LONDON – Spring has arrived on cue for European biotech with the launch of a new €150 million (US$199 million) venture capital fund from Index Ventures – with backing and active involvement from two pharma partners, GlaxoSmithKline plc and Johnson & Johnson – to specialize in investing in early stage companies.

The fund was unveiled at the BioEurope 2012 meeting in Amsterdam, the Netherlands, one day after the Wellcome Trust, of London, said it was setting up a £200 million (US$318 million) fund to invest in biotech start-ups. And next week the charity Cancer Research UK is due to announce it, too, is forming a fund to invest in early stage assets.

Taken together, the three provide testament to the quality of Europe's science base and promise to revitalize European biotechnology at a time when it is almost impossible for early research to get out of the laboratory.

The new Index fund will invest in first-in-class or best-in-class products that are based on novel science and meet unmet medical need. It intends to attenuate the risk by putting its cash into small companies that have only one or two assets, to reduce the amount of money that goes into building corporate infrastructure and focus on finding out if the molecules work or not.

Similarly, the Cancer Research UK fund will not back companies, but will support the development of products to the point that they will fit into the bottom end of the pharma pipeline and can be out-licensed.

Francesco de Rubertis, partner at Index, said GSK and J&J are putting money into the new fund because they share Index's asset-based approach.

"There is a shared philosophy, a shared vision, a shared view, on how early stage venture capital can be more effective," he told delegates at the BioEurope Spring meeting Wednesday.

While Index will maintain full decision-making rights to the portfolio companies and the fund rules will follow those of previous Index funds, the two pharma partners will sit on the scientific advisory board and share their expertise.

Paul Stoffels, worldwide chairman of the pharmaceuticals group at J&J, said that in the past too much money has been spent on building infrastructure that did not add value to products.

"You need to be as efficient as possible to progress assets to the pipeline – that's where the value is created," he told delegates. The way to do that is to "do the killing experiment first," applying the minimum amount of capital to find out if a drug works or not, he said.

That will make the money that is available to commercialize research go further, Stoffels added, noting that pharma's involvement at that stage of the R&D pipeline is important because so many pharma compounds have failed in the past. "Others shouldn't fail in the same way; we need to share our experience on what failed," Stoffels said. At the same time, the industry also can share its insights into the market and what innovations are likely to attract reimbursement.

GSK has been active in the biotech venture space for longer than most pharmaceutical companies, through SR One, one of the oldest captive VC funds in the industry. It also has taken an increasing interest in early stage research through direct collaboration with universities and in discovery deals with biotechs.

But Moncef Slaoui, chairman of R&D at GSK, said "the key point is 'and' and not 'or.'" It takes a lot of work to discover a new drug, and GSK employs only 0.01 percent of all the scientists in the world. "We have to reach out to any good ideas, anywhere in the world," and "capture diversity of ideas," Slaoui said.

The partnership with J&J in the new Index Ventures fund is yet another approach to doing that, and it is "lean and focused on advancing the project rather than the infrastructure," Slaoui said.

The new fund will consider opportunities in Europe mainly, but also will make U.S. investments.

The scientific advisory board for the new fund will be composed of nine members, including Slaoui and Paul-Peter Tak, head of GSK's Immunoinflammation Therapy Area Unit, along with Stoffels and Bill Hait, global head of R&D at J&J. The five Index-appointed executives are De Rubertis, Kevin Johnson, Michele Ollier, Roman Fleck and Remy Luthringer.

In the past, Index has been involved in the start-up rounds of companies, including Genmab A/S, PanGenetics BV (later acquired by Abbott), Addex Pharmaceuticals Ltd., ParAllele BioScience Inc. (acquired by Affymetrix Inc.) and ProFibrix BV.