While European biotech companies are raising a third to two-thirds as much as their U.S. counterparts in their venture, IPO and follow-on financings, a small river of European money is flowing across the pond into U.S.-based life science companies. According to European buysiders, there are two fundamental reasons for money leaving the Continent: a shortage of investment opportunities in Europe and better valuations in the U.S.

European investors provided $397.2 million (12 percent) of the $3.3 billion accounted for by 25 marquee U.S. financings this year, represented by the top 10 each of IPOs and venture financings, and five of the top 10 follow-ons for which European allocation was made available. By comparison, European companies in total raised only 3.5 times that amount ($1.39 billion) in IPOs, follow-ons and venture rounds through June 30.

European money is playing the most significant role (on a percentage basis) in U.S. venture rounds and IPOs. Of the $478.6 million raised in the 10 largest U.S. private rounds, Europeans provided $80.1 million (17 percent). And European investors purchased $227.2 million (14 percent) of the $1.6 billion raised in the top 10 U.S. IPOs. By contrast, only 7 percent of the paper from 5 of the top 10 U.S. follow-ons - $90 million out of $1.3 billion - was sold to Europeans.

With their financial lifeblood being exported to the U.S., the phenomenon may be particularly frustrating for European life science executives. While the amount of money raised by global life science companies has been increasing steadily, Europe's take has fallen from 28 percent of the total money raised for the industry in 1996 to a mere 8 percent of the industry's take through June 30 of this year.

European pilgrimage