BioWorld International Correspondent

PARIS - ExonHit Therapeutics SA launched an initial public offering on the Alternext market of the Euronext stock exchange in Paris Nov. 8, hoping to raise 6.5 million (US$7.6 million).

Paris-based ExonHit is increasing its capital by 2.5 million (before the extension clause and overallotment option) to cover a public offering in France and a private international placement in certain countries that do not include the U.S.

An additional increase of 4 million is reserved for the French diagnostics company BioMérieux, which will purchase the corresponding shares at the issue price, provided the IPO succeeds.

In mid-October ExonHit and BioMérieux, of Marcy L'Etoile, renewed and expanded a research collaboration aimed at developing new blood-based diagnostics for the early detection of cancers.

Although financial details were not disclosed, the deal is valuable to ExonHit, given the size of the cancer screening market. (See BioWorld International, Oct. 19, 2005.)

Through the IPO, ExonHit would put 1 million new shares on the market, representing 5.2 percent of its capital. The number could increase to about 1.2 million shares (nearly 6 percent) if the extension clause is fully exercised.

In addition, a greenshoe of 172,500 shares is being offered, which would increase the total shares in public hands to about 1.3 million, almost 6.9 percent of ExonHit's capital.

For its part, BioMérieux would purchase a maximum of 2 million shares representing 10.4 percent of the company's capital and voting rights. Another 125,000 new shares are reserved for company staff.

The price range for the offering is 2.50 to 2.89 per share, which would value the company at between 54.6 million and 62.5 million (not counting the overallotment option and the shares reserved for staff).

The offering opened on Nov. 8 and will close Nov. 16. The price of the shares and the final number issued will be announced Nov. 17.

ExonHit has raised 48.5 million in three funding rounds since 1998, and had cash and cash equivalents of 8.3 million at June 30. Significantly, none of its existing investors are using the IPO to exit.

Its main shareholders are Oxford BioScience Partners, of Boston, and four Paris-based venture capital funds - BNP-Paribas Banexi Venture III, CDC Innovation, Sofinnova Partners and AGF Private Equity. Another four European funds invested in the company on the occasion of its third funding round at the beginning of 2004: Dresdner Kleinwort Capital, of London; Danske Bank, of Copenhagen; LCFE. de Rothschild, of Paris; and Sudinnova, of Lyon.

Exonhit's financials show that its revenues, essentially from research collaborations, were 4.2 million in 2004, but 2.2 million in the first half of 2005. Its research and development spending has been in decline: 11 million in 2003, 10.4 million in 2004 and 3.4 million in the first six months of this year. As a result, the company's net loss sank to 2.2 million in the first half of 2005, after being as high as 11.5 million in 2004.

Finance Director Philippe Rousseau described the 2004 net loss as exceptional, saying it was attributable to non-operational factors, such as a drop in the tax credit.

ExonHit chose the Alternext market for its IPO for several reasons, Rousseau said, including the fact that there is no limit on the percentage of a company's capital placed on the market and that companies are freer to price future share offerings instead of having to set a price related to their share price at the time. And there were tax benefits for investors on the Alternext market, he said.

ExonHit is a leader in the area of gene expression and analysis, especially the alternative splicing process through which individual genes generate proteins and functions. ExonHit uses its proprietary DATAS (differential analysis of transcripts with alternative splicing) technology in three different markets - DNA chips, diagnostics and therapeutics, including individualized treatments.

It has collaborations with Affymetrix Inc., of Gaithersburg, Md., and Agilent Technologies Inc., of Palto Alto, Calif., for biochips, under which its partners produce the hardware while ExonHit supplies its SpliceArray software.

In the diagnostics area, ExonHit's activities now are bound up with BioMérieux. Their six-year agreement provides for the development of diagnostic tests for at least five different cancers.

The aim is to produce blood tests that can detect cancers at a very early stage, as well as provide individual data on each patient for optimizing subsequent treatment.

Under the agreement, ExonHit will receive research and development funding, plus development milestones and royalties on future product sales. In exchange, it has granted BioMérieux an exclusive license for the use of its technology and methods in the field of blood diagnostics, gene profiling and the design of microarrays.

The two companies expect to have their first product on the market within four years.

ExonHit also has several drug discovery programs under way in neurodegenerative diseases, such as Alzheimer's and Parkinson's disease, as well as chronic leukemia and certain ophthalmic conditions.

Its strategy is to out-license products once they have reached the Phase I or II trial stage. It already is planning to out-license its two lead compounds, EHT 0202 and 0205.

The former, which is being developed for both Alzheimer's and Parkinson's, is due to be licensed out following a Phase II trial scheduled for the near future, while the second, which is for Alzheimer's alone and is nearing the end of the preclinical development stage, could be out-licensed either before or after a Phase I trial.

Another compound nearing the end of preclinical development is EHT/AGN 0001, which is being co-developed with Allergan Inc. for the treatment of neurological pain and certain ophthalmic diseases.

Under that program, which is due to run to 2007, ExonHit is receiving R&D funding of $4 million a year plus milestones and could receive royalties.