Some of Europe's cash-strapped biotech companies may just be able to see a light at the end of the tunnel.

Young drug discovery groups have struggled to raise funds during the financial crisis, but investors, analysts and industry insiders now see some signs of confidence creeping back into the sector.

In the last two months we saw that a window kind of opened up and a lot of good companies with good assets were successfully able to raise money, said Carmen Tang, a biotech fund manager at Pictet who oversees assets of $1.7 billion.

Biotechs around the world raised $5.9 billion in the year until June 4, up from $5.4 billion in the same period in 2008, data from specialist biotech publication BioWorld Insight showed.

No health care companies have listed on the Swiss exchange since Addex in 2007 but now there are signs there could be some offerings coming up.

Privately owned drugs group Nycomed, based in Zurich, has said it is targeting a stock market listing, leaving the door open to what could be one of the sector's biggest initial public offerings (IPOs) in years.

Clinuvel could also consider listing shares in Switzerland this year and several biotechs have raised substantial funds -- including NovImmune, which tapped investors for a chunky 62.5 million Swiss francs ($57.9 million) -- and GlycoVaxyn.

It needs some extra effort to convince investors, you have to show more value in the pipeline, said Olav Zilian, analyst at Swiss brokerage Helvea.

In the U.S. there has been a series of smaller biotech companies that have receive cash by placing shares. It could happen that maybe one or other private biotech in Switzerland could be financed further, Zilian said.

HIGH RISK, REWARD

Start-up biotechs are a risky proposition due to the unpredictable process of getting medicines to market, but they also offer big rewards for those investors who make the right choice.

It has been a tough few months for Switzerland's listed drug discovery groups -- Arpida (ARPN.S), Basilea, BioXell, Cytos and Santhera have all had significant pipeline setbacks that have hammered shares, illustrating the potential perils of investing in the sector.

The problem extends across Europe. France's young biotech industry has sought help from the government after a near 80 percent plunge in investment last year.

But investors can hit the jackpot if they make the right biotech choice. Big drugmakers are constantly on the lookout for interesting medicines to fill up sparse pipelines, whether through acquiring companies or partnering deals, and valuations are still very attractive.

Last year Novartis paid $880 million, a premium of over 90 percent, for Swiss biotech Speedel.

Tang's Pictet fund focuses on larger cap biotechs due to the riskier nature of investments in smaller companies, but as a result it missed out in April on Dendreon, whose shares rocketed after positive clinical data.

The pharma industry should seize this opportunity to acquire more small and medium sized biotech companies rather than focusing on high profile mega M&As, said Ranjith Gopinathan, analyst at Frost and Sullivan.

This would save not only the struggling biotech industry but also the pharmaceutical industry in the long run.

But there are plenty of companies that are having problems raising cash, said Ian Massey, chief executive of privately held Synosia, which raised 32 million francs in January.

I think that there's been a lot of failures in the industry in general, which is from my perspective making the investors somewhat cautious, Massey told Reuters.

It is a risky business with high reward that we are in, he said. It's potentially a good time for being able to pick out assets at a good valuation.

(Editing by Sitaraman Shankar)