The European biotech sector has had a bumpy past. Today, however it has reached a record momentum and is flourishing like never before. Stock exchanges, such as Euronext, support Biotech companies and have contributed largely to the record high we see today.
The global financial crisis hit Europe in 2008. Like a tidal wave, it tore through the biotech sector, leaving behind the debris of shattered companies and resulting in widespread cost-cutting with employees being laid off and research shelved. Nearly a decade later, the European biotech sector is flourishing again and has reached a momentum that was quite unforeseeable in the aftermath of 2008.
It took six years until the gradual recovery of the European biotech sector became apparent. Then, in 2014 and 2015, companies reached a record high in matters of revenues, net income and initial public offerings (IPOs). Whilst there had only been 8 IPOs in 2011, for instance, 33 companies went public in 2015.
The European biotech momentum
The overall uplift in the economy also meant that biotechs began hiring rather than laying off workers. In 2011, the European biotech sector employed a total number of 47,700 people. By 2016, it counted 67,460 employees, which presumably went hand in hand with the increasing number of companies founded within that four year period.
In recent years, R&D has also experienced a mighty push. With important discoveries being made more frequently, companies have to uphold a continuous effort to adjust their pipelines. In 2012, for instance, European biotech companies focused on orphan diseases, cancer and chronic diseases, such as diabetes type 2 and alzheimer’s disease (AD). And although there had been a lull in the study of gene therapies, they experienced their come-back when uniQure introduced Glybera, a drug for people suffering from lipoprotein lipase deficiency (LPLD).
The year 2013, saw the focus shift towards autoimmune diseases and HIV. Then, in 2014, more than 50% of European companies increased their R&D spending. The effect of this was seen a year later with a new boost in AI research, followed by the discovery of CRISPR-Cas9, which opened a whole new avenue for drug development.
Political tensions spreading fear in the life sciences sector
It becomes apparent that the European biotech sector has reached a significant momentum, an entrepreneurial movement that is occurring in all major cities. But amidst the political uncertainty of post-Brexit talks and the anti-science attitude of the Trump administration, we have to ask ourselves how this momentum can be upheld.
Trump’s actions are seen by many as a threat to the very substance of entrepreneurship, and with rising geopolitical tensions between America and various regions in Eastern Europe and Northeast Asia, an uncertain environment has developed with many fearing for access to funding, and the growth and development of biotech companies.
In face of these challenges, biotech leaders have to strengthen both their business model and their financing sources. And one way to enable companies’ continuous self-support and that of the European biotech momentum in these times of political turmoil, is by listing on the stock exchange. However, this decision is not an easy one, and sometimes it is better to think outside the box, or rather across borders. More and more companies, for instance, are turning their backs on their domestic markets and looking towards foreign ones instead.
Listing on a stock exchange keeps a company safe
Europe is home to a number of stock exchanges ranging from global to regional ones. Well-known domestic stock exchanges include Deutsche Boerse in Germany, Warsaw Stock Exchange in Poland, the Swiss SIX Exchange and Stockholm Stock Exchange in Sweden. The London Stock Exchange is a leading marketspace, but there are also two pan-European players, Euronext and OMX, particularly acting on the lsiting field. OMX is a merger of Baltic and Scandinavian stock exchanges.
When it comes to the life sciences, Euronext, which is present in France, Belgium, the Netherlands and Portugal, has become a listing choice for many companies from other European states. Having recognized the historical biotech momentum as an opportunity, it has set out to help the European biotech industry and contribute to the movement by supporting companies, raising money and creating jobs.
Back in 2013, Euronext allocated dedicated resources to focus on the financing of SMEs. A specific focus on Life Sciences companies among selected growth sectors, aided the expansion of the life sciences franchise (45 Life Sciences IPOs since 2013). Today, Euronext stands as the leading listing venue in the world for Medtech and second – after the US – for Biotech.
Euronext is the largest biotech stock market in Europe
Geneuro, for example, is a Swiss company that focuses on diseases of the nervous system and autoimmune diseases. In 2016, it raised €33m (~ $39m) after its IPO on Euronext. “Our domestic stock exchange is SIX,” explains Miguel Payró, CFO of Geneuro. “Here there are very few listed biotechs and even less SMEs. There are also less funds and analysts following biotech than on Euronext Paris, where the biotech ecosystem is much deeper and more dynamic.”
The CEO of Noxxon, Aram Mangasarian, agrees with Payró. “In many ways, the French market has been the most active European stock exchange for biotechnology companies and there is a high demand there. We appreciate the flexibility of Euronext and the French market appetite for biotechnology stories,” he says. Noxxon is a German clinical-stage biotech company with expertise in the field of oncology, which raised €3m (~ $3,5m) after listing on Euronext in 2016.
The sudden boost of the biotech sector in 2014, was recognized by Euronext faster than by any other stock exchange. That same year, it listed the Irish company Mainstay Medical, which raised €18m (~ $21m) as a result, and the German company Probiodrug that secured €22.5m (~ $26m).
Native stock exchanges often risk-averse
Probiodrug, which is listed on Euronext Amsterdam, develops drugs for AD and already has its lead candidate in phase 2 development. “We chose Euronext, as it has evolved into the leading European exchange and trading platform for technology companies, including those in the life sciences,” explains Konrad Glund, CEO. “Our IPO together with the follow-on financings, demonstrates the successful access to and acceptance of international investors. We have raised approximately €50m (~ $59m) over the last three years.”
He points out that this success most probably would not have been possible on the Deutsche Börse, because German investors are still largely risk-averse and sitting on the sidelines due to bad past experiences with biotech companies.
In the wake of the growth of its Biotech franchise and having recognised the momentum, Euronext also launched TechShare in 2015. It is an educational programme to help innovative Tech SMEs to familiarize with capital markets and their mechanics. TechShare equips Biotech entrepreneurs with the tools to best leverage capital markets at no costs.
Europe has spiked international investors’ interests
In 2017, Euronext is expanding, opening offices in further European countries, including Germany, Spain, Italy and Switzerland. This move correlates with the world’s growing interest in the European biotech sector. Its extreme growth and the political turmoil in the US are making Europe increasingly popular for international investors.
Since a few years, Euronext has seen a growing participation of US investors. Today, it counts more than 440 institutional investors from 30 countries across Europe, the US and Asia investing in its Biotech community, with holdings worth €6.1bn (~ $7.2 bn).
More than a quarter of the 75 funds exclusively dedicated to Life Science companies are US funds. General investment funds investing in several Euronext Biotech companies are also very important: 36% of these funds hold at least 3 biotech companies in their portfolio. This has contributed to making Euronext the largest biotech market in Europe and the listing venue of choice for life science companies.
Many businesses have seen the access to international investors as a reason to list on Euronext. Glund explains that AD, Probiodrug’s main focus area, became an investment topic for Wall Street only in 2015 and 2016. “Europe, on the other hand, ‘discovered’ AD as an investment in 2014, so a move to NASDAQ would have been challenging, whilst the move to Euronext gave us access to international investors.”
Payró has a similar story to tell: “Listing in the US is significantly more onerous in terms of work and costs than listing on Euronext or SIX. For our size at the time of our IPO, Euronext was the best choice given the number of listed biotech SMEs, of biotech investors, brokers and biotech-related events, as well as the strong and supportive EU regulatory framework.”
SMEs are better off listing on Euronext
To date, Euronext has listed 86 life sciences companies – including 47 biotechs – of which 81 are SMEs and 5 have a market capitalization of more than €1bn (~ $1.2bn). Most of them, like Probiodrug, Noxxon and Geneuro focus on inflammatory diseases, oncology, neurology, cardiovascular diseases or allergies.
When asked what they would recommend to a European biotech company that is thinking about an IPO, Mangasarian answered, “The biotech sector is extremely versatile and demands a lot of flexibility. We need to grasp opportunities when they present themselves. My advice is, to weigh the balance of time-sensitive opportunities, like market factors, against the paper-work and long-term impact of listing in another country. However, all biotech CEO’s know this, biotech’s don’t walk a straight path, they have to keep adjusting to a constantly changing environment.”
Glund replied, “With Euronext’s focus on SMEs and technology, coupled with their investors’ expertise, it is an excellent place to launch. Given that in the last four years the number of biotechs listed here has increased from 12 to 47, it seems as though the market agrees with me.”
This week Euronext is launching its second phase of deployment, expanding to other European countries. If you want to discover more on Euronext and its role in the European biotech momentum, click here for the FREE Biotech Barometer 2017!
Images via Euronext (Biotech Barometer and “Financing the Growth of Life Sciences Companies”) Phongphan, worradirekt, Golden House Studio/Shutterstock