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Russian stem cell firm hopes to raise $5.5 million in IPO

By Polya Lesova, MarketWatch

A stem cell technology company hopes to raise as much as 165 million rubles ($5.53 million) in an initial public offering in Moscow, becoming the first Russian company to launch an IPO this year.

The news marks an important threshold for Russia's stock markets, which tumbled last year at the height of the financial crisis only to rebound strongly in 2009. The dollar-denominated RTS stock index /quotes/comstock/!rtsi (XX:RTSI 1,287, +16.74, +1.32%) has surged 104% this year, while the MSCI Russia index is up 85%.

The Human Stem Cell Institute (HSCI), which was founded in 2003, said Wednesday that its offering will comprise about 15 million shares and the price range was set at between 9 and 11 rubles per share.

The IPO will be conducted on the Moscow Interbank Currency Exchange, or Micex as it's known. It will be the first IPO by a Russian company in 2009 as well as the first IPO ever by a Russian biotechnology company.

Kathleen Shelton Smith, principal at Greenwich, Conn.-based firm Renaissance Capital, said the tiny size of the HSCI offering makes it difficult to extrapolate a trend about a rebound in the Russian IPO market.

"It's hard to give much significance to this because it is a small IPO," said Smith.

However, "globally, we're seeing a lot of IPO activity being led by Hong Kong and the U.S.," Smith said.

But HSCI's general director Artur Isaev said there could be more deals to come.

"I would certainly not be surprised if, on the back of our successful listing, we see more Russian companies coming to market," Isaev said in an email to MarketWatch.

There has been media speculation in recent weeks that Rusal, the world's biggest aluminum producer controlled by Russian oligarch Oleg Deripaska, is planning an IPO in Hong Kong, though the company says no decision has been made about the timing and venue of a potential listing.

Exposure to Russian biotech sector

HSCI expects its market capitalization to be between 675 million rubles and 825 million rubles ($27.7 million) after the IPO, with about 20% of its shares in free float.

After the completion of the IPO, Isaev will retain the largest shareholding in the company.

"This also marks the first time investors will be able to gain exposure to the high-growth potential of the Russian biotech sector," he said.

HSCI decided to go public now because it wants to raise capital to support its growth plans. It intends to use the proceeds from the offering to research and develop cell-based medications aimed at treating blood cancer, heart attacks, burns and skin defects.

"The industry is still in the early stages of growth, and we would expect the level of competition to rise as the industry expands," Isaev said.

The company has laboratories and offices in Moscow and St. Petersburg in Russia as well as in Ukraine and Germany. It controls 54% of the Russian market for stem cell technology, according to HSCI.

The company operates banks for the storage of stem cells and it also researches and develops drugs using stem cells.

The value of the Russian stem cell storage market is projected to be 2.82 billion rubles ($94 million) by 2013, according to estimates by HSCI.


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