Global visibility

On the face of it, Europe seems to have all the pieces in place. Capital is available from public and private sources, there are clusters of world class science and technology, companies have been able to conclude validating partnerships and benchmark M&A transactions, and a core of bellwethers has emerged.

While it is also clear that not all European companies are able to bask in this warmth, the most favored and most internationally minded companies that have ambitions to become industry bellwethers have had little trouble listing on their local exchanges and getting global investors on board.

Indeed, U.S. investors are already active in the European biotech space, tapping into globally competitive science and taking advantage of the reduced competition for deal flow compared with the U.S., which allows for entry at lower valuations.

Moreover, it is no longer so imperative for European biotechs to list on NASDAQ. U.S. institutions are willing to invest in quality companies in any markets with high liquidity.

Thus the challenge for European biotech companies is how to get more visibility with these investors. And the challenge is more difficult for some than others. The U.K. - once the undisputed center of European biotech - faces the hardest times. Not only does no British company appear in Europe's top 10 list of biotechs market cap, but U.S. investors find it easier to invest in continental Europe than in the U.K. because of British rules governing such issues as pre-emption rights and when acquired shares can first be traded.

Meanwhile, upstarts on continental exchanges are finding ways to attract global investors without being forced to uproot themselves and head for the U.S.

Current demand

BioCentury began examining the "European Iceberg" in 1999 to track both the clinical progress of the European industry and its contemporaneous financing demands to monitor whether the sector would be able to adequately finance its development without slowing its progress. As the financial demand below the surface became more acute, the annual Iceberg survey was launched in 2003 as a precursor to the annual BioEquity Europe financial meeting.

This year, BioCentury's annual review forecasts that European biotech will need a record $3.8 billion to get from the beginning of 2007 to the end of 2009, compared with last year's projection that the industry would need $3.1 billion for the three years to the end of 2008 (see "Forward Demand: 2003-2007").

Overall demand from clinical stage companies is about $2.2 billion for those in the private sector, and $1.6 billion for unprofitable but publicly quoted concerns (see "Products Mean Burn," A11).

While the sums required may look steep, they are clearly within reach of the European sector these days. Indeed, it was only in the fallow post-bubble year of 2002 that European biotech companies were unable to raise well above the average sums the survey suggested was necessary.

Last year, Europe's biotech industry collected $4.5 billion in 78 venture rounds, 21 IPOs and four follow-ons and other vehicles. In 2005, the European sector collected $3.3 billion in 86 venture rounds, 23 IPOs and 35 follow-ons and other vehicles. In the past three years, the European biotech sector has been able to raise $11.5 billion from the capital markets (see "Money Flows," A3).

During the first quarter of this year, the sector raised $2.8 billion, although the $900 million placing by Shire Pharmaceutical Group plc (LSE:SHP; SHPGY, Basingstoke, U.K.) accounted for a large chunk of the total.

1Q financings included seven IPOs raising $289 million, 17 venture rounds collecting $344 million and other vehicles bringing in $2.2 billion. The sum raised in IPOs is almost three times what it was in 1Q06, while the venture total was slightly lower than the $369.5 million raised in the equivalent period.

Europe's share of the global pie remains roughly the same as in previous years, coming in at 17% in 2006, versus 17% in 2005 and 18% in 2004. Last year's share was slightly distorted by a $5 billion debt deal by Amgen Inc. (AMGN, Thousand Oaks, Calif.). SHP's placing similarly distorted Europe's 39% global share during the first quarter (see

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