by Samir Devani, Managing Director, Rx Securities

As we approach the end of 2019, I believe the year will be seen as one of the worst from the perspective of European biotech IPO activity. Only Ascelia Pharma managed to list on NASDAQ Stockholm raising SEK222m in the process. This drought in public funding in Europe cannot be attri­buted to poor stock performances in the sector, as our European Biotech Index is up approximately 30 per cent year to date, outperforming the NASDAQ Biotech Index, and making 2019 another superb year.

Disappointingly, European companies looking for capital have had to tap the US market, both from an IPO perspective and concerning se­condary fundraising (e.g. US$505m by Genmab, US$557m by Argenx). I strongly believe that European capital markets are not working for the sector. Consolidation would ge­nerate larger, better financed businesses, which, combined with tax-incentives, government funds, and policies that promote greater investment in higher-risk companies, could assist the development of biotech ecosystems within Europe. These changes need to happen in the next two to three years, otherwise we’re all moving to California!

Generally, we believe the investment case for biotech remains strong. This is highlighted by some major M&A acti­vity over the year, including the acquisitions of Celgene (by Bristol-Myers Squibb for US$74bn), Loxo Oncology (by Eli Lilly for US$7.2bn), The Medicines Co. (by Novartis for US$9.7bn) and Spark (by Roche for US$4.8bn). In my opinion, the most surprising big partnering transaction in 2019 was Galapagos’ 10-year global R&D collaboration with Gilead, whereby the Dutch-Belgian biotech received US$3.95bn up front and a US$1.1bn equity investment. The deal contributed to Galapagos’ stellar 2019 stock performance (+110%). Other strong performances were delivered by Zealand, Veloxis, and Shield. However, we should never forget that biotech is risky, and there were also numerous disappointments, including those from Motif Bio (UK) and Kia­dis Pharma (Netherlands).

Therapeutically, Alzheimer’s disease was a big topic this year. The surprising return of aducanumab in October, facilitating the recovery of Biogen’s US$18bn market cap loss when Phase III trials were stopped for futility, also benefited two European biotech companies: Bioarctic (Sweden) and Vivoryon (Germany).

This text was originally published in the European Biotechnology Magazine Winter Edition 2019 released on 12th December. Full download of the Magazine is available here.