European venture capital firm Gilde Healthcare Partners closed its €150 million (US$213 million) Gilde Healthcare II venture fund and is actively seeking new investments.

Gilde originally planned to raise €125 million in the fund, but ended up expanding to €150 million to accommodate interest from new as well as existing investors. General Partner Pieter van der Meer attributed that interest to investor appreciation of Gilde's existing portfolio and recognition that "quality is a core asset" when it comes to investments.

Attendees at last week's EuroBIO 2007 conference in Lille, France, may be surprised to hear of investors clamoring to participate in a fund for privately-held European biotech companies. Panelists at the event bemoaned the lackluster returns from IPOs and the lack of funding for start-ups. So far this year, European biotechs have raised about $1.5 billion, but more than 46 percent has gone to just 14 large deals, while 117 financings have brought in less than $7.1 million. (See BioWorld Today, Sept. 27, 2007, and Sept. 28, 2007.)

Van der Meer, however, is encouraged by the European biotech venture capital market. "For the first time, we've seen in Europe last year more start-ups than in the U.S.," he said, noting that the increased activity has drawn the attention of some U.S. investors.

He also added that Gilde is seeing "quite attractive valuations in Europe," and that even though some complain about limited returns from IPOs, "we can only say that in our companies, this was not the case."

As evidence, van der Meer pointed to some of the exits that have occurred in the €127 million Gilde Healthcare I venture fund. Portfolio companies Innate Pharma, of Marseille, France, and Amsterdam Molecular Therapeutics Holding BV (AMT), of Amsterdam, the Netherlands, have both gone public with positive multiples. Yet van der Meer said that while the AMT offering delivered a 3X multiple, Gilde is not yet exiting because the firm believes the company "has a great future."

"We view an IPO as a way to raise funds, not just as an exit," van der Meer said. Just as in the U.S., the best returns come from strategic deals, and "a listing may be a way to get there," he added.

Several Gilde portfolio companies have made attractive exits via merger or acquisition, including Glycart Biotechnology AG, of Zurich, Switzerland, which was acquired by F. Hoffmann-La Roche Ltd. for $183 million, delivering a 7X multiple in two years. As further evidence of the demand for deals, van der Meer pointed to the $454 million acquisition of Domantis Ltd. by GlaxoSmithKline plc, a deal Gilde wasn't involved in but which delivered a 10X multiple to the investors.

Van der Meer projected that big pharma will continue to take a strong interest in acquiring European biotechs, and that the IPO window will remain "half open" - in other words, open for high-quality companies. With a "positive" view for the future, Gilde already has started making investments with the Gilde Healthcare II venture fund.

The fund will invest in therapeutics, diagnostics, medical device and enabling technology companies at all stages of development, from seed rounds to pre-IPO rounds. Approximately 15 investments are planned, with each ranging between €1 million and €15 million.

About 20 percent of the fund is earmarked for investments in American companies. The first fund invested in Boston-based diagnostics company BG Medicine Inc., and the second fund already has invested in San Diego-based therapeutics company Conatus Pharmaceuticals Inc.

Founded in 2000, Gilde is based in Utrecht, The Netherlands.