Sweden: A Midnight Sun for Biotech

The nation's "Medicon Valley" is thriving thanks to venture capital, deals with pharma giants—and laws that let scientists own their research

by Kerry Capell

Only a decade old, the Swedish biotech industry is starting to set the pace in Europe. Fledgling companies are attracting foreign and Scandinavian investors, striking lucrative deals with pharmaceutical giants, and outperforming many of their peers on European stock markets. "There is a substantial amount of money going into Swedish biotechnology, one of the key clusters for innovation in Europe," says Dr. Eugen Steiner, a partner at venture capital firm HealthCap in Stockholm.

That's no exaggeration. Venture capitalists already have poured more than $46 million into Swedish biotechs so far this year, compared with $24.7 million in all of 2006, according to BioCentury, an independent market research firm in San Carlos, Calif. Sweden also boasts some of the biggest recent European biotech initial public offerings: Stockholm-based Biovitrum (BVT.ST), for instance, raised $104 million last September in the second-largest European biotech IPO of 2006. (Britain's Renovo (RNVO.L) raised $113 million.)

Medicon Valley Leads Growth

Since it went public, shares in Biovitrum, a spin-off of Pfizer (PFE) that specializes in treatments for obesity, diabetes, inflammation, and blood diseases, have risen 150%. There are plenty of other Swedish success stories, too, including Solna-based Meda (MEDAA.ST), which focuses on areas such as cardiology, gastroenterology, and pain and inflammation. It reported an 83% increase in revenues last year, to $756 million—the fastest growth of any European biotech—and its shares are up 50% in the past 12 months.

What's fueling the boom? Credit Sweden's top-tier academic institutions, an abundance of seasoned pharmaceutical talent, and a unique approach to intellectual property rights. Plus, Sweden now hosts one of the fastest-growing venture capital sectors in the world. That combination has helped the nation of 9.1 million citizens create a biotech industry that ranks as the world's largest on a per capita basis.

Much of the activity is based in the so-called Medicon Valley, now home to more than 300 biotech companies. The area, which spans from the Skane region in southern Sweden to the outskirts of Copenhagen, Denmark, was Europe's fastest-growing biotech cluster in 2006, as measured by products under development. According to a Boston Consulting Group study, Medicon Valley is surpassed only by Cambridge, England in life sciences research and development.

Intellectual Property Advantage

"Investors from all over the world are looking at Sweden because the technology and competence in biology is world-class," says Bill Gedales, managing general partner of New York-based venture capital firm NGN Capital. At the same time, they're also taking all European biotech more seriously than ever before (see BusinessWeek.com, 05/22/07, "The Maturing of Europe's Biotechs").

Sweden's standing in world-class science is rooted in its academic excellence. Thanks to institutions such as the Karolinska Institute, Uppsala University, and the Royal Institute of Technology, Sweden's medical research community is considered one of Europe's strongest. But it wasn't until a decade ago that Swedish universities were able to commercialize discoveries made by their own researchers. Today these universities have created holding companies through which they can own shares in other companies.