopes to get some research coverage amongst the analyst community. "No decent brokerage house here could ignore a billion franc life science company, after all," pointed out an investment banker who declined to be identified for this report.

Speedel has always been a little different. The seven-year-old firm was founded by a woman, Alice Huxley, and she remains CEO. This is different in a world where the corporate suites are still mainly occupied by men.

It eschewed venture capital to finance its R&D, choosing to work mainly with institutional and private investors. The firm raised a substantial amount of capital as a private company, compared to its worldwide peers.

Strong-minded approach

When it shelved plans for a traditional IPO earlier this year, it reflected the owners' strong-minded approach. Local press reports suggest there was disagreement over the price of shares and the valuation of the company between the firm's major shareholders and investments bankers.

Speedel itself will not comment in detail on the reasons for its decision, however Wirz did tell swissinfo that he feels that the way that the company's shares will be floated now will allow the "market to determine" the right price.

It is clear that Speedel will take advantage of being listed to eventually raise new capital for further drug research. Wirz confirmed this, saying that being listed "will make it easier to approach the capital markets for future financing".

Speedel's move has surprised a lot of investment bankers and consultants associated with SWX. One market participant, speaking off the record, expressed doubt about a high volume of shares traded, due to the small number of potential sellers.

Wirz confirmed that the pool of potential sellers is made up of six investors that own less than five per cent of the company.

Another wonders whether the market will really create a realistic share price, due to the size of the free float. A small free float usually means an illiquid share with an inflexible price. It is easy to have an artificially high, or even very low stock price, if few shares are ever bought or sold.

by Valerie Thompson


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