German biotechs merge

Venture-backed Curacyte and VitaResc have announced plans to merge at a time when biotech companies are urged to consolidate.

German biotechnology firms, Curacyte and VitaResc Biotech have agreed terms on a merger that will see the two companies operate under the Curacyte name and be run by Curacyte's current management team of Helmut Giersiefen and Andreas Zaby.

News of the merger came as the enlarged company announced that investors had committed a E5.5m. Details of the funding were not disclosed although German venture firm Techno Venture Management, The Stroh Companies Inc. and Dutch house NIB Capital are among those contributing. Curacyte also confirmed that it plans to commence a third round of funding within the next twelve months.

News of the deal comes as a US report highlights a sharp fall in biotechnology investment in 2001. US investment in the sector fell by 76 per cent last year, according to research by Ernst & Young, although the 2001 figures are still the second highest recorded by the biotech sector.

The Ernst & Young Beyond Borders biotech report found some encouraging signs for the industry, with 110 European products in the latter stages of development, Phases II and III. But initial public offerings were down sharply, with only $175m of equity raised in 2001 compared with $3.1bn the year before.

The survey thereofre highlighted a need for consolidation in a sector that has witnessed the creation of a large number of start-ups in recent years. Speaking to Financial Times, Ernst & Young’s Scott Marshall, based at the firm’s San Francisco office said: “Critical mass has become essential. It is enormously challenging for small companies to maintain themselves attractive to Wall Street.”

Total capital raised by the industry in the United States hit $32.7bn in 2000, by far an all-time high, but then fell to $7.9bn in 2001. A similar trend was evident in the European biotech industry, which raised $2.2bn in 2001 against $6.9bn in 2000.