Flotation raises less than expected

Nov 28 2007 by Chris Knox, The Journal

A TYNESIDE drugs development company has raised less than half its original target as it floats on the stock market today.

Newcastle University spin-out eTherapeutics has raised £1.33m to fund its research and development work, instead of the £3m it hoped to get from its float on the Alternative Investment Market.

Founder and chief executive Prof Malcolm Young blamed the current stock market turmoil and reassured investors by saying the company had had promising talks with blue chip companies which are hoped to yield some income.

“We have done well to launch an exciting proposition to investors during a time of such instability,” he said. “The situation in the world-wide credit markets brought about by an unstable US sub-prime sector did not help us and has affected how much we were able to raise.”

Although Mr Young could not estimate the immediate effect of the float, he hopes the firm’s annual turnover of £1m will more than quadruple over the next two years.

The firm will use the extra cash to increase its focus on a number of disorders which it believes have yet to be properly addressed by rival drug companies, including depression, high cholesterol and malignant melanomas.

Mr Young said: “The funds raised will enable us to develop and broaden our drug development pipeline, and will significantly raise the profile of e-Therapeutics with potential licensing partners. I would like to thank all of our investors for recognising the exciting opportunity that lies ahead.”

He also said that he believed the company was valued too low at £37.33m considering the current size of development deals in the drugs industry.

He cited a number of deals which showed the levels of business that can be achieved in the sector, including a recent $1.1bn contract won by GlaxoSmithKline (GSK) and Synta Pharmaceuticals to develop and sell a treatment for melanoma.

Mr Young said: “When you consider the size of some of the deals that have recently taken place, you would have to say that a market cap of £37.33m does not match the potential of e-Therapeutics. Add the fact that we have also been developing a melanoma treatment that we believe is better than the one being developed between GSK and Synta.”

e-Therapeutics was set up in 2001 after Mr Young attracted more than £10m research funding from the Engineering and Physical Sciences Council while practising at Newcastle University. He plans to set up offices in Vancouver to help expand in the US and Canada. The company already has offices in China and India.