NorwayNorway

Major investments renew optimism

29.01.2006

For many years, a distinctive feature of the Norwegian biotechnology industry was as follows: A few large, partly profitable companies are dominating the sector and besides, there are existing a lot of small companies, with significant research and investment needs. During the past few years, however, the industry has attained a renewed optimism, with major investments and several new listings on the stock market. Additionally, the industry - so far mainly concentrated on pharmaceuticals - is about to extend its horizon to the marine environments.

Today's Norwegian biotechnology industry is made up of some 75 companies, of which five are listed on the Oslo stock market, representing an estimated 0.3 % of the total market value.
The majority of the companies are small and short on capital, compared with similar companies in neighbouring Sweden for example. But expectations for the industry are high, at least among Norwegian industrialists. According to a poll made in 2005 by the Research Council of Norway (RCN), the majority of these are simply of the opinion that in the future biotechnology will be as important to the Norwegian industry as oil and gas are today. As a comparison, the Norwegian oil
industry accounted for 21 % of the Norwegian gross domestic product and 47 % of the export revenues in 2004.
The optimistic industrialists towards biotechnology in Norway can recount several positive events in 2004 and 2005 to back up their views. The Oslo-based company DiaGenic was successfully listed on the stock exchange in 2004 and has since seen a considerable interest in their shares. DiaGenic has developed a technology that makes it possible to use blood samples to diagnose a whole range of diseases, and has already taken out patent rights in the USA for a test for Alzheimer's disease.
Furthermore, in November 2005 the company Biotec Pharmacon, Tromsø, was listed on the Oslo Stock Exchange. Biotec Pharmacon is a research intensive biopharmaceutical company that has deve-
loped betaglucans from brewers' yeast and produce them for human use and for the animal health sector. At last, in December the Bergen-based company NorDiag was listed on the stock exchange with a technology aimed at diagnosing cancer at a very early stage. Their first test kit can prove early stages of colon cancer, by analyzing DNA remnants in stool samples. The biggest individual initiative by a non-listed biotechnology company in Norway took place in September 2005 in Algeta ASA, where large international venture funds invested a total of Euro22.7 million through a share issue. The capital will be used on clinical testing and further development of the company's candidate product for treating cancer of the prostate. Whereas conventional cancer radiation treatments make use of light beta particles and gamma rays, Algeta intends to use heavy alpha particles instead, as it is thought they can be more accurately directed towards the cancer cells.
Considerable investments
Investors have taken an interest in several other Norwegian companies too. In September 2004 Norsk Hydro and the venture fund NeoMed invested Euro12.3 million in Clavis Pharma, which is working on a new medicine for cancer. In July 2005 the company received another Euro3.7 million to be used chiefly to conduct clinical testing of the company's two main products.
In April 2005 the pharmaceutical company GemVax was sold to the Danish bio-technology company Pharmexa, in a deal where Pharmexa was going to raise at least Euro20.1 million to finance the Phase III studies of the company's immune therapy products against cancer. GemVax was established in 2001 when the industrial group Norsk Hydro divested all its engagements in the pharmaceutical development industry. A mention should also be made of the announcement in November 2005 by antibody specialist Affitech A/S and American group XOMA Ltd. that they had signed an antibody collaboration and cross-license agreement for antibody-related technologies. This is not the first time the Norwegian biotechnology sector has developed companies that have been sold or merged with foreign companies. The largest are Axis Biochemicals which merged with UK-based Shield Diagnostics to form Axis-Shield ASA; and Nycomed ASA, merging with Amersham International in 1997 to form the industrial corporation Nycomed Amersham plc. This has subsequently changed their structure and name to Amersham Health, now GE Health Care.
30 companies with profit
In 2006 it may pay to keep an eye on companies such as Bionor A/S in Skien, a company which develops, produces and markets diagnostic tests for human and veterinary medicine including aqua culture. In addition, the Bionor milieu includes a large and promising activity in immunization therapy and HIV vaccines.
Accounts from 2004 show that the Norwegian biotechnology industry at the time had approximately 30 companies showing a profit, while the majority had negative results, but positive equity. The largest biotechnology company controlled by Norwegian owners is the international pharmaceutical veteran Alpharma ASA, which was established in 1903 and is listed on the New York Stock Exchange. (see Table 2) Also GE Healthcare have a big Norwegian operation following their take-over of Amersham Health, while the ownership in the company is mainly in foreign hands.
Public opinion is changing
In terms of turnover FMC Biopolymer takes a good Norwegian second place with sales of Euro80 million in 2004. The company is a world-leading alginate manufacturer, now also focusing on biologically active alginates for such diverse purposes as healing of wounds for humans, and pro-bio-tic feed for farmed fish. Third on the list is the omega-3-fatty-acid-specialist Pronova Biocare with a turnover of Euro57.2 million. Dynal Biotech ASA, the world-leading supplier of tissue typing reagents for transplantation, was not far behind, with a turnover of Euro 37.3 million and a result of as much as Euro13.5 million. Dynal also makes monosized polymer particles which are used for the magnetic separation of different types of cells, nucleic acids, proteins or other biomolecules. Dynal was sold to the US-company Invitrogen in 2005.
Norwegian public opinion on biotechnology roughly corresponds to that of other European countries. There is a considerable scepticism to genetically modified organisms in food, but a considerably greater tolerance for biotechnology in pharmaceuticals.
In the period 2001-2005 Norway had a non-socialist minority government that passed a strict law on biotechnology, supported by one socialist opposition party. The law prohibited activities such as research on fertilized eggs and pre-implantation diagnostics, as well as placing serious restrictions on Norwegian stem cell researchers, who had to settle for work on so-called adult (somatic) stem cells and keep away from embryonic stem cells. However, in 2005 the Norwegian media took up the case of six-year old Mehmet, who was suffering from a serious disease of the blood. Mehmet's fate helped turn both public opinion and political opposition, and as a first step the Norwegian Storting (parliament) decided on a dispensation system, allowing testing of fertilized eggs to reveal tissue compatibility in cases where there were „particular reasons to do so“. The new centre-left government, which won the elections in autumn 2005, have stated clearly that the biotechnology law is up for liberalization.
Norway has adopted the EU patent directive, but is not a member of the European Patent Office (EPO). The interest group Norwegian Bioindustry Association (NBA) (see Table 3) has strongly advocated such membership, pointing out that this would make Norwegian companies more attractive as technology partners for foreign companies. The new government, headed by prime minister Jens Stoltenberg, is expected to put a proposal for Norwegian membership in the EPO before the Storting in 2006.
An academic-based industry
A great many of the Norwegian biotechnology companies originate from research being done at one of the country's universities. Most of the Norwegian biotechnology industry is located around the two universities in the Oslo region, that is the University of Oslo and the Norwegian University of Life Sciences at Ås (see fig.1). This region is home to more than 33 NBA member companies from the biotechnology industry. The other hubs are the university cities of Stavanger (4), Bergen (6), Trondheim (4) and Tromsø (4).
One characteristic of the university cities are their large research units such as the research foundation SINTEF and the Norwegian University of Science and Technology in Trondheim, and the Norwegian Radium Hospital in Oslo, which have been very important to the Norwegian biotechnology industry. The Radium Hospital, which is a specialist hospital for cancer treatment and the largest cancer centre in Northern Europe, has given rise to companies such as GemVax and PhotoCure, which develop and sell pharmaceuticals and medical devices based on their proprietary photodynamic therapy technologies. The latter signed an important agreement in January 2006 giving GE Healthcare the exclusive global rights outside of the US and the Nordic region to market and distribute PhotoCure's product Hexvix.
While previous advances in these areas in Norway relied on pioneers and enthusiastic entrepreneurs for their commercialisation, an infrastructure has now been developed encompassing all Norwegian universities as they have set up their own technology transfer offices. The public support schemes have to be described as fairly good, although the problems of getting seed capital persists as does the support for setting up new companies. The Research Council of Norway has several activities geared towards biotechnology, and much has been gathered into the large programme called FUGE (Functional Genomics in Norway). The programme runs from 2002-2011, with a budget of NOK150m annually until 2007.
The tax deduction scheme SkatteFUNN has also become an important policy instrument following its instigation in 2002. This scheme allows tax payers with activities in Norway a tax deduction of up to 20 per cent on the costs for research and development projects.
Research-related tax deduction
SkatteFUNN had a total of 512 R&D projects under the technology heading „biotechnology“ in 2004. Most of these concerned marine biology and aquaculture, followed by bioproduction, biomedical equipment and diagnostics. The project costs amounted to a total of Euro0.13 million or ten per cent of the SkatteFUNN project portfolio. This scheme has thus proved other surveys to be true, when they show that Norwegian biotechnology companies in Norway invest more in Research and Development, and that they have more international cooperation and more patents for processes and products, than other companies.
Incidentally, Norwegian scientists are relatively inexpensive compared to many other countries, and foreign scientists coming to Norway often speak highly of research environments with high professional standards in an international context, as well as a high level of democracy and an open leadership style.
Potential in blue biotechnology
Concerning the diversity of biotechnology in Norway, the large majority of companies work in the “red” biotechnology in the pharmaceutical field. The ”green” part of biotechnology, which deals with agriculture, is almost non-existent in Norway. The „white“ industry share is relatively low, too. But the most exciting prospects for the future may lie inside the „blue“ biotechnology, with its focus on the marine sector. The Norwegian coastline is 22,000 km long, already providing unique opportunities and facilities for tourism, and may in the future provide equally good opportunities for the biotechnology industry.
Pronova Biocare's health-promoting omega-3 fatty acids are extracted from fatty species of fish, so the marine connection is very clear in their case. However, the marine connection is also apparent in companies such as Biotec Pharmacon or FMC Biopolymer. Not to mention Aqua Gen, which is Norway's premier producer of salmonid eggs and aims at being a total supplier of eggs to the national and international aquaculture industry. Other examples: The research foundation Akvaforsk has applied for a patent on a method to test the haemoglobin type in cod, in order to enable the selection of the best conditions for growing cod in pens.
Furthermore, the National Institute for Nutrition and Seafood Research in Bergen has successfully established cultures of embryonic stem cells from the marine cold water species turbot, in order to understand the mechanisms that result in pigmentation defects in farmed flatfish. Another company, Navamedic, recently published that they will market a glucosamine product based on shrimp shell, approved as a medicine for patients suffering from mild to moderate osteoarthritis.
The potential of the oceans to be explored is obviously abundant.

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