MUNICH, Germany - The consolidation that biotechnology investors and observers have been clamoring for already is well under way in Europe and, for that matter, the rest of the world, one investment banker said.

"People say it's not happening, but it is happening. Consolidation is out there," said William Kridel Jr., managing director at Ferghana Partners Inc., an investment bank. "Companies are running out of money, shareholders are running out of patience and investors are running out of rope.

"It's Darwinism, and it should be."

Kridel's firm collected data showing 63 deals in 2002 that involved a European biotechnology or pharmaceutical company, subsidiary or unit as the target of a merger or acquisition. That figure compares to 14 deals in 2001 and represented about 40 percent of such mergers and acquisitions worldwide last year.

He presented the results of his research Tuesday in a panel discussion on consolidation at the third annual European C21 BioInvestor Conference being held at the Hilton Munich Park Hotel.

Thirty-five of the 63 deals involved two biotech companies. Another 13 were pharma-pharma deals, and there were 13 deals in which a pharma company bought a biotech company. The final two were biotech companies purchasing pharma companies or units.

Public companies were targets in 30 of the transactions, and private firms or units were acquired in 33 of the deals. The large majority of the deals, or 52 of them, were valued at less than $200 million.

Impediments often cited as standing in the way of consolidation, such as company executive egos and inflated notions of valuations, now are being overcome simply because they have to, Kridel said.

"Companies recognize their limited positions, their impoverished positions or their compromised positions," he said. "[And] shareholders are much more restless."

Most of the deals tracked by Ferghana were across borders, and overwhelming they involved either firms in the same sector or two platform companies. The major reasons for the mergers were gaining access to cash, diversification, gaining functional expertise, gaining access to geographical markets, integration, or building size to attract institutional investors.

One tip: "Deeper beats broader," Kridel said.

Conditions Can Only Improve, Can't They?

If there's gloom in the industry, there is not yet a sense of doom in most corners. The feeling is that there will be some sort of upswing, products will emerge, investors will make money. Someday the corner will be turned.

One upside: From the venture capitalist perspective, fundamentals are extremely strong, said Mark Wegter, general partner at LSP Services Deutschland GmbH in Munich. Also, the number of companies in Europe increased to 1,775 from 975 between 1997 and 2001, he said.

Alexandra Goll, a partner at Techno Venture Management GmbH in Munich, put the number of European companies at 1,879 and the revenue they generate at €15.3 billion. Still, however, indices are down more than 50 percent from their heights, initial public offering markets are closed and the ratio of product failures to successes is not good.

Tim Wilson, a biotech veteran who has worked on both sides of the Atlantic, said it's been worse in the U.S. before (1994), but perhaps never this bad in Europe. But he likened it to someone who drank bottles of vodka one evening and vowed, while suffering in bed the next day, never to do it again. But eventually he will - and eventually people will gravitate back to biotech investing.

"We think when prices are down you buy, and when prices are up you sell," said Wilson, principal, life science investments at Atlas Venture in London. There are some decent companies out there in mid-stage development that are running low on cash, he said, which "as an investor, that's attractive."

The conference continues through today.