When France's MedinCell needed funding to progress with the launch of a newly developed drug, it decided the time was right for a long-planned IPO. David Wigan reports.
Jaime Arango
French biotech company MedinCell is involved in the research and development of drugs. Over the years, it has had to rely on a patchwork of financing, but when it came to its latest development, the company decided it was crucial to ensure a consistent pipeline of funds.
The new drug, Bepo, involves an injectable slow-release system for administration that enables patients to receive doses over time (rather than all at once), and will enable patients in areas such as mental health to better manage their disease and stay stable over a longer period. It is in phase three of clinical trials – usually the final stage before the drug is granted a licence.
Innovative development
MedinCell's Bepo technology consists of a gel that can be mixed with drugs already on the market. Once injected under a patient’s skin, the gel degrades and releases the drug automatically for up to a year. Administrators can fine-tune how quickly the drug is released by altering the gel’s ingredients. “The drug can be released over days, weeks or even months, which we hope will be a huge benefit where there are high incidences of non-observance, such as in schizophrenia,” says Jaime Arango, director of finance, administration and legal at MedinCell. “The technology also allows the gel to be removed, if necessary, so that the impact immediately drops.”
All of MedinCell’s 150 employees are shareholders and the company has a partnership with Israeli multinational Teva Pharmaceutical Industries (Teva), in which Warren Buffett’s Berkshire Hathaway has a significant stake. Teva has put money into MedinCell since 2014, including €15m in 2016, repayable through five-year and seven-year bonds.
Over the course of 2017, MedinCell also received loans from France’s Banque Populaire (€7m) and venture capital firm Seventure Partners (€4m in the form of convertible bonds). In 2018, the European Investment Bank made a €20m investment and BNP Paribas and CM-CIC Innovation bought convertible bonds for €3.2m. CM-CIC had already invested in 6.2% of the company’s stock in a private secondary market transaction in October 2017.
(Separately, MedinCell was also awarded a $3.5m grant from the Bill & Melinda Gates Foundation to advance development of a six-month acting injectable contraceptive, with the aim of helping women in developing countries.)
Planning for an IPO
“We had a lot of investment coming into the company in 2017 and 2018, including some convertible bonds that were sold with the intention of converting them into equity once we went ahead with an initial public offering [IPO],” says Mr Arango. “We wanted to get some institutional investors on board, which would give confidence to others when we did eventually go ahead with a listing.”
Executives at the company had always planned to bring MedinCell to market, but were uncertain as to timing. Plans began to materialise in October 2017, when CM-CIC came on board, according to Mr Arango. In the following months, stock markets around the world entered a period of rising volatility, amid concern over trade wars, rising US interest rates and the political situation in the Middle East.
The IPO went on ice until April, at which time stock markets appeared to calm and MedinCell executives set off on some pre-listing roadshows. “We wanted to show investors that we had solid plans to develop to expand our product portfolio and our technology platform,” says Mr Arango. “We also wanted to pay back some of our bond debt.”
Bryan, Garnier & Co and Crédit Agricole Corporate and Investment Bank were appointed as joint global coordinators and joint bookrunners, with Allegra Finance acting as financial adviser. After discussions with bankers in mid-2018, the price for the offering was set at €7.25 per share. The company aimed to raise about €30m from the offering (including a 20% subscription by Teva), which would value the company at €144.1m.
Better visibility
“With the investors we had we were pretty confident we could convince other investors, and we went ahead in early October,” says Mr Arango. “The issuance went better than expected, and we were able to attract €30m initially and then another €1.4m on an over-allotment.”
Some 4,137,931 new shares were issued, with investors including existing partners and a mix of generalist, socially responsible and US-based specialist funds.
“We were very happy; the listing was a great milestone for MedinCell,” says Mr Arango. “It means we will gain more visibility and will be able to develop our pipeline knowing that we are sufficiently funded in the medium term.” MedinCell shares began trading on Euronext Paris on October 8, 2018.
