BioWorld International Correspondent

MUNICH, Germany - At the Sachs Bloomberg Investor Forum here, many investors and biotech company representatives said that 2003 had not been as difficult as 2002, but that any upswing in Europe was still tenuous and dependent on developments in the United States.

"Biotech is still in a trough," said Neil Cohen, a partner with Israel Seed Partners, of Jerusalem. He said that more than a dozen U.S. companies are looking to make an initial public offering, and "the reaction of the public markets will send a big signal to the venture world."

"European IPOs are still a matter of time," Hanns-Peter Wiese, a partner with Global Life Science Ventures GmbH, of Munich, told BioWorld International. "The initiative will come from the United States."

The closed public markets over this year and last have led to an emphasis on partnerships as a source of revenue, late-round financing and as an exit for venture investors. Chris Piggott, senior director for global business development with Aventis, of Strasbourg, France, said that the industry needs to recognize the structural changes that have taken place in the approach to partnerships.

"Regional deals have gone away, and biotech now provides a collective 30 percent of big pharma's pipeline," he said. That means partnerships are crucial for the life cycle of growing biotechnology companies, and they are being pursued more systematically from both sides in a global marketplace.

"From 1993 to 2002 the number of deals has been generally steady, with the value increasing to approximately $6 billion in 2002," Piggott said. "However, most of the money has been going to a very few, very successful companies. Partnerships are not providing broad-based support to biotech as an industry."

Chris Henderson, director for global licensing with AstraZeneca, praised the current positive atmosphere in seeking partnerships. "There have been good changes over the last two to three years, with a much wider group of companies seeking partnerships. There is greater recognition by both sides of partners' strategic needs, such as co-development, co-commercialization, and acceptance of the need to retain certain rights."

Henderson also pointed out pitfalls inherent in the new emphasis on partnerships.

"Earlier commitments mean longer-term partnerships, possibly 15 to 20 years," he said. "Everyone involved has to master the management of multiple partnerships. Biotech companies have to come to terms with both the loss of control that partnerships bring and the need for rigorous evaluation."

Investor interest remains overwhelmingly oriented toward product companies.

"[For venture capitalists] the baseline has shifted to valuation of products; technology is not valued," said Jesper Zeuther, managing director with BankInvest Bio Venture, of Copenhagen, Denmark.

One new area of discussion at the conference was biogenerics. They have piqued VC interest, but market opinion about their potential is divided. Francois Thomas, senior consultant with Atlas Venture, said biogenerics are products in which people will be making money, but stressed that significant issues remained unresolved.

"There is considerable regulatory uncertainty, and there are very important questions about the cash outlay required," because companies in the field are likely to be engaged in manufacturing, he said.

Turning from a pan-European perspective to the German market, Horst Domdey, CEO of Bio-M AG, of Munich, told BioWorld International that consolidation in Germany is still taking place. "It will be painful, but it will bring necessary reforms," he said. "Firms have run low on water, but they are just now getting thirsty."

He added that many German companies have less than 24 months of financial reserves and will face a crucial testing period.

While biotech companies look to ensure continued future operations, investors will be watching for a signal from the U.S. public markets in the first months of 2004.