Vectura pulls £50m share placing as biotechs feel strain

Biotech company Vectura has called off what would have been one of the sector's largest fund-raisings this year after its share price slumped more than 20 per cent in a month, The Independent on Sunday can reveal.

The secondary offering for between £40m and £50m in new shares, led by investment bank Piper Jaffray, was cancelled because investor appetite evaporated as the company's shares took a nosedive, according to industry sources. The company declined to comment.

The recent market turmoil - the FTSE 100 has registered big losses over the past few weeks - has hit the biotech sector particularly hard because most companies are loss-making and seen as higher risk. "The big enthusiasm for the sector has collapsed," said a banker. "We have seen [other] deals being pulled."

Vectura, which specialises in inhaled drugs for conditions such as chronic obstructive pulmonary disorder and premature ejaculation, was expected to use the cash for product development. Its move has stoked fears that the funding window for biotech companies is now closed until at least after the summer. That could put some groups in a dire position. "There are a few companies out there that just don't have much money left," said asource.

Vectura is getting through nearly £15m of its cash every year. At that rate its £29m in reserves will last less than two years, though it is eligible for milestone payments from major partners including Novartis and Boeh- ringer Ingelheim.

The reversal of sentiment on biotech companies has been sudden and extreme. In the first few months of this year there was a string of listings in the sector - most notably Renovo, a stem cell company that raised £50m in a float. It shares began trading on 12 April, the same week that Entelos, a US biotech, had its debut.