Oct 17, 2005
| With the largest share of biotech companies per capita and prestigious research institutes, Sweden offers business opportunities for industrial and financial investors alike.
With more than 230 biotechnology companies involved in pharmaceutical development and biotech tools and supply, it may surprise some to discover that Sweden has Europe’s fourth-largest biotech industry. But not Alex Suh, managing director at California Technology Ventures, an early-stage VC firm.
“Sweden is known for its brilliant scientists and great commitment to R&D,” says Suh, who has approached Sweden on the lookout for technology and companies to partner or merge with U.S. companies that his company has funded or will fund. “Sweden is a place that people have not paid much attention to and where there is opportunity.”
The major poles of activity are in the Stockholm/Uppsala region (home to the famed Karolinska Institute) and Medicon Valley (Malmö/Lund and Copenhagen on the Danish side), each with more than 100 companies. The cities of Göteborg, Linköping, and Umeå are other areas of biotech strength.
The largest firms — Biovitrum, GE Healthcare, and Pharmacia Diagnostics — each employ more than 500 people in Sweden. However, the majority of firms employ fewer than 100 employees. Highly innovative, Sweden is among the world’s top-three producers of biotechnology knowledge per capita and among Europe’s largest recipients of life sciences venture capital. Sweden’s success is due to a long pharmaceutical tradition, great scientific achievements, close industry/academia collaborations, and successful spinout activity. In total, the life science sector, home to AstraZeneca, Elekta, and Gambro among others, employs more than 40,000 people.
Several Swedish VCs focus solely on life sciences and biotechnology. These include HealthCap, H&B Capital, Medicon Valley Capital, and Scandinavian Life Science Ventures. HealthCap, with committed capital exceeding $900 million, is the largest specialized provider of venture capital within life sciences in Scandinavia. U.S. investors committed more than 50 percent of the capital in HealthCap’s fourth fund.
Partnering with local VCs is the preferred strategy for many foreign investors, such as Apax, MPM Capital, and Schroder Ventures. Suh takes a similar view: “Our strategic plan calls for investing in select Scandinavian venture funds that will assist us and cooperate in promoting investing opportunities that open the U.S. market for the Swedish companies and add technology advances to our U.S. companies.”
For Suh, it is a win-win situation. “We know it is important for Swedish companies to have support systems and opportunities to market their products in the U.S. to become a truly global company. It is just as important for our U.S. companies to look globally for technologies that they can add to their portfolio, support or advance their efforts without reinventing the wheel.”
There are already several high-profile collaborations between American and Swedish biopharma firms — a trend likely to continue:
• Wyeth has a strategic research partnership with Karo Bio, a Swedish drug discovery company focused on nuclear receptors. The collaboration concerns the newly discovered liver X receptor (LXR), which has a possible indication for atherosclerosis.
• Merck entered into a research collaboration with Carlsson Research, a Göteborg-based drug discovery company founded by Arvid Carlsson, the Nobel Prize-winning neuroscientist. The agreement entitles Merck to develop and market compounds from Carlsson Research’s dopamine stabilizer program.
• Endo Pharmaceuticals has partnered with Orexo for the rights to develop and market Rapinyl, Orexo’s patented product for management of breakthrough cancer pain, in North America.
Major investment by American firms in Sweden is also increasing. In May 2005, Pfizer announced it would build a major new plant near Stockholm for production of the company’s growth hormone Genotropin and other drugs. (Sweden overcame competition from more than 10 sites worldwide to win the $150-million investment.) In September, GE Healthcare unveiled $100 million of new investment aimed at expanding the company’s Swedish production capacity for protein separation.
The world’s leading life science research laboratories, including the Stanford Genome Technology Center and the Harvard Center for Cancer Prevention, use bioanalytical systems and DNA sequencing equipment from Swedish suppliers such as Biacore and Pyrosequencing. NIH is also collaborating with Sweden in stem cell research as well as sponsoring numerous research projects at Swedish research institutions.
Biotage, one of Europe’s fastest growing technology firms, is a good example of a Swedish firm that has made major inroads into the United States. Founded in 1997 as Pyrosequencing to commercialize a technology for DNA sequencing, Biotage has grown to some 350 employees and $70 million in annual sales, partly through acquisitions of U.S. firms.
Suh stresses the importance for Swedes and Americans to understand the cultural differences when dealing with each other. “We have found dealing with Swedish businesses and investors sometimes like working with the Japanese. It is a bit slow, conservative, and very consensus oriented. That is wise, but sometimes conflicts with the way we do business in California. However, we have high regards and respect for the people. They are sincere, honest, brilliant, and hardworking.”
A number of initiatives have been taken to foster increased cooperation and funding between Swedish and U.S. companies. Sweden hosts the annual Biotech Forum, the largest and longest-running life sciences event in Northern Europe, and arranges many other prestigious meetings to promote cross-border business, including investment forums in Sweden and the United States. For instance, Invest in Sweden Agency (ISA), a Swedish government agency responsible for promoting business and investment opportunities in Sweden, regularly leads Swedish biotechs on fact-finding missions to the United States, allowing American counterparts to meet top executives from Sweden’s most prominent companies, research institutes, and venture capitalists. ISA also arranges tailor-made visit programs for U.S. firms to Sweden.
Such meetings and visits offer “excellent opportunities for U.S. firms and researchers to explore Sweden’s biotech capabilities and opportunities and to establish key contacts at some of Sweden’s top firms,” says Anna Gustafsson, a manager at ISA. “We’re confident they’ll find that doing business in Sweden is highly efficient, productive, and rewarding.”
- Strong biotech industry — more than 200 companies
- Solid medical research foundation and tradition
- Highly innovative
- Cost efficiency in R&D; excellent business environment
- Close cooperation between industry and academia
Björn Bergstrand is the director of BBD Corporate Communications. E-mail: email@example.com.