Sweden - a Hotbed for Biotech Research
From two to 200 biotechnology companies in ten years - building on a long tradition of R&D achievements, Sweden has become home to one of Europe's largest biotech industries, active over the entire value chain of new therapy and drug development. But competition is closing in - and to keep its leading position - Sweden faces a number of challenges. The country may only have nine million inhabitants, but an unusually high proportion of this small population is active in the area of biotechnology.
The biotech industry, which has enjoyed a five-year average annual growth rate of more than 12 percent measured in employee numbers, has posted more rapid growth than any of Sweden's other main industries in recent years. Today, Sweden ranks as Europe's fourth-largest biotech country with nearly 200 companies, employing some 8.000 people (source: VINNOVA Analysis, 2003). That gives Sweden the largest share of biotech companies per capita in the world (source: The Lancet, Vol. 363, 2004).
If you count the number of people employed in the strong life science sector, the number adds up to 30,000. Swedish publications in clinical medicine are also the world's most-cited, in relation to the population. There are many reasons for this strong development of an industry which has evolved through an increasing demand of new drugs from an aging population, needs which the traditional pharmaceutical industry has not been able to fulfil.
”Sweden enjoys most of the necessary prerequisites for nurturing a strong biotech industry, combining a tradition of leading medical research, close co-operation between industry and academia, cost-effective research, capital availability and commercial stringency with a favourable regulatory environment,” says Hans Nyctelius, CEO and President of the Swedish biotechnology industry organization SwedenBIO. The fact that Sweden, as a nation, spends more on research and development in relation to GDP - 4.3 percent - than any other OECD country contributes to providing a highly innovative environment.
Birth of a Boom
You could of course say that it all comes down to tradition. Sweden has a long history of innovative research in medicine and physiology - to date, eight Swedes have received Nobel Prizes within these areas. This tradition also empowered world leading pharmaceutical companies Astra, now part of Astra Zeneca, and Pharmacia, now part of Pfizer. These two companies dominated the Swedish biotech research arena for a long time along with the predecessor of Pharmacia - Kabi Vitrum -, which in the late 1980s was one of the first companies in the world to employ recombinant DNA technology in drug development. However, in the late 1990s, Pharmacia decided to focus primarily on the later stages of drug development. In the process, it spun off several biotech related activities such as Pharmacia Biotech (now part of GE Healthcare), the Lund-based companies Active Biotech AB, Biovitrum AB - which is now one of Europe's largest biotech drug development companies - and most recently Pharmacia Diagnostics AB in Uppsala, which was spun off in 2004. In addition, two of the largest biotech successes in Sweden, Q-med AB and Biacore AB, both in Uppsala, are partly based on research from Pharmacia. “This restructuring of the company also led to a great number of highly skilled ex-Pharmacia and Astra employees either starting biotech companies of their own, or being recruited to other newly founded businesses,” states Nyctelius. A boom was born.
Collaboration is the key for Achievements
Collaboration is in many ways a key word when it comes to explaining the achievements of the Swedish biotech industry. Not only between academia and industry - but also between these sectors and public healthcare. The amount of informal knowledge transfer and co-operation between these sectors surprise many international observers, as well as the ability to integrate basic and clinical research. Another important explanation is the early start of an advanced healthcare system, which was open to new treatments and technologies. The centralization of the health care system also resulted in the establishment of medical records with common processes and methods, containing a unique collection of medical and genetic information. This open attitude also applies to embryonic stem cell research, which has been limited for ethical reasons in many other countries. Sweden has, in contrast, decided to support embryonic stem cell research and to allow therapeutic cloning.
Another evidence of the strong spirit of collaboration is that while Sweden represents only one percent of the global consumption of drugs, it is home to about six to seven percent of the world's clinical trials. The new clinical directive is fully implemented and Sweden attracted one third of all EU applications for clinical trials in July this year.
A Source for Innovation
These are some of the reasons why using Sweden as a source for innovative drug discovery and development has become increasingly popular for some of the world's leading pharmaceutical companies. In a record-breaking deal with Swe-dish Biovitrum in 2003, Amgen bought the development and marketing rights to Biovitrum's small molecule enzyme inhibitor for diabetes treatment. The same year, Merck entered into a licensing agreement with Carlsson Research AB, a Gothenburg-based drug discovery company founded by Arvid Carlsson, Nobel Prize-winning neuroscientist. Swedish biotech firms have, in fact, entered into strategic research collaboration with pharmaceutical and biotech companies all over the world. Karo Bio AB, which focuses on nuclear receptors, has partnerships with Merck and Wyeth, whilst Medivir AB that is pursuing research in the areas of infectious diseases and autoimmune disorders, has concluded deals with Boehringer Ingelheim and GlaxoSmithKline and most recently Active Biotech with Teva Pharmaceutical Industries Ltd. A number of Swedish firms have also struck agreements with Japanese companies. One example is Uppsala-based Orexo AB, which has sold the licensing rights for its product Rapinyl™ for treatment of acute pain in cancer to Kyowa Hakko Kogyo Co. Ltd. Swedish Biotech companies are active over the entire value chain of new therapy and drug development. The strongest focus is on drug discovery and development, biotech tools and supply, as well as bioproduction.
Aiming for Full Integration
One of the larger research companies in the Nordic region within the area of drug discovery is Medivir, which was spun-off from Astra in 1988 and listed on the Stockholm stock exchange in 1996. Medivir, with 120 employees and operations in Sweden and the UK, specializes in research based on knowledge of genes and the gene products coding proteases and polymerases. The Stockholm-based company's research is directed towards developing compounds into new drugs that suppress and regulate the function of polymerases and proteases in various medical disorders, such as HIV, jaundice, shingles and cold sores, as well as autoimmune diseases such as arthritis and multiple sclerosis. During the last year only, the company has employed 15 new researchers.
”Although old in comparison with most of the other companies in the business, Medivir embodies many of the characteristics pinpointed today as necessary for future success. It has critical mass, a broad product portfolio - and thereby a good risk profile - as well as partnerships with several global pharmaceutical companies,” says the company's CEO and President Lars Adlersson. But Medivir has set the company's ambition even higher - the goal is to break the traditional role of biotech companies as supplier of innovation to big pharmaceutical companies. Medivir strives to become a fully integrated pharmaceutical company with its own sales and marketing organisation and has therefore kept the rights to their innovations on the Nordic market. The market appears to believe in this strategy, as the company's new share issue last spring was oversubscribed. ”We have several projects in clinical development. As soon as one of these is ready to market - or if we can exchange one of our projects with a product from one of our partners - we will start preparing for our own sales and marketing organization,” states Adlersson, who thinks that the industry needs a more commercial attitude to keep attracting investors in the future.
Combining Academia With
If Medivir illustrates some of the characteristics deemed necessary for long-term survival on the biotech market, the small Gothenburg-company AngioGenetics Sweden AB is a good example of how and why Sweden has gained its leading position in the business, combining academic research excellence with a strong entrepreneurial drive. AngioGenetics, with nine employees, has during its short existence gained a world reputation for identifying and blocking the formation of blood vessels - angiogenes in Latin. The method can be used to block cancer tumours getting nutrition and thereby preventing them from growing. It can also be used in the treatment of heart and eye diseases. ”I didn't have time to finish my studies. During an international conference in the US in 1998 we compared notes with fellow researchers from all over the world - which made us realize that our research on blood vessels was world leading,” explaines Mattias Kalén, the young CEO and one of the founders of the company. After some initial problems - such as writing a business plan and raising capital - the company was founded in 2001. One of the company's three existing projects is focused on the reformulation of already existing medical products. The project is performed in collaboration with the Tumour Biology Centre in Freiburg, Germany. ”We're hoping to have a project by 2006 that we can package and sell to a partner for clinical development,” says Mattias Kalén.
Sweden has also a strong track record of companies in the biotech tools and supply area. One example - described as “shining” in recent stock comments - is Uppsala-based Biotage AB, a supplier of solutions for medicinal chemistry research and applied genomic analysis. The company was formed following Swedish Pyrosequen-cing's acquisition of Personal Chemistry and the US company Biotage LLC. After a period of restructuring, including changing its name and cost cutting, Biotage's CEO Jeff Bork now sees growth and a broadening of the product portfolio as essential for long term profitability. “Our goal is to have sales corresponding to $100 million, compared with $50 million today. This kind of size is necessary if we wish to eat, instead of being eaten. We have already fulfilled our aim to halve our costs, while gaining a positive cash flow is within reach. Our next step is to acquire more businesses, preferably in the area of medical chemistry,” Bork explained. The company has 235 employees working on the company's premises in Sweden, the US, England and Germany. Biotage is a truly global company, with only one percent of its sales in Sweden. The main growth in the short term will take place on the US market, Bork predicts, but in the long term he sees Asia, China and Japan as the most interesting markets.
But not everything on the Swedish biotech horizon is so rosy. Overall and in the long-term perspective, the growth potential for the Swedish biotech industry is promising, according to most business insiders. “But there are several challenges that have to be addressed in order to secure Sweden's leading position,” says Nyctelius. Some of the challenges cited by several sources comprise cuts in basic research - as well as the struggle for early funding experienced by start-ups and the lack of a buoyant exit market. Another challenge is the absence of directed tax incentives for R&D, existing in countries like France and Canada.
SwedenBIO, the national biotech organization formed in 2002 has so far attracted more than 80 major biotech companies. Its main objectives are to promote the Swedish biotech industry and to improve the industrial environment. As part of this strategy, SwedenBIO launched its National Agenda for Growth with an 18-point action programme. One of its tasks is to create a dialogue with the Swedish government - and discussions are “promising”. Among the actions prioritized in the short term by the Swedish biotech industry are establishing a national biotech governmental committee and strengthening the governmental funding of competitive research as well as seed funding. ”We need the same kind of tax environment as the countries that we compete with, allowing tax breaks for R&D, for example,” states Nyctelius.