Phytopharm turns to Nasdaq in search for US investors

Phytopharm, the company which is using exotic plant extracts to develop drugs for Alzheimer's disease and obesity, yesterday became the latest of the UK's emerging life-science companies to seek new investors from the US.

Phytopharm, the company which is using exotic plant extracts to develop drugs for Alzheimer's disease and obesity, yesterday became the latest of the UK's emerging life-science companies to seek new investors from the US.

Richard Dixey, the chief executive, unveiled plans to list the company's shares on Nasdaq in the autumn. He said Phytopharm had applied for regulatory approval and was immediately setting up an easy means for US investors to trade Phytopharm shares.

The move comes at a time of impassioned debate within the biotech industry over how to narrow the perceived funding gap with the US, where rival life-science companies are seen to have access to more and easier sources of finance.

The industry's lobby group, the BIA (BioIndustry Association), has promised to step up its campaign to get an exemption for biotechs to rules which force companies to get shareholder approval before issuing new shares worth more than 5 per cent of the company. Pre-emption rights ensure existing shareholders have an opportunity to invest first if they want to avoid having their stake diluted.

Mr Dixey said Phytopharm's secondary listing on Nasdaq was prompted by the desire to improve liquidity in the shares, but could also give the company access to a greater pool of extra funding in the future. "The US has 500 specialist biotech investment funds, while there are five in London," he said.

Most biotech company chief executives support the BIA's attempt to remove pre-emption rights for new investments worth up to 20 per cent of the company.

Simon Sturge, of Vernalis, said he saw the need for change when the company re-acquired marketing rights to its migraine drug, Frova, this year. "That was a deal put together relatively quickly which we didn't have the immediate funds to pay for. We had to tell the market we had the need to do a rights issue which, in an era of hedge funds, meant speculators were, logically, shorting the stock."

And David Oxlade, of Xenova, said: "We are suggesting an exemption for certain classes of company, loss-making companies which everybody knows will have to raise money one way or another before they become profitable. The way these companies become profitable is not by issuing debt but by bringing in new equity investment, and this will almost always breach the 5 per cent barrier."