VIENNA, Austria - The Cordia-EuropaBio Convention 2003 brought together industry representatives from throughout Europe last week. With companies and investors expected from Europe's far reaches, rumors were it would attract about 2,500 attendees.

It fell short.

"They say there are one thousand, five hundred people here," one Belgian attendee said, speaking to a woman while riding the morning bus to the conference hall.

"I don't believe it," she answered, and added, "I wonder how many people will stay for the last day?"

"I spoke at a panel yesterday," he said. "There were eight people at it."

The official count was that 1,500 number, but it felt like fewer walking around the center. And the building itself is nearing the end of its life - the conference was the last scheduled event before the building is shuttered in favor of a newer model being constructed next door. That provided wrinkles for attendees. Registrants with laptops struggled to access the Internet through provided connections, they had trouble calling up remote e-mail accounts, and on the last day of the event, had trouble eating - the food ran out, leaving anyone not in the lunchroom by 1 p.m. queuing up for only a plate of salad and/or a piece of desert.

But at any initial convention launch, as Cordia-EuropaBio was, there are bound to be glitches, and overall, attendees were supportive. And why not? After all, Vienna, draped in its Christmas garb, was a glorious host and with 170 companies from 30 countries present, the event still provided a rich network of potential contacts.

The conference can serve as an analogy for European biotechnology in general - the event, like European biotech, had potential and solid support but still struggled.

Investing in biotechnology anywhere has its share of risks, but Europe presents a particular dilemma in the current environment. With Europe's initial public offering landscape even drier than the one found in North America, institutional investors have to wonder how they'll get the return they desire. In boom times, those investors reaped their rewards through IPOs. At times like these - in which a few U.S. biotech companies have slid into the market with decidedly mixed results and the European window is still shut - those investors often need to find other options. Investing in biotech can always be a gamble, but throwing millions of euros behind a young European biotech firm today must seem like rolling the dice even more than usual.

The last official event of the Cordia-EuropaBio conference? A trip to the Baden Casino, Europe's largest gambling hall, located at the edge of the Vienna Woods.

In Dry European Market, IPOs Become Plan B

Erkki Pekkarinen, president and partner of Bio Fund Management Oy Ltd. in Helsinki, Finland, came to the conference in hopes of meeting contacts - not only young companies looking for investors, but also big pharma representatives who might be able to provide "exit routes" for his firm's current holdings. Bio Fund's portfolio includes FibroGen Inc., of San Francisco, and Bio Tie Therapies Corp., a Finnish company focused on research and development in inflammation, blood coagulation, thrombosis and cancer. Past investments include PhotoCure ASA, of Oslo, Norway, which Bio Fund exited in October 2000 after the company went public on the Oslo Stock Exchange in May of that year, and MAP Medical Technologies Oy, a Finnish company focused on radiopharmaceuticals and radiochemicals that Bio Fund exited in July 2002 when MAP was acquired by Schering AG.

He acknowledged the difficulty young European companies are facing today, saying that biotechs struggle to "find a good enough group of investors" to stick with a company through several financings. Without that repeating core, getting satisfying private rounds in today's environment can be nearly impossible.

"Valuations with new investors have been at this time - I don't want to use the word ugly,'" he said, pausing to search for the right term. "Violent," he finished.

Another problem is that many European biotechs have thin pipelines, although Pekkarinen finds that scenario opens "a window of opportunity" for investors, who can "find good technology stories with narrow pipelines and then merge those companies."

Also, young biotechnology companies often lack in business savvy what they make up for in science. They have the biotech, but "the business comes at a too-late stage for these companies," Pekkarinen said. And they often don't have high-quality management. But that's where investors can help, he said.

"The importance of boards cannot be emphasized enough," he said, adding that when Bio Fund invests, it takes board seats and works with management to help guide the company forward.

Still, even in a better financial environment, European companies are hamstrung by a lack of trading markets.

"There are not so many places where you can bring your company public," Pekkarinen told BioWorld Financial Watch. "That is a problem, especially now that some of the markets have collapsed," referring to the Neuer Markt and Easdaq. He hopes other markets will rise to fill those vacated spots, but he added that a company shouldn't have a goal of becoming listed anyway.

"They can die as a listed company," he said, and pointed to Nasdaq-traded companies with sagging stock prices. "How many are really traded? And how many can raise money from it?"

The question is, then, how do investors find their exit when an IPO isn't an option?

"Trade sale," Pekkarinen said. In other words, invest in a company, grow it through mergers and acquisitions, then fold it into a pharma or larger biotech company at a nice mark-up from the original investment, such as Bio Fund did with MAP Medical. Before his firm will invest in a company, it "must have a clear view of how to exit," he said - when, how and at what price. For now, an IPO as an exit route is definitely "Plan B," he said.

That leaves companies in a difficult spot, though, given that most don't particularly want to begin as a start-up, pour sweat, blood and tears into it for years and then watch it be swallowed by a pharmaceutical giant. But it's a reality today.

"It should be obvious to [company] owners" that a trade sale is a possibility, he said.

Igeneon Watches, Waits For IPO Opportunity

If the European IPO market does gather steam and a crack appears at the window, Igeneon AG seems a likely candidate for a European biotech IPO. Based in Vienna, the company is focused on immunotherapies designed to prevent or delay the development of metastases in cancers of epithelial origin. It has what the U.S. markets have recently demanded for an IPO - a busy pipeline that includes at least one late-stage product. Igeneon has an ongoing Phase II/III trial in adjuvant non-small-cell lung cancer with its vaccine IGN101, and in November said it was initiating a Phase III study in metastatic colorectal cancer with the product, as well as a Phase III in adjuvant breast cancer, which it says is the first pivotal trial worldwide with a breast cancer vaccine in the adjuvant setting.

It also has IGN311, a monoclonal antibody in Phase I work, and IGN301, another cancer vaccine that has finished Phase I. It has three products in preclinical development. The company has about 65 employees and was co-founded in June 1999 by its CEO and president, Hans Loibner. It was first invested in by Novartis Venture Fund, and "with that commitment in hand" it was able to secure 3i Group plc as its main investor for the Series A, which raised €2.3 million, Loibner said.

Igeneon has been able to keep that required core of investors - 3i owns about 31 percent of the company today, and Novartis Venture Fund owns 13 percent - which helped the company secure a €30 million Series B round in August 2001.

"At that time, it was the largest private round in Austria and one of the 10 largest in Europe," Loibner told BioWorld Financial Watch. He added that Igeneon's plan was to have a public offering not long after the Series B, but "a few months after closing [the B round], it was clear that was not possible."

The company has enough cash to get it "well into the middle of next year," he said, but as things look now, "sooner or later, the next step is to follow [with another round], as usual."

Igeneon has options, though. Partnering could help push a Series C back and then perhaps an IPO might become possible. In a perfect world, Igeneon would partner IGN101 to bring in resources, but "would not partner more than that," Loibner said, keeping the other products for itself from that point forward. Like many companies, Igeneon eventually would like to be fully integrated and "do it all ourself," he said.

When asked about a trade sale as an option for Igeneon's investors, Loibner acknowledged his desire to remain an independent company, but said, "We are open to anything. That's not our best plan, but that cannot be excluded."

If the markets do open, Igeneon might be able to exclude a trade sale completely. IGN101 "will be a blockbuster," he said, if and when it makes it to market. There is more to come in the pipeline and what Igeneon has to offer looks very similar to what recently public U.S. biotech companies have in their portfolios.

"I would say it exactly in that way," he said. "We would be in tier one, if the markets open. We would be a top candidate in Europe for an IPO."