12:00 AM
Aug 09, 2004
 |  BioCentury  |  Finance

Ebb & Flow

Six substantial venture rounds - three each in the U.S. and Europe - brought in $166.1 million last week, but the differences between the rounds illustrates the continued lag in European funding. Thus, three U.S. companies raised a total of $109 million in rounds of $29 million, $32 million and $48 million, while the three European rounds were $18-$20 million each. Not surprisingly, the U.S. companies expect to get further on the money.

The average amount raised per European investment so far this year is $13.2 million, equaling the 2001 average and up $1-$2 million on the intervening years. European venture rounds total $688.3 million year to date. So far this year the average U.S. venture round is $22.3 million, and a total of $2.5 billion has been raised (see "Europe Rising").

"We may have seen an increase in the average European round, but cash does not go further in Europe, and companies have either thinner pipelines or have to come back to investors sooner," said Denise Pollard-Knight, head of healthcare private equity at Nomura.

Thus she argued that the average European round has to come closer to U.S. levels if Europe is to capitalize on its biotech opportunities. "We still have too many European companies raising too little cash on the basis that they can IPO at the earliest opportunity," she said.

For the remainder of the year, both Pollard-Knight and Andrew Fraser of 3i are confident that funds will continue to flow to the private sector. "From what we see in the pipeline, VC investments in Europe should comfortably top $1 billion this year," said Fraser, director of the U.K. healthcare team at 3i.

However, both Pollard-Knight and Fraser think that not enough will go to early stage plays, expecting the majority of the rounds to be series C or D.

So far this year, the majority of European activity has been in series A and B rounds. The shift to later rounds is, said Pollard-Knight, "in part a function of the market and the maturity of the sector in Europe and more late stage investment opportunities." Additionally, she feels that some VCs are shifting to later stage deals in a move to find early exits.

European rounds

In France, Innate Pharma raised E15 million ($18.2 million) in a series C round and brought in three new investors: Novo Nordisk (NVO); NIF Ventures; and Quilvest. Other investors included Sofinnova; Alta Partners; GIMV; Auriga; Axa; Gilde; and Innoveris. The cancer play now has about E30 million ($36 million) in cash and has raised about E40 million ($48.4 million) since its creation in 1999.

The company has two compounds in Phase I studies. Innacell gamma/delta is an autologous cellular immunotherapy process designed to produce large numbers of highly enriched gamma9delta2 T cells. Phosphostim is a gamma9delta2 T cell receptor agonist. Last year, Innate granted NVO exclusive rights to a family of receptor targets expressed by natural killer (NK) cells to treat cancer.

In Spain, Neuropharma raised E16.4 million ($19.7 million) through a private placement of 2.1 million shares at E7.80. The series A round valued the neurology company at E45 million ($54.5 million).

Neuropharma has two compounds to treat Alzheimer's disease in preclinical development: NP03112, a heterocyclic thiadiazolidinone glycogen synthase kinase 3 beta (GSK3beta) inhibitor; and NP00361, a dual acetylcholinesterase (AchE) inhibitor. Neuropharma is a subsidiary of Zeltia (MSE:ZLT), which invested E1.1 million in the round.

In Belgium, agbio company CropDesign raised E16 million ($19.2 million) in a series E round led by GIMV. The cash, which is expected to last about four years, gives the company time to develop its corn hybrids, which are designed to have enhanced yields and improved tolerance to abiotic stress. "We expect to meet this development milestone in about three years," said CEO Karl-Peter...

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