THE new issue market for fledgeling biotechnology companies all but slammed shut last night, after Renovo became the third drugmaker in less than a week to scrap flotation plans.

The company, which hopes to become the first developer in the world to launch a prescription drug to prevent scarring of the body, was initially looking to value itself at £160 million to £200 million.

Last Thursday, Renovo’s backers indicated that they would be prepared to cut the target sharply to between £80 million and £100 million, after investors balked at the initial pricing range.

Yesterday morning, the company tried to firm up orders based on a valuation of between £65 million and £75 million, in a last-ditch effort to get the deal away. However, despite the cut, several key City institutions declined to participate in the deal, leaving Goldman Sachs, Renovo’s adviser, with no option but to pull the issue. A source close to the situation last night blamed “adverse market conditions” for the decision.

One heavyweight investor told The Times: “Renovo was always an aspirational float in this market — unless it agreed to come at a bargain basement price it was never going to succeed.”

Another specialist fund manager said that, in the current environment, he was not interested in buying into a biotech company that would not make a profit for at least another four years.

Renovo was seeking new cash to help to fund phase III trials of Juvista, a synthetic version of a protein that helps the body repair itself. The company has three other treatments in late-stage tests and a further 13 in the pipeline.

The decision to pull Renovo’s initial public offering (IPO) will be watched at ProStrakan, a Scottish drug developer that is also trying to raise money on the stock market.

ProStrakan’s board is almost a week late in signing off plans to proceed with an IPO after a wrangle over its valuation. It is understood that Warburg Pincus, which owns 44.4 per cent of ProStrakan, is reluctant to proceed with any IPO that would value the drugmaker below £250 million. Some outsiders suggested last night that, based on Renovo’s experiences, the company might struggle to get a valuation of £170 million.

Fund managers last night urged ProStrakan to postpone a deal. One key investor said: “Enough floats have gone awry in the last few weeks to prove that the funding window is now shut. ProStrakan should wait until after the summer — the company doesn’t need the money that urgently.”

Last week, Speedel, a Swiss drug developer, and Epitan, an Australian drug developer, dropped plans to raise cash from share sales, citing deteriorating investment markets.

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