When Life Sciences Partners (LSP) started pursuing investments in private European life science companies in the late 1980s, it was not entering a crowded field. Europe has long lagged behind the US in biotechnology funding.

of the few European specialists in the field. Based in Amsterdam, Munich and now Boston as well, LSP has, since inception, invested in almost 50 life science companies, of which a large number have listed on international stock exchanges or merged with leading pharmaceutical players. Some of the companies in which LSP was a founding investor include Crucell in the Netherlands, Qiagen in Germany, and KuDOS in the UK.

Though for the last two decades LSP has specialised in deploying venture capital to grow companies such as the above to the point where it can take them public, it is now embarking on a new strategy.

Last month, LSP announced the launch of a partnership with Dutch pension asset manager APG Investments to invest in public companies, using its traditional venture model in an innovative way. APG, one of the world's largest pension asset managers with assets under management of more than €200 billion, will contribute much of the capital to the project. LSP, meanwhile, will provide its expertise of investing in the sector to pick up stakes in publicly listed European small-cap biotechnology companies. The firms are not disclosing the amount that the venture will invest, but did say they have a number in mind.

Mark Wegter, general partner at LSP, says the two entities began planning the partnership at the end of last year. “They want to increase their exposure to biotech in Europe, but they lack the expertise,” he said. “On our side, we think there's a great opportunity in the public market for biotech. So we approached them and said what do you think of a partnership to build up a portfolio of biotech investments, the bulk of which would be via new offerings such as IPOs, follow-ons, M&A and restructurings? It's going to be very much a private equity approach to public equity investing.”

Wegter says LSP sees an opening in this space now because it is at an advantage as one of the few specialised biotech investors in Europe at a time when the continent's biotech activity is likely to increase as its biggest pharmaceutical companies turn to small-cap biotech companies for product development.“We won't go as far as on the private equity side, because there's a different way of working with public companies,” he says. “The profile of these publicly listed companies with around a €50 million to €250 million market cap, they have a quasi-private profile – they're relatively small, their stock is illiquid, and their pipeline is narrow. They need capital to grow.”

Wegter says now is the ideal time to invest in such companies in Europe because big pharma is increasingly looking to such outfits for their research. “Many big pharma companies are now planning to get new products from the smaller biotech companies – by acquiring them,” he says. “They want to acquire companies that are developing targeted products for smaller patient populations.”

Vehicles targeting European life science investment seem to be on the increase. Also last month, Fountain Healthcare Partners launched the largest life science venture fund in Ireland at €75 million, one of the largest life science funds raised globally by an emerging manager.

Wegter says the area is attractive now because all Europe is missing is the capital. “If you compare the total number of companies in Europe to the total number in the US, private and public, they're roughly comparable,” he says. “If you look at output, Europe is at par with the US. But compare total market cap, and the European combined total is almost insignificant compared to the US.We think that means there is a huge growth opportunity for European life sciences companies.”