Sweden’s plethora of micro-sized and small biotech companies create a richness of innovations and a culture of knowledge sharing. To bring good science to market, they also need business intelligence and the right capital.
Sweden boasts a thriving growth of micro-sized and small biotech companies that contribute to a dynamic, innovative climate and a culture of sharing and exchanging competence and knowledge. On the flip side, the realities that these resource-limited companies face place hurdles on the path to successful commercialization for many.
This spring, two reports have been published showcasing the make-up of the Swedish life science ecosystem. Both conclude that micro-sized and small companies make up the largest percentage by far in terms of the number of companies.
According to SwedenBIO’s report The Swedish Drug Discovery and Development Pipeline 2023, which was launched in March, 71% of Sweden-based pharmaceutical companies are micro sized, with 1-9 employees, and 15% are small companies with 10-49 employees.
The innovation agency Vinnova’s report, Statistics of Swedish life science companies, which covers all Swedish life science companies up until 2020, shows that 42% of the companies are single-person companies, 40% are micro-sized, and 13% are small companies.
“It’s exciting that we have so many small companies in Sweden – we have a huge innovation power and a lot of knowledge sharing,” says Dr Christina Herder, interim CEO of Idogen, a small biotech company that develops cell therapies.
With 30 years in the industry behind her, and as a board member of several companies, Dr Herder has good insight into the realities of small biotech companies. One draw-back, she says, is that many small companies don’t understand the whole journey towards commercialization. The scientific expertise is solid, but the business intelligence to assess market competitiveness and market size is often lacking. As is the ability to set a solid regulatory strategy to ensure that the product gets approved in the end.
In small companies there’s a tendency to focus too much on the science.”
“In small companies there’s a tendency to focus too much on the science. You’d rather spend money on one more round of testing, rather than to do a proper market analysis, but the companies must understand that they need both good science and a market for their invention,” Dr Herder says.
Besides that, micro-sized and small companies also need to find the right investors. In this sector, it’s not just a matter of attracting capital, but attracting intelligent capital – namely from sources that are intimately familiar with the specific realities of the life science sector.
“More experienced life science investors know what to ask for and have high requirements that the company can prove their potential for commercialization. This is beneficial for small companies because in the process of answering these questions they become more familiar with their own company and its market potential,” Dr Herder says.
Companies often wait too long and ask for too little when they raise capital – particularly in the current market.”
Erik Rosenberg Sjöström, partner and head of origination at the investment bank Vator Securities, notes another problem, that the companies often wait too long and ask for too little when they raise capital – particularly in the current market.
“Don’t wait too long to raise capital in the hope that the investment climate will improve, but plan according to what the market is like right now and assume that the risk tolerance will continue to be low in the next several months or year,” he cautions.
Swedish companies must get better at understanding how to make those connections and attract foreign investments.”
For micro and small companies that are plotting the next steps on their commercialization journey, Dr Herder advises to look for alternative sources of funding.
“For a long time, we’ve been blinded by the idea that you have to go public. It can be more complicated to raise funds as a privately owned company, but there are a lot of investments aimed at this type of company if we look abroad. Swedish companies must get better at understanding how to make those connections and attract foreign investments.”
To succeed, you need a structured, step-by-step approach over time, where you turn to the right investor at the right time.”
“You need to have a long-term plan when you build your investor base,” Rosenberg Sjöström says, and continues, “The step to widen the ownership of the company from a small number of private investors to large, global specialized investors is quite big. To succeed, you need a structured, step-by-step approach over time, where you turn to the right investor at the right time.”
This column was originally written by Alexandra Hoegberg, Director of Communications & International Marketing, SwedenBIO, for NLS magazine No 02 2023, out May 2023