BioWorld International Correspondent

Despite a couple of late-stage misses this year, sentiment on European biotechnology remains largely positive, according to the third annual Biotech Investment Barometer compiled by the venture capital firm Global Life Science Ventures (GLSV) GmbH.

The Munich, Germany-based life sciences investor polled biotechnology industry executives and members of the investment community in both Europe and North America in September. It received some 200 responses, almost 80 percent of which came from European sources.

The overall outlook for the sector remains optimistic, although confidence has dropped somewhat from 2006, when 72 percent of respondents regarded the future of European biotechnology as being either fairly or highly positive.

This time around the equivalent statistic was 68 percent.

European biotechnology exited 2006 in good spirits, with high expectations for late-stage pipeline products, such as satraplatin, a prostate cancer treatment in development at GPC Biotech AG, and desmoteplase, a stroke drug in development at Paion AG, of Aachen, Germany. Neither met market expectations during 2007, however, as the latter missed the primary endpoint of a pivotal trial and a new drug application for the former was withdrawn, following a negative recommendation from the FDA's Oncologic Drugs Advisory Committee (ODAC).

"In spite of that the overall sentiment is very positive," GLSV partner Peter Reinisch told BioWorld International. The survey data indicated sentiment on early stage funding has improved from last year, even though it remains a thorny issue.

"The funding situation is still very difficult in Europe - as it is in the United States - but it is probably more difficult [in Europe] than in the United States," Reinisch said.

Positive relations between biotech firms and big pharma offer further grounds for optimism, with 80 percent of respondents indicating that big pharma's attitude toward biotech had improved in recent years, and 69 percent indicating that big pharma had been making more effective use of biotech innovation to fill its development pipeline.

"The symbiotic relationship between biotechnology and pharma is getting stronger and stronger," Reinisch said, adding that venture capital firms, including his own, are being invited by big pharma to make presentations on their investment strategy and their investment portfolios.

Despite a strong stock market performance from quoted European biotech firms in 2007, European survey respondents continue to believe that they remain under-valued compared to their U.S. peers, although North American respondents believe otherwise. Forty-two percent in the latter category regard European biotech stocks as being overvalued.

Survey respondents now consider the IPO environments in Europe and the U.S. to be broadly similar, and Reinisch said that Europe out-performed the U.S. on this measure during the first half of 2007.

In last year's survey, most respondents said they expected the IPO window to remain open for more than six months in 2007. So far, there has been little IPO activity since the first half of the year, however. The outcome of the next public offering therefore will be an important test of sentiment, Reinisch said.

"Whoever is first will be important," he said.

GLSV investee Nitec Pharma AG, of Basel, Switzerland, could be first up. It is planning to go public in late 2007 or early 2008, but there may be others ahead of it, Reinisch said.