BioWorld International Correspondent

DRESDEN, Germany - It used to be that the second recruit to a biotech start-up was the chief financial officer, but in these product-obsessed times, the second name on the corporate roster is development director.

"Today, early stage companies need to be more advanced, with a validated approach and a clear focus on products. This is changing the way biotech companies are structured," Hanns-Peter Wiese, partner at the venture capital firm Global Life Science Ventures (GLSV) GmbH, told BioWorld International.

In its past two financings, GLSV has insisted the second executive hired was the development director. "And we have raised the hurdle in terms of what we expect from the CEO," Wiese said.

Munich-based GLSV is pickier also about what kind of start-ups it will fund.

"We are looking for companies with a novel approach in areas of unmet need where we can completely finance the next stage [of development]," Wiese said. A recent investment that reflects that is Neuraxo Biotec GmbH, of Dusseldorf, which has proof of efficacy in an animal model for Cordaneurin, a reformulation of a marketed product, in acute spinal cord injuries.

"This is a new mode of action, based on a known substance that has been reformulated and therefore has IP protection, and has shown in animal models that it restores functionality," Wiese said. The 12.8 million (US$15.1 million) first-round funding will enable Neuraxo to start a Phase I/II trial by the end of the year, the results of which will make it clear whether or not investors should put more money in.

Wiese said GLSV is prepared to set milestones for the companies it invests in and enforce them. When an investee company failed to reach a milestone earlier this year, the plug immediately was pulled.

"The company closed, and we got 50 percent [of our money] back," he said.

While those tactics may indicate otherwise, the overall climate for investing in European biotechnology is positive, according to GLSV's 2005 Investment Barometer. It's calibrated from a survey of 98 investors, analysts and biotech executives across continental Europe, in which 46 percent of respondents said they were more optimistic than 12 months ago, 65 percent felt confident about the next two to five years and 87 percent felt the long-term perspectives for investment were generally, or highly, favorable.

But GLSV will be sticking to the restrained tactics it has adopted since the technology bubble burst at the start of the century. "Around 2000, we saw many inexperienced lead investors. Now we are getting leads from seasoned investors, but we remain conservative about what we invest in," Wiese said.

Other early stage investors are similarly cautious, Wiese said, and it remains difficult to find a lead investor. GLSV recently spent nine months on the road with a term sheet for Fibrex Medical, a start-up with approval for a Phase I trial of FX06, for preventing reperfusion injury following a heart attack.

"Finally, Atlas [Venture] came in, but said the corporate headquarters should be moved from Germany to Delaware in the U.S.," Wiese said. The rationale is the presence of a large venture capital community to be tapped in subsequent rounds.