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Biotechnology in Sweden

Sweden has the fourth largest biotechnology industry in Europe, after Germany, the UK and France. It tops the list of industrialised countries in terms of investing the greatest proportion of their gross domestic product in 'knowledge', defined as education, software and research spending. Bioseeker Group looks at the opportunities in this booming sector.

Sweden is a country also well known for its pharmaceutical industry because of outstanding research institutions such as Karolinska Institutet, universities such as Lund and Uppsala, companies such as Pharmacia and AstraZeneca and its standing as a host country for many clinical trials.

The mergers that resulting in Pharmacia Upjohn (now Pharmacia Corporation) and AstraZeneca in the late 1990s were not well received by the Swedish public. However, this turned out to be very fruitful in terms of opportunities presented for new start-up biotechnology companies and the increased availability of researchers.

Recently, the four separate research councils in Sweden have amalgamated to form one large research council with four branches, called The Swedish Research Council. The task of controlling activities involving biotechnology is split up at several different public agencies. Because of the fast development in biotechnology, it has been proposed that a special governmental agency for inspection of biotechnology should be started. Such an agency would investigate all new activities in biotechnology and not specialise in any other field of research. Another agency for technological evaluation has been suggested because of the general complexity of the biotechnological science and the information about it. The proposed organisation would work towards spreading information and stimulating discussions about the subject. More importantly, this agency would be involved in transferring information regarding different technologies to the politicians and aiding in their decision-making processes. Such organisations already exist in many other European countries.

University research & Commercialisation

Sweden has 13 universities and 37 university colleges, of which 23 are state-run. There are also private educational organisers such as Chalmers University of Technology AB, the Foundation for the University College of Jönköping and the Stockholm School of Economics. There are 300,000 students enrolled in universities and university colleges, 18,000 enrolled in research training and 20,000 people working as teachers and researchers.

Funding of university research

Government funding of university education and research changed drastically during the 90's. When a coalition of right wing parties were in control of the government from 1991 to 1994, state money was allocated into three different foundations, away from political control. The strongest of the three was the Swedish Foundation for Strategic Research. It obtained SEK6bn. This foundation changed the traditional basic research focus in Sweden to more applied research. When the Social Democrats came back into power in 1994, they managed to retain a certain level of political control over the foundations by creating legislation permitting the appointment of chairmen by government. They then decreased the funding for the four research councils in proportion to the amount of grant money that they where spending on research. This marked the first real modern shift of grants for research in Sweden.

Sweden's entrance into EU in 1995 caused a relocation of research money from Sweden to Brussels, and Swedish scientists were forced to apply for research grants from the EU in international competition with other EU member countries. This marked a second paradigm shift for Swedish research. Since then, private funding of research at Swedish universities has increased from year to year and today it contributes to more than 50 per cent of the annual research budget in many cases. The number of collaborations and alliances with the industry has increased notably, and all major universities in Sweden today have strong partnership with global enterprises.

In addition to the main universities in Lund, Göteborg, Linköping, Stockholm, Uppsala and Umeå, a number of other schools have recently been approved as universities in smaller cities in Sweden. This has lead to a relocation of money and study positions from the larger universities to the smaller. There is a debate whether the creation of smaller universities dilutes competence and resources available for education and research.

Commercialisation of university research

Typically, the idea for a biotech company comes from research performed in academia. However, it was not until in 1996 that Swedish universities were able to commercialise on innovations or discoveries made by their own researchers. Today, universities have created holding companies through which it can own shares in any other company.

At the present time, it is the scientist who owns the full rights to any discovery or innovation that he or she makes. However, there are strong voices for a change towards universities gaining commercialization rights of research results, whereas the innovator or scientist will have royalties on future incomes. One of the proponents of this idea is Anders Flodström, rector of the Royal Institute of Technology.

Patenting

According to an investigation made by the European Commission, Sweden has the best innovation climate in Europe. The European countries have been compared across a number of parameters such as number of educated engineers and scientists, number of patents etc. In twelve out of sixteen categories, Sweden performed 20 per cent better than the EU average. In second place overall came Finland followed by Denmark and Germany. This study was based on figures from 1999.

One problem for patenting in Sweden is that practically all applications for research grants are available to the public. This is due to the fact that the research councils finance a large part of the academic research in Sweden. Since most of the councils do not treat applications as classified information, problems relating to the novelty of invention sometimes arise when future patents are filed. Public authorities recognize the problem and it has been recommended that a public investigation should evaluate whether applications for research grants should temporarily be classified as confidential information.

The Swedish share of all American patents is now approaching 1 per cent and the share for biotechnology-related patents is approximately 0.5 per cent, which can be compared with a two to five per cent share of total articles published in different areas related to biotechnology.

Venture capital in Sweden

Stage 1 financing

On the money-raising front, several sources are available for the initial financing of biotech start-ups in Sweden. The founder/entrepreneur can apply for local grants and government funding programs. The funding for research at this level is strictly non-commercial and is on the order of $10,000 to $20,000 per year.

Stage 2 financing

Sweden has recognised the need for government-supplied capital resources for start-up companies. Some of the government institutions supplying capital are Industrifonden, NUTEK, ALMI, and Teknikbrostiftelsen. These institutions typically operate as adjuncts to a venture capital investor, supplying approximately 30–50 per cent of the total initial investment. The capital is supplied as a loan to the entrepreneur at a favourable rate (5–10 per cent) and does not demand equity. In addition, loan payback is deferred or forgiven if the project does not meet its stated goals.

Another initial source of capital in Sweden is a well-established network of business angels, who also bring knowledge or intellectual capital. Sweden also has several innovation centers or ‘incubators' where biotech start-ups can mature. These organisations, funded by a mix of private and public money, administer research, development facilities, and provide basic research equipment for a diverse collection of entrepreneurial projects.

Initial funding is typically $40,000 to $50,000, and laboratory space and equipment to the entrepreneur are provided at a favorable price. In exchange, the innovation center often demands part ownership of the start-up, typically in the range of 5–20 per cent.

Stage 3 financing

Sweden has a solid venture capital community, which has developed with the wherewithal to understand the life sciences and fund a growing number of new enterprises. The Swedish venture capital market ballooned under year 2000. The Swedish venture capital association increased its members from 50 to 140 in two years. There are approximately 200 venture capital investment companies in Sweden, of which around 30 of have special interest in the biotechnology industry. It is expected, however, that the number of venture capital companies will start to decrease as a result of unwise investment, declining market size and lack of capital.

Biotech clusters & regions

Science and technology parks

There are more than 30 science and technology parks in Sweden. The coordinating organisation for these is Swedepark. This organisation supports ventures within knowledge-based and high-tech businesses. Today, the science and technology parks are well-established environments for the promotion of new companies, product development, and collaboration between universities and businesses.

The tenants in the parks are offered varying degrees of service according to their different needs. Of special importance are the services provided for newly established firms such as advice about patents and licences, judicial matters, financing, marketing, information search, etc

Regions

Medicon Valley (Lund-Malmö-Copenhagen)

Deriving its name from Silicon Valley, this region owes its existence as a thriving economic zone to the building of the bridge across the Öresund, opened in 2000, that links Copenhagen in Denmark to the city of Malmö in Southern Sweden. The intent is to capitalise on the region's strength in healthcare, pharmaceuticals, biotechnology and life sciences. A necessary requirement for a successful technological region is strength and abundance of university research. Medicon Valley houses Lund University (Sweden's largest), Malmö University, University of Copenhagen, as well as the Technical University of Denmark and the Copenhagen Business School of Pharmacy.

Approximately fifty per cent of the pharmaceutical and biotech companies in Scandinavia reside in the valley together with a fair number of medical device companies.

Linköping-Stockholm-Uppsala-Västerås

The square region formed by Linköping, Stockholm, Uppsala and Västerås is a very knowledge-intensive area. Several of Sweden's most well renowned universities such as Karolinska Institute, Stockholm School of Economics, Royal Institute of Technology and Uppsala University are located here. In addition to these universities, there are several science and technology parks in the area.
 
A large number of biotechnology start-ups are located in this region, as well as well-renowned university hospitals such as Uppsala Academic Hospital, Huddinge Hospital, Karolinska Hospital, and Linköping University Hospital. This area is also the foothold for global enterprises such as Pharmacia Corp, AstraZeneca, and Ericsson.

Being the capital of Sweden, Stockholm also houses the Swedish Parliament and a number of governmental and non-governmental organisations such as the Royal Swedish Academy of Sciences and the Royal Swedish Academy for Engineering Science. Sweden's Medical Products Agency is found in Uppsala.

Sweden's largest banks such as SEB, Föreningssparbanken, Handelsbanken have their head-offices here and the venture capital community is very strong.

Gothenburg

Located on the west coast of Sweden, Gothenburg is Sweden's second largest city. The two main universities in this area are Gothenburg University and Chalmers University of Technology - a world-renowned engineering institute. As much as three technology parks are associated to Chalmers.

In close contact with Gothenburg University is Sahlgrenska Hospital and Sahlgrenska BioMedical Innovation Center. This is the primary site for biotechnology startup companies in the region.

Umeå-Luleå

Umeå and Luleå house the most northerly located universities in Sweden. In spite of their location, both cities attract many students to the engineering and medical programs offered. Umeå University is very strong in molecular biology, forest biotechnology, and chemistry.

Today there are almost 30,000 students in Umeå and Luleå together. Umeå has a university hospital and a science and technology park, which houses a number of interesting biotech companies.

An overview of biotechnology companies in Sweden

The Swedish biotechnology industry can be segmented into the ten different fields of;
Agrobiotechnology, Bioinformatics, Bioproduction, Biotechnology Equipment, CRO, Dentistry, Diagnostics, Health products / Functional Food, Medical Device and Pharmaceuticals / Therapeutics. The largest field is; Pharmaceuticals / Therapeutics, followed by Medical Device and Biotechnology Equipment.

Biotechnology shares are traded officially on OM Stockholm Exchange Market (A-list and O-list), Nordic Growth Market AB (SBI-list), Aktietorget or Nya Marknaden.. However, only one out of ten biotech companies are officially traded today.

Agrobiotechnology/functional food

All of the companies in this field are small and need larger marketing and sales organisations to scale up their business. R&D activity within this field is diverse and includes anti-fungals, vaccines, probiotics, functional food and wound healing.

BioGaia is the largest company in this field. The company's R&D is focused on probiotic food (Reuteri bacteria). There are around 25 different probiotic products on the Swedish market today. Other companies in this field are Agrivir AB and Probi AB.

This market is controlled and regulated by the National Food Administration. To culture genetically modified crops, a permission from The Swedish Board of Agriculture is required.

Bioinformatics

Information technology is a very strong market in Sweden, with several companies having a business strategy aimed at accelerating rational drug design, technology development, new methodologies, services for clinical research, and delivery of IT systems to hospitals, industries and pharmaceutical companies. In spite of the recent problems in this market, this segment is expected to increase significantly.

Bioproduction

The customers for these companies involved in the production of biological molecules, microorganisms, or cells are biotechnological companies, university research groups or food- and pharmaceutical industry. This segment is probably the fastest growing segment in Sweden today and many companies in this segment are generating black figures. Examples of bioproduction companies companies in Sweden are BioInvent and Biovitrum.

Biotechnology equipment

Several of Sweden's hottest biotechnology companies such as Biacore, Gyros, Personal Chemistry, and Pyrosequencing are involved in this segment. Gyros is developing a ‘lab- on-a-CD technology', while Personal Chemistry has developed a microwave oven for facilitating organic synthesis and increased yield. Pyrosequencing has developed a new method for sequencing short DNA segments and SNP analysis.

Dentistry

Nobel Biocare is clearly the biggest company in this group with over 1100 employees. This company is one of the world leaders in dental implants and prosthetic solutions.

Diagnostics

The companies in this field cover a diverse range of different diseases. The concentration in this category lies mostly in diagnostics for infectious diseases, cancer  and brain damage. There are also at least two companies involved in developing general diagnostic techniques for multiple diseases. Only 7 out of 25 companies have products on the market in human diagnostics.

The biggest companies in this group are: Nova Medical, Sangtec Medical and Diffcham.

Health products

The companies Hebi, Abigo, and CCS dominate this segment. The business areas of Hebi Healthcare are entail hygiene, fine chemicals and pharmaceuticals. Abigo has products in self-medication, wound healing, and medical device development.

Medical device

Swedish companies in this field cover almost all different types of disease areas. A majority of the companies have products on the market. Several companies are involved in developing inhalation systems for therapeutic and anesthetics use. Other strong groups deal with developing prostheses and related devices, blood cell analysis and purification, and devices for monitoring cardiovascular function and microcirculation.

Pharmaceutical/therapeutic

Today, very few companies are involved in R&D for new small molecular drugs in Sweden. Most of the companies with a therapeutic ambition are working with biopharmaceuticals, bigger biological molecules such as proteins, complex carbohydrates and cell- and tissue therapy.

Most of the companies do not have any therapeutic product on the market and showing negative results due to their R&D costs. Several companies are based on one single technology platform.

Some of the companies in this group are Active Biotech, Medivir and Biophausia.

© Bioseeker Group 2002. All rights reserved.

This information was compiled by BioSeeker Group AB - a Sweden-based business and competitive intelligence company for investment and R&D management of biotechnology and pharmaceutical companies. BioSeeker Group has formerly published the report Swedish Biotechnology Industry (Jan 2001) and several other business reports. This autumn, BioSeeker will release ‘Industry Report: Commercialising on Swedish Biotechs'. For more information about BioSeeker's products and services, please visit www.bioseeker.com or contact bioinfo@bioseeker.com.