(with additional comments from Mark Clement of Merlin Biosciences)

D&MD: I received the news of your appointment as executive vice president and chief financial officer of Neurotech SA, a specialist biotechnology company developing cell therapy and protein-delivery products for the eye and the brain, and thought it would be a good idea to interview you about the company's funding and development.

Davitian: As I have only just joined the company, I am not yet deep inside it; although I looked into it in some detail before making the decision to join.

What I can say about its funding is that Neurotech was able to announce last May that it had raised 35 million ($30.5 million) in a pre-initial public offer (pre-IPO) funding round. That was France's largest biotech private funding and one of the largest in Europe so far in 2001.

D&MD: How did Neurotech come to arrive at the 35 million figure for that funding round and for how many years will that last?

Davitian: These additional funds were required to allow Neurotech to progress several key projects towards clinical trials. Originally, the company anticipated asking for less - Euro 25m - to complete clinical trials.

However, there was so much interest in Neurotech among investors that the company decided to increase the amount it would raise to 35 million. That provided the company with three years of cash, taking into account the clinical trials program.

D&MD: I noticed that joint lead investors in the funding round were Apax Partners and Merlin Biosciences. What was the reason for having joint lead investors in this case?

Davitian: I wasn't involved in that aspect, so I would suggest that you contact our chief executive officer, Tom Shepherd, or Merlin Biosciences managing director (European activities) Mark Clement for details of that.

Clement: Usually, one party tends to dominate in funding. Merlin has its own way of doing things and we have taken a strong position in Neurotech. However, our relations with Apax have always been quite good and our team in France was aware of that. The funding group needed a strong presence in France and we felt that there would be merit in working with Apax. The benefits were that we were able to leverage with someone with a strong local presence. Merlin is actually responsible for a slightly larger unit of the funding. However, the concept of co-leadership enabled us to take a broader view and to have a more integrated approach to due diligence.

D&MD: I understand that Neurotech has decided to focus on eye diseases, although it retains an interest in the central nervous system. Can you explain how this came about, what is the role of the company's proprietary encapsulated cell technology (ECT), and what products you are developing?

Davitian: Neurotech has established a clear focus on ophthalmics and is developing its "biotech of the eye" on the basis that there are large areas of unmet clinical need. Also, there is a large number of patients and limited competition.

This is due not only to the complexity of the diseases but also to the presence of the blood-eye barrier, which limits local access or orally or systemically applied molecules. Cell therapy, either encapsulated or naked, allows the continuous local production and release of therapeutic molecules from living cells following a single administration. In addition, the eye is an optimal site for cell therapy because it is easily accessible, can be visualized directly, and consists of localized space with a small internal volume.

Neurotech uses genetically modified eye-derived cell lines, either encapsulated as a means of locally delivering proteins over a long period of time, or as a cell therapy to replace damaged cells. We have good data from animals and the conditions are the same in humans.

The company has successfully concluded preclinical trials in the fields of retinitis pigmentosa and age-related macular degeneration (the main cause of blindness in adults).

ECT is suited to the eye, but it could also be possible to use it to develop therapies for CNS diseases. However, our core focus is on the eye, so we are prepared to consider out-licensing ECT outside this core focus, and other companies may be interested in licensing deals.

D&MD: When would Neurotech move to an initial public offering (IPO), its level of funding, and what role might partnerships play in the company's development?

Davitian: The question of a time scale for an IPO is difficult. Our first priority is to start human clinical trials. We aim to file an innovative new drug (IND) application in Europe and in the US in mid-2002. We may then start Phase II clinical trials, so an IPO is possible in two years.

We are currently in discussions with other companies with a view to broadening our technology platform and to commercialize out products worldwide.

Partnering with other companies could mean that we would move earlier to an IPO, but we don't need to go public too early.

D&MD: What are the prospects for companies considering an IPO in the current climate? Are the markets closed to IPOs? Should a company press ahead with an IPO or should it bid its time until the market changes?

Davitian: Everybody needs to be very careful. It seem that, since 11 September, there has been quite an active market for healthcare overall in the US, but this does not apply in Europe at present.

Companies just need to focus in terms of their development programs and conservative in their burn rate. They also need to look at partnership deals.

However, you never know when the market will change. You just need to get ready to place your IPO.

D&MD: Based on your experience, do you have any particular tips for start-ups seeking funds?

Davitian: In raising funds, I would say that the key is preparation, preparation, preparation. You have to establish the credibility of your core technology and the skills of your staff. You need a clear strategy, and you need to try to be a leader, especially in a niche market.

For example, eye disease is a growing market. ECT is a significant technology, which Neurotech purchased from CytoTherapeutics (now StemCells, Inc), which had been developing it since the 1980s. After such a big investment, ECT is now a mature technology.

The quality of management is also important for investors. Neurotech's management is multicultural and multinational. We have a strong US presence and visibility is important in that market. Also, we have advice from experts on two continents. The quality of collaborators is important.

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