Private equity and venture capital funds have provided in excess of E1bn per year over the past two years as the sector proves to be more resilient than others in a declining investment market.
In the first half of 2002, venture capital firms have invested E565m in biotech related firms, indicating that the popularity of the sector has continued apace despite a sharp downturn in the overall venture capital investment activity this year.
The report, published by Deloitte & Touche, which tracks the financial and operational performance of nearly 1,800 businesses in the European life sciences sector, estimates that employment in the sector is growing at 23 per cent per year. The report also indicates a sharp drop in seed and very early stage investment, with firm preferring to commit capital to later-stage businesses.
The bulk of European life science activity is occurring in the UK, Germany, France, Switzerland and the Medicon Valley (Northern Denmark and Southern Sweden). The UK, Europe’s most mature biotech region, continues to dominate, although France, Denmark and Sweden are gaining market share.
The strong performance of biotechnology businesses has continued into the second half of 2002. Much of the venture capital finance that has been invested since the end of June has gone to biotech and life science firms. KuDOS, a Cambridge-based developer of anti-cancer treatments, secured over £30m from Advent Ventures and 3i, the largest financing round for a European business in just under a year.
The strength of interest in biotechnology has also been good news for firms launching funds targeting the sector. Merlin Biosciences this week held a first close of E125m for its third Biosciences fund and said it was confident of hitting its target of £250m early next year.
The broader venture capital market has experienced a sharp decline since the boom years of the late 1990s. A number of general partners have been forced to cut back the size of their funds during the last twelve months in response to investors expressing concern about whether uninvested capital could realistically be deployed in the current market environment. However despite cutbacks by leading funds including Carlyle, Accel Partners and Kleiner Perkins, the survey found that 95 per cent of fund managers had no intention of reducing the size of their funds.