BioWorld International Correspondent

LONDON - In a reflection of the extent to which venture funding is being remodeled, venture capitalist firms now are investing in each other.

Bioscience Managers Ltd. (BML), of London, announced this week that it has invested $25 million in the portfolio of the Danish venture capital fund, Nordic Biotech. BML's Healthcare I fund has acquired holdings in a number of Nordic's portfolio companies and made direct investments in some others.

"We lined up our institutional investors behind a game plan to buy into existing VC portfolios," said Michael Forer, BML's managing director. "We were quite surprised in the amount of deal flow in terms of the number of VCs that were interested in doing something with us. We expect to do more deals of this kind."

Although both BML and Nordic are VCs, they are interested in different parts of the market. Nordic historically has invested in companies from their very early stages, often before they even were up and running, whereas BML, and its forerunner, the Rothschild Bioscience Unit, is interested in later-stage companies.

For some of the Nordic companies, the BML investment represents a partial exit. "But from Nordic's point of view, it is also a case of getting a good co-investor," Forer said.

Christian Hansen, partner and co-founder of Copenhagen-based Nordic, said the strategic investment from BML validated Nordic's investment strategy. All the companies involved are clinical stage, and Nordic believes the BML investment will help bring them through to a trade sale or an IPO.

One of the companies, Osteologix A/S, of Copenhagen, recently went public by a reverse merger with Castle and Morgan Holdings Inc., of New York, in an all-share deal, and used the listing to raise $10 million. Until that, Nordic was the sole investor, and the listing was not an exit for Nordic, which made a further investment.

Similarly, Curalogic A/S, also of Copenhagen, listed on the Copenhagen market last month, a move that Forer said was "more of a financing than an exit."

Other companies in Nordic's portfolio include LifeCycle Pharma, a spinout from the Danish pharmaceutical company H Lundbeck A/S; Forward Pharma, a dermatology specialist; and Gastrotech Pharma, which is developing treatments for endocrine disorders.