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Ark Therapeutics: Spreading, or Hiding Risk?

Executive Summary

Since its IPO in March 2004, Ark Therapeutics has been watched closely, as the first European biotech to float in nearly three years. Critics point to a lack of strategic focus, claiming the broad collection of products in the firm's portfolio, including a device, drugs and even a diagnostic, will be difficult to exploit in a small company with limited resources. Yet diversity apparently proved an attractive feature-particularly to generalist investors who see the company as a spread risk bet on biotech. It has also allowed Ark to hide the far higher risk associated with individual follow-up programs, where most of the firm's value lies, behind a sure-bet marketed product.

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Microscience IPO: With a Little Help From Its Friends

Unusually, the VC investors in UK-based Microscience have announced they will pump a further £10 million into the vaccine developer as it tries to enter the lukewarm public markets with a summer IPO on London's AIM. With underwhelming debuts from Ark Therapeutics and Basilea Pharmaceutica in Europe and dramatically reduced offering prices in both Europe and the US, Microscience's investors' show of solidarity may make a necessary difference. But in the end, it's still all about the valuation.

Sinclair Pharma: How Low Risk Can You Go?

Sinclair Pharma was the only health care firm to have floated in Europe in 2003; investors liked its very low risk model: take little development risk then partner for marketing. Yet in taking the specialty model to its extreme, Sinclair's challenge will be to secure enough valuable products to keep investors interested, particularly if European markets warm up and begin to embrace a new, stronger generation of R&D focused firms.

NicOx/AstraZeneca: Transparency vs. Partnering

AstraZeneca's news that nitric oxide donator AZD 3582 had failed to reach a primary end-point in a Phase II trial sent originator NicOx's shares plummeting, as investors lost faith in the biotech's entire platform. NicOx is disputing the data's accuracy in an attempt to salvage investor confidence--and to survive. The events highlight the tension between Big Pharma's duties to investor transparency and to protect its biotech partners. They're also a reminder to biotechs that there's more to deals than just royalties.

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