LONDON - Jonathan Kil, president and CEO of Sound Pharmaceuticals Inc., is looking for a considerable first round of funding - as much as $40 million, although that might be done in tranches, with a first closing for $10 million.

His Seattle-based company has been in operation for three years and last summer it filed its first investigational new drug application, for an otoprotectant oral drug called SPI-1005, to be tested in reducing hearing loss associated with noise exposure.

The first trial would involve 60 active military personnel in a Phase I/II study at Madigan Army Medical Center at Fort Lewis in Tacoma, Wash. The company also is receiving funding from the U.S. Navy to conduct animal studies with another drug designed to regenerate auditory hair cells. The company has a nice story to tell.

And Kil told his story to a panel at the European C21 BioVentures conference, held here March 22-23. His and two other firms were in a competition of sorts, with one presenter winning a "best in show" award and some valuable recognition. Kil and Sound Pharmaceuticals took the prize. Why, though, travel across the ocean and through eight time zones to tell it, when a plethora of VC firms sit just to your south?

"We already had one [European investor], so I thought, Why not another?'" Kil told BioWorld Financial Watch.

That European investor, a leading hearing device company, has agreed to put $5 million into the coming round. For a young firm, it was a dream come true - the phone rang and when Kil answered, money was on the line.

"They called us," Kil said. "They got UBS [Warburg] to do a search" for those working in hearing loss. That call came in December, company execs visited Seattle in January, and last month Kil flew to see them.

The undisclosed investor required nothing but equity, which made Kil happy, but they did "ask to be the only hearing aid company [as an investor], so there's a string. But we could live with that."

For $5 million, most companies would. But Kil's mindset highlights the growing trend of global investing. Biotech firms need money, and when it's boiled down, 1 billion Japanese yen can fund a pipeline just as far as $10 million.

Taking Biotech Investing Worldwide

Chairing a panel on U.S. investors participating in European rounds, Steven Burrill, CEO of life sciences merchant bank Burrill & Co., quickly stepped outside the bounds of the panel's design.

"I don't see it as a U.S./European phenomenon," he told the crowd. "I see it on a global basis." He mentioned the rising economies of Brazil, Russia, India and China, adding, "If you and I start a company, we are global. Diseases are global, markets are global, and the capital markets are equally global."

Once a firm thinks of itself in global terms, he said, it becomes easier to imagine tapping funds from around the world, too.

That's not to downplay what Europe has to offer, both for those looking to invest, as well as those needing money. Biotech has a presence in Europe, particularly London, as evidenced by the £519 million (US$985 million) raised on the London Stock Exchange's main market and Alternative Investment Market by biotech and pharmaceutical concerns in 2004.

In fact, Europe is beginning to have what some might consider a resurgence. Once thought of by U.S. investors as a land of overpriced but underdeveloped biotech firms, market corrections and time have changed that.

Andrew Faser, director, health care for 3i, "sees no shortage of opportunities" in Europe. U.S. VC firms today can "look at good assets and negotiate attractive pricings," he said, taking advantage of Europe's "maturing pipeline."

Two or three years ago, there was hope that the European markets would return to biotech at the levels seen in 2000 and 2001, he said. That didn't happen - but the markets have come back, only at lower valuations, driven down by a "tightened" money supply, a selective public market and fewer VC funds. Now, even with the difficulties of the euro/dollar exchange and negotiating the niggling effects of doing business overseas, a U.S. fund can stare across the expanse of about 2,000 private biotechs in Europe and find satisfaction.

"I wouldn't call it bargain hunting," Faser told BioWorld Financial Watch. "I'd call it asset hunting."

That flip-flop - U.S. deals now are seen as higher-priced vs. the EU - has come about in the past two years or so, Burrill said. Still, Europe isn't without problems. An investor might get an attractive price in that Series A round, but it's getting back out of European firms that is proving difficult.

A lack of investor exits has "caused the European VC markets to not exist, basically," Burrill said. In general, he noted, "the public markets are not taking us out at the rate we want."

His firm used to invest $5 million in first rounds, and "put in our back pocket" $3 million for the second round, and $1 million for the third round.

"It's the reverse now," he said. "It's a game of big money. If you as an investor can't put $20 million into a company yourself, then you probably shouldn't invest."

All of which feeds back into his global theme. Money is money, and biotech always needs it. He used a real estate analogy to press his point. A four-bedroom house in San Francisco has a different value than its exact replica in Boston, Paris or Tokyo. It's the same house, made of the same material, and those different prices are what he called "aberrations in value" that can be exploited by biotech firms needing cash.

Take for example San Diego-based MediciNova Inc., which raised about $116.4 million on the Osaka Stock Exchange in February, selling 30 million shares at about 400 yen (US$3.88) each. MediciNova isn't in Burrill & Co.'s portfolio, but it would blend in there.

"When we invest in a biotech firm, the CEO isn't thinking about going public in Hong Kong," Burrill said. "But maybe he should be."