BioWorld International Correspondent

PARIS - Edmond de Rothschild Investment Partners, part of the private equity arm of the Paris investment bank La Compagnie Financière Edmond de Rothschild (Groupe LCF Rothschild), launched a new venture capital fund, BioDiscovery II, with the aim of raising €120 million to invest in French and European biotechnology.

The funds for BioDiscovery II are being raised in three stages. An initial €34 million tranche closed in December, followed by €42 million May 31. The final closing is scheduled for the end of December.

The funds subscribed have come from Rothschild itself (€10 million) and 26 other organizations, including the French government's bank, Caisse des Dép ts et Consignations (€10 million so far), Institut Pasteur and Institut Curie, Amgen France, French health insurance and life assurance companies, and other institutional investors. Most have invested between €2 million (the minimum allowed) and €5 million. Rothschild expects most of the remaining €44 million it hopes to garner to come from European investors outside France.

Announcing the creation of the new fund, the chairman of LCF Rothschild, Michel Cicurel, boasted that it was the largest investment fund in France devoted exclusively to biotechnology.

France and Europe had been left behind in the development of the biotechnology sector, he went on. The industry in Europe is only a fraction of that in the U.S., whether measured in terms of the number of companies, the size of the work force, the level of investment or the revenues generated.

The participation of Amgen particularly is significant since, as the CEO of Amgen France, Marc de Garidel, pointed out, it is the U.S. company's first investment in a biotechnology fund outside the U.S. He observed that the French biotechnology industry needed a second wind, suggesting that BioDiscovery II would harness "investors' confidence in the sector."

BioDiscovery II is due to run for eight years, similar to the first biotechnology investment fund created by Rothschild in 2000. That one, BioDiscovery I, was established with funds of €30 million, which was invested in 18 companies. The president of Edmond de Rothschild Investment Partners, Pierre-Michel Passy, said there have been only two defaults. He said the fund had made its first exit in October, having tripled its investment, and would exit another this year.

Edmond de Rothschild Investment Partners invests only in unlisted companies and confines itself to minority shareholdings. BioDiscovery II will participate in Series B financings and invest up to €10 million in individual companies, although not all at once, compared to a maximum of €3 million for BioDiscovery I.

Gilles Nobécourt, the fund's manager of the life science sector, told BioWorld International that BioDiscovery II would close its first three investments within the next four to five months, the first in the next few weeks. In the case of companies producing therapeutics and screening technologies, it will invest at most two years before the start of clinical trials, and one year in the case of those developing molecular diagnostics.

Rothschild has other biotech funds, and those accounted for the three investments in 2004. Two were in the second-round financings of Strasbourg, France-based Faust Pharmaceuticals (to which Rothschild contributed €3 million) and Novagali SA, of Paris. Rothschild looked at 160 investment projects in 2004, met with 35 firms, carried out in-depth studies of 15 and drafted term sheets with five before investing in three.