BioWorld International Correspondent

Merlin Biosciences Ltd., a London-based life sciences venture capital group, is establishing an office in Finland in a move that could trigger greater consolidation and internationalization of that country's biotechnology sector.

That action forms part of a cooperation agreement with the state agency Finnish Industry Investment Ltd., which earlier this year committed €10 million to Merlin's latest fund, Merlin Biosciences Fund III LP. Merlin last week named Niilo Santasalo, formerly senior investment banker at Helsinki-based PCA Corporate Finance Oy, as the head of its Finnish operation.

He already has a number of investment candidates under review. "We have about five or six companies we are evaluating as potential opportunities," Santasalo told BioWorld International. Most of those, he said, have products in Phase II clinical trials, are approaching the Phase III stage and are well placed for signing collaboration agreements.

Merlin, which advises funds with €400 million under management, already has a portfolio presence in Finland through Ark Therapeutics Group plc, the London-based company formed through the merger of UK firm Eurogene Ltd. and Oy Quattrogene Ltd., of Kuopio, Finland. Santasalo said that other potential investees in Finland could follow a similar development path. "With some of the candidates we are evaluating there are already merger candidates [in place]," he said.

Merlin's main contribution to the development of Finnish companies, Santasalo said, will be its international industry experience and network, given the limited scale of Finland's pharmaceutical and biotechnology sectors.

Finland has a base of more than 100 biotechnology companies, located in centers such as Helsinki, Kuopio, Turku, Tampere and Oulu. About 20 to 30 of them are of sufficient scale to attract significant levels of venture capital, Santasalo said. Up to now, however, biotechnology investing in Finland has been an overwhelmingly local affair, albeit with some input from funds based in Denmark and Sweden. According to the Finnish Venture Capital Association, Finnish private equity and venture capital companies invested €56 million in life science firms in 2002.

Merlin has cultivated links with the Finnish biotechnology sector in recent years, and has formed a close relationship with Sitra, the Finnish National Fund for Research and Development, which is one of the main local players in biotechnology funding. That organization, which has 40 biotechnology firms in its portfolio, said it made investment decisions involving €25 million last year.

Santasalo is looking to close Merlin's first investments in less than a year. "I would say over the next six to 10 months we are aiming to strike at least one deal, hopefully two."