European biotech on course for record year with $3.9B raised in first half of 2018

This is the second of a two-part series on Life Sciences Connect looking at the current robust financial climate for biopharma. “Biopharma IPOs gone wild,” also via BioWorld, the daily biopharma news service from Clarivate Analytics, appeared on July 10, 2018.

European biotechnology firms engaged in drug development raised $3,904 million during the first half of the year, dwarfing the $2,302 million raised during the equivalent period last year and putting the sector on course for a new high-water mark.

A strong uptick in private equity investing ($1,438 million for H1 2018 vs. $649 million for H1 2017) was a major factor in the sector’s performance. (See European biotech total funding H1 2016 –2018, below.)



So too was the contribution of listed firms, which raised $1,681 million (vs. $1,049 million in H1 2017) in follow-on offerings and other transactions. IPOs raised the least amount – seven transactions generated $785 million – but the outcome was comfortably ahead of what European firms raised during the same period over the last two years.


European biotechnology firms engaged in drug development raised $3,904 million during the first half of the year, dwarfing the $2,302 million raised during the equivalent period last year and putting the sector on course for a new high-water mark.”


The increasing maturity of the European sector is key to its ability to tap into the large pool of capital available through Nasdaq, now the go-to place for the top tier of firms. All but a couple of the largest follow-on transactions of listed companies occurred on the New York exchange. The same was true for IPOs. (See Top 10 follow-on offerings H1 2018 and Top five IPOs January–June 2018, below.)



The continued flow of U.S. cash into European biotechnology is proving transformative – and not just for financial reasons. The exposure of European firms to experienced U.S.-based investors can have effects that extend beyond the balance sheet. For Jena, Germany-based Inflarx NV, a company with expertise in developing antibodies against proteins of the complement system, engaging with U.S. investors actually caused it to shift its clinical development strategy.

The company has concluded three sizeable transactions with U.S. investors in less than a year, raising $136 million in a pre-IPO crossover round and an IPO last fall, followed by a $62.9 million follow-on offering in May (exiting shareholders sold an additional $79 million worth of stock as well).

At the same time, the perception that U.S. investors will throw cash at any company “is completely wrong,” CEO Niels Riedemann told BioWorld. “When you get it, you get it for real.” The company went through a rigorous due diligence process led by individuals with senior leadership experience at some of the industry’s largest firms. “Those guys know where to poke,” he said.


The perception that U.S. investors will throw cash at any company is completely wrong. When you get it, you get it for real.”

– Niels Riedemann, CEO, Inflarx NV


The company “checked the box” in terms of technology, but its focus on sepsis-associated organ damage and on acute care in general, was deemed to be too risky, given the high variation between patients, the need for large trials and complex endpoints. It has therefore pivoted to hidradenitis suppurativa, a painful, debilitating skin disease that has a large patient population with few therapeutic options. Humira (adalimumab, Abbvie Inc.), the tumor necrosis factor-alpha inhibitor, is indicated for the condition, but only a minority of patients respond, Riedemann said. A phase IIb trial of IFX-1, an antibody that selectively targets complement C5a, will read out in the first half of 2019. The company is also starting two phase II trials of IFX-1 in antineutrophil cytoplasmic antibody (ANCA)-associated vasculitis, an inflammatory disease that damages blood vessel walls, later this year.

Inflarx is using some of the cash it has raised to build a basic research capability at Ann Arbor, Mich. It’s a sort of homecoming for the company. Its founders Riedemann and chief scientific officer Renfeng Guo met as post-docs in the lab of Peter Ward, long-time chair of pathology at the University of Michigan Medical School, where Guo holds an adjunct post.

Morphosys AG is another German firm to migrate recently to Nasdaq. Long a European bellwether, it is a mature company, offering a completely different proposition to investors than most other European firms. Long established on its home exchange in Frankfurt, the antibody developer already had a large U.S. institutional presence on its shareholder roster. Its “second IPO” on Nasdaq grossed $239 million, including the overallotment option, and brought in additional investors who “couldn’t or wouldn’t” invest in Europe, CEO Simon Moroney told BioWorld.

Some 92 percent of the 50-plus institutions who participated came from the U.S. They’re already up about 20 percent on their investment since the IPO. “The stock has performed solidly, if not spectacularly, which is fine,” Moroney said.

The timing of the transaction was linked to the progress of a key pipeline asset, MOR-208, an anti-CD19 antibody in development for B-cell malignancies in adults unable to undergo high-dose chemotherapy or autologous cell therapy. “It’s in a phase II trial, but, based on our interaction with the FDA, we’re encouraged to think we can file based on this completed phase II trial,” Moroney said. The company could file toward the end of 2019, and, with the help of a priority review voucher, gain approval in the second quarter of 2020.

Morphosys now has “an effective cash balance” of €450 million (US$522 million), Moroney said, and it plans to use some of its cash to build a commercial infrastructure in the U.S. to enable it to market the drug itself. It is in the process of defining its organizational requirements. It has yet to decide on a location, but New Jersey is the leading candidate, given its concentration of big pharma personnel and its proximity to the company’s investors in New York.


U.K. firms top in private equity rounds

In the private equity sphere, the U.K. retained its leadership, accounting for four of the top 10 transactions – and for three of the top five deals. (See Top 10 private equity deals January–June 2018, below.)



No other country had more than one top-10 deal. Some of these firms are likely to find their way to Wall Street at some point in the future. Mainz, Germany-based Biontech AG already throws big biotech shapes, having banked about $450 million in equity funding so far and a similar sum in partnering deals. (See BioWorld, Jan. 5, 2018.)

It has near full-spectrum coverage of the immuno-oncology space, with ongoing alliances with the Genentech arm of Basel, Switzerland-based Roche Holding AG in personalized mRNA-based cancer vaccines, with Indianapolis-based Eli Lilly and Co. on the discovery of novel tumor targets and T-cell receptors (TCRs), with Paris-based Sanofi SA on mRNA-based cancer immunotherapy, and with Copenhagen, Denmark-based Genmab A/S on bispecific antibodies. The company explicitly stated that a key focus this year is on developing its single-batch manufacturing capabilities. But its large cash consumption – its alliances typically involve co-development rather than straight out-licensing deals – means that another significant financing event may not be too far away.

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