Convergence considers IPO after GSK spin-off, as European biotech revives

Reuters - UK Focus

* CEO says Convergence could raise 50-100 million pounds

* Follows success for pain drug in mid-stage trial

* UK biotech sector boosted by Circassia IPO in March

* Biotech support firm Abzena also announces plan to float

By Ben Hirschler

LONDON, June 16 (Reuters) - Convergence Pharmaceuticals, aspecialist pain drug company spun off from GlaxoSmithKline (Frankfurt: GS7.F - news), is preparing for a possible stock market listing asBritish biotech companies enjoy a revival of interest frominvestors.

The European sector has been slow to catch up with its U.S.peers, which have seen a renaissance in the past two years, butsince allergy drug developer Circassia raised 200million pounds ($335 million) in March - the biggest Londonmarket debut in years for a biotech company -the wider industry's fortunes have turned.

Now Convergence Pharmaceuticals, which was created in 2010following GSK's decision to exit certain areas of neuroscience,says it could raise between 50 million and 100 million pounds inanother substantial initial public offering (IPO).

Chief Executive Clive Dix said on Monday that listings inLondon and New York (Frankfurt: HX6.F - news) were under consideration, with a potentialflotation most likely to take place early next year as the groupreadies its most advanced drug for final-stage clinical testing.

"We are now starting to talk to advisers about the state ofthe FTSE and Nasdaq markets for biotech and are consideringseriously floating the company," Dix said in an interview. "We'dprobably be looking to go out early next year."

A further funding round from venture capital investors, whohave already put up $35.4 million, is a fallback option if thewindow for biotech IPO fund-raisings closes before then, headded.

Convergence's backers include Apposite Capital, New Leaf andSV Life Sciences. GSK also retains an 18 percent stake inConvergence.


The company has been encouraged to look at an IPO followingsuccessful mid-stage clinical trial results showing itsexperimental drug CNV1014802 reduced pain by 55 percent inpatients with trigeminal neuralgia (TGN), a rare and severe formof facial pain.

Convergence received orphan-drug designation from the U.S.Food and Drug Administration last year for the drug in TGN andDix believes it has potential in several other conditions aswell. The firm also has several other products in development.

Dix, an industry veteran, said the success of Circassia hadbeen a spur to emerging healthcare companies and their backersin Britain.

Firms raising money in Europe rely more heavily ongeneralist and small-cap investment funds - many of which havelittle appetite for early-stage biotech businesses - makingEurope a tougher place to raise funds than the United States,where an experienced pool of specialised funds understand thesector's complexities and long development timelines.

"(Circassia) has given us more confidence and I think it hasgiven the sector more confidence too," Dix said. "I think we areseeing a proper recovery now. This isn't just hype. There arelots of very good small company start-ups and spin-outs."

Separately, another British biotech business called Abzena,which provides services and technologies to biotechnology andpharmaceutical companies, said on Monday it intended to launchan IPO on London's AIM market, formerly the AlternativeInvestment Market. Cenkos is acting as its adviser and broker.

Abzena's investors include Imperial Innovations,which has a stake of 26.2 percent worth 11.1 million pounds atthe end of January, making the group worth 42.4 million at thattime.

In another fillip for European biotech investors, Actelionsaid its experimental heart and lung drug Selexipag met itsprimary goal in a late-stage study, boosting its shares morethan 14 percent. ($1 = 0.5956 British Pounds) (Editing by Sophie Walker)

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