Biotechs toast relaxation of guidelines on fundraising

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The British biotech industry was celebrating yesterday when new guidelines were published promising them greater flexibility when raising new funds.

The Pre-Emption Group, which represents listed companies, investors and intermediaries and advises the Department of Trade and Industry, announced that rules on pre-emption rights, which date from 1987 and give existing shareholders first refusal when a company issues new shares, would be relaxed.

Previously, if a company wanted to raise more than 5 per cent of its share capital, it had to go back to existing shareholders who often turned them down. While these pre-emption rights remain to protect against shareholder dilution, under the new guidelines investors will have to engage in discussions with companies and decisions will be made on a case-by-case basis.

Aisling Burnand, the chief executive of the BioIndustry Association, which had been lobbying for change for more than three years, said: "This is a major step forward. In the past the rules were implemented in an inflexible way by some institutional investors - in some cases any applications above the 5 per cent limit were viewed as negative and automatically turned down." But she deplored that a new, higher limit had not been set.

Britain's biotech industry has long complained it is at a disadvantage to rivals in the United States where firms have a much freer rein to raise much-needed cash to develop new drugs.

The minister for Science, Lord Sainsbury, has backed the UK industry in its demands for change.