FRANKFURT – John Kerry and Hilary Clinton are among the political luminaries due to visit Germany at the weekend, to mark the 25th anniversary of the fall of the Berlin Wall, on Nov. 9.

The great and the good of European – and global – biotech have already assembled here in Frankfurt, where conference organizers EBD Group are celebrating a little history of their own. This week's meeting, at the Portalhaus Messe in Frankfurt, is the 20th Bio-Europe Fall meeting since its inception.

Anna Chrisman, managing director of EBD, recalled that the first event, in Hanover, attracted 97 delegates, who took part in just 60 one-to-one meetings. "The state-of -the-art partnering system was a white board," she told delegates during the opening plenary session. "The networking activity was a trip to the local casino."

This year's event has attracted 3,200 delegates from 54 countries, who will take part in 18,000 meetings over three days. Thankfully, the whiteboard is no longer needed. Given the level of risk attached to biotech, trips to the casino probably aren't either.

Leverkusen, Germany-based Bayer AG is evincing its appetite for early stage risk by putting $25 million into Versant Venture's fifth fund, which is targeting a $250 million closing. The two organizations developed a relationship through Bayer's investment in Versant's Inception Sciences incubator, which led to the creation a year ago of the joint venture Inception 4, which is exploring early stage approaches for retinal disease. They unveiled the next step in the development of their relationship during an informal press release at the Bayer booth. "One of the things I appreciate about Versant is the depth and the focus on the science," said Nigel Sheail, Bayer Healthcare's head of global business development and licensing.

THE BAYER CONNECTION

The Bayer connection – it will take a seat on Versant's scientific advisory board – adds an additional European dimension to Versant, which began investing in Europe eight years ago and which opened an office in Basel, Switzerland, in 2008. Versant, which also has a presence in its native San Francisco and in Vancouver, has quietly closed about nine early stage deals in Europe in recent years, not all of which it has disclosed. "We're one of the few funds that has an active presence on both sides of the Atlantic," Tom Woiwode told BioWorld Today. "We think that's a real advantage."

Notwithstanding the oft-rehearsed differences between U.S. and European biotechnology, Europe has "unique pockets," Woiwode said, such as gene therapy and cutting-edge biologics, where it is leading the U.S. In terms of exits, the public markets in Europe remain weak, but other options are still there.

"The M&A market is absolutely global," he said. "I don't think European companies are at a disadvantage."

Speaking during the opening plenary, David Loew, senior vice president of commercial operations, Europe, at Paris-based Sanofi SA, said that European biotechnology is entering an acceleration phase, and the sector now is ripe for more global venture capital investment following its slow ramp-up over the past two decades. "Is it going to be in the next year or two? No. Is is going to be in the next five to 10? Yes."

But the weak state of the capital markets remains a problem. "The one thing which is still missing – and we've got to scream that – is a pan-European market for growth companies," Gilles de Nobécourt, partner at Paris-based venture capital firm Edmond de Rothschild Investment Partners, told BioWorld Today. "Nobody seems to be working on that." The failure of Easdaq is commonly held up as a counter example, but Nobécourt dismissed the objection. "Twenty years have passed since then. Maybe somebody should take that seriously."

European companies may be able to raise €20 million (US$25 million) to €40 million in cash, on the Euronext Exchange or in London, but anything beyond that – to support phase III trials for example – is rare. "It would have been interesting to see if Molecular Partners [AG] could have done that on the Swiss Exchange," Nobecourt said.

However, the Schlieren, Switzerland-based biotech pulled a planned CHF151 million (US$157 million) initial public offering (IPO) in Switzerland in late October, citing volatile market conditions.

Even though none of Europe's capital markets is putting out a welcome mat for biotechnology, a new study from Berlin-based Biocom AG ranks the Euronext Exchange, present in Paris, Brussels, Amsterdam and Lisbon, as the top performer. Its analysis is based on six metrics: number of listed biotech firms, number of IPOs, average raised per IPO, average raised per follow-on financing, number of follow-on financings per company and average trading volume. London's AIM comes next, followed by Nasdaq OMX, which operates eight exchanges in the Nordic and Baltic regions.

EUROPE STILL TRAILS U.S.

Europe, in aggregate, is still lagging far behind the U.S. "Europe is now where the U.S. was two years ago," Boris Mannhardt, who chaired a panel on access to funding for European companies. More tellingly, the collective market capitalization of Europe's listed biotech firms is a mere $60.9 billion vs. $633 billion for their U.S. counterparts. The total capital raised differs by a similar factor, meaning that many European IPOs do not represent proper exits for investors.

"This is the key issue in Europe, in comparison with the U.S.," said fellow panelist Sigfried Bialojan, who is head of Ernst & Young's Life Science Center in Mannheim, Germany. It feeds backward into the other stages of a company's life cycle. "If investors don't have access to the capital markets, that system will not be sustainable." The absence of institutional investors – which has been exacerbated by new Europe's solvency rules for financial institutions – makes it even more difficult to support biotechnology. Specialist investors, who normally move in ahead of general investors, have been eliminated in Europe. "I'm skeptical that we see the [IPO] window swapping over," Bialojan said.

"We have a structural problem," said another panelist, Matthias Kromayer, of MIG, a Munich-based venture capital firm. "This problem has nothing to do with our industry. It has to do with the history of Europe." Culture is another issue. Net household wealth in Germany stands at €3 trillion, he said, but a negligible amount goes into biotech. "German private individuals – and some of you in the room might be private German individuals – base their investing on three factors: one, lack of risk; two, lack of risk; and three, you've guessed it, lack of risk."

Mobilizing private capital – private and institutional – is what has made U.S. biotechnology successful, Bialojan said. "This is what is missing here. The only way to get out of it is to incentivize it."

At the risk of doing a disservice to those whose lives were blighted during the 28 years of the Berlin Wall's existence, the funding gap between European and U.S. biotech is beginning to look every bit as daunting and insurmountable as that barrier once was. However, European biotech has no need of a Ronald Reagan. Its destiny is in its own hands. The meeting continues Tuesday.