Search for content, post, videos
Advertisement

Nordic life science shows resilience in the face of financial turbulence

Helena Strigård

The robust financial ecosystem surrounding Nordic life sciences offers an edge of resilience in a global arena that’s moving into a bear market.

Over the last few years the Nordic financial landscape has seen a boost of new actors specializing in life sciences entering the stage, with the establishment of several VC funds and angel investor programs. In parallel to this development, the Swedish stock market has impressed with a position as the third busiest place globally in terms of absolute numbers of annual life science IPOs (Swedish Drug Discovery and Pipeline Report) – while at the same time the drug discovery and development pipeline is maturing. This could give the Nordics an edge of resilience as experts warn we might be moving into a bear market.

“There’s reason to believe that the Nordic life science scene will be showcasing relative resilience in the face of inflation, rising interest rates, market volatility and a chaotic macro-environment.”

Regardless of fluctuations in the financial markets, the need for medical interventions across populations won’t decrease. As access to funding is tightening worldwide, the relative strength of sectors and regions in turbulent times will be a factor that determines which direction the existing capital will flow. There’s reason to believe that the Nordic life science scene will be showcasing relative resilience in the face of inflation, rising interest rates, market volatility and a chaotic macro-environment.

The Nordic SMEs’ access to funding is by no means untouched by global events, where financing rounds are reportedly shorter and harder to close at the expected level compared to 10–12 months ago (based on interviews with SwedenBIO members). Yet, we still record an all-time high of investors coming to our part of the world for partnering meetings with Nordic SMEs, as well as new players coming into the local financial landscape and expanding their portfolios.

As the Nordic countries come together as one life science region, their financial markets are also increasingly acting as one, which is an advantage in this new economic reality. Many Danish life science companies are listed on the Stockholm stock exchange and Danish big pharma venture arms and foundations are providing intelligent capital for innovative start-ups across the Nordics. One example is the Novo Nordisk Foundation, which from 2022 has opened up their application system for grants to all Nordic countries.

“This has led to Nasdaq Stockholm now welcoming primary investments made by US-based companies, not just dual listings, as of July 1st last year.”

Our financial markets are not only increasingly opening up for each other, but also investing in life sciences around the world. Sweden’s main stock market, Nasdaq has become a leading market for life science companies all over the world, with several international companies continuing to show their interest in Nasdaq’s European markets. This has led to Nasdaq Stockholm now welcoming primary investments made by US-based companies, not just dual listings, as of July 1st last year.

2021 saw a strong development on the eastern side of the Nordics as well, with Finland championing deep tech in step with interesting developments in the intersection between life sciences and other tech-savvy industries. This is reflected in the many tech-VCs operating in Finland in this interface – as well as in the Baltic countries that are close friends of the Nordic life science family. In 2021, Finnish startups raised a record amount of growth funding, up 40% since 2020, with last year’s venture capital investments in Finland totaling EUR 1.3B, excluding private loans.

The question still remains if the strong outset of the Nordic life science industry – underpinned by several years of growth – will shield the regional market from some of the turbulence now hitting global financial markets?

The joint efforts of the five neighboring countries to catch international attention seem to be paying off, as demonstrated by a record number of investors and company delegates attending last year’s September edition of Nordic Life Science Days in Malmö in southern Sweden.

The question still remains if the strong outset of the Nordic life science industry – underpinned by several years of growth – will shield the regional market from some of the turbulence now hitting global financial markets?

“There is less money in the system compared to 2021, when VC deal-making hit an all-time high of over $340 billion and firms ramped up bets on high-tech, biotech, healthcare and fintech startups, buoyed by excess liquidity and an accommodative monetary policy.”

Undisputedly, the wells are drying up in many sectors globally. There is less money in the system compared to 2021, when VC deal-making hit an all-time high of over $340 billion and firms ramped up bets on high-tech, biotech, healthcare and fintech startups, buoyed by excess liquidity and an accommodative monetary policy (Reuters).

The value of deals struck in the first half of 2022 dropped to US$144.2 billion, due to an ongoing stock market rout driven by fears of a looming recession, raging inflation and aggressive rate hikes – from US$158.2 billion over the same period 2021 (Reuters). In the US, the venture financing deal value for US-based biotech companies decreased by 46% in the first quarter, compared to the same period the previous year, according to GlobalData (Fierce Biotech).

Where the existing VC will go to is less obvious. Some argue that this could materialize as a prime time for big pharma’s venture arms to get into the game. These are more capitalized than ever, post-covid, and are likely to ramp up their deal flow to accommodate what private capital cannot (Scrip Pharma Intelligence). According to a new report by Viola Group, the preferences for where VC is going have changed since 2021, with the health sector now ranking as the fourth biggest investment target – while retail has dropped off the list of top-ranking sectors.

Despite absolute declines, the relativeness of sectors and the varying degrees of resilience of different geographic hot spots will be increasingly important for investors to keep an eye on as we enter into the first half of 2023 and beyond. The robust Nordic ecosystem surrounding our sector will certainly have a role to play.

Text by Helena Strigård, CEO NorthX and former Director General of SwedenBIO

This column was originally written by Helena Strigård on behalf of SwedenBIO for NLS magazine No 03 2022, published in the end of September 2022.

Advertisement