Article by Kenneth R. Boehner and Heather A. Forrest

Realizing the potential of the biotechnology industry requires a seamless cooperation between the public, academic and private sectors. Once perceived to possess a prohibitively burdensome tax and regulatory regime and limited ability to attract private equity, today’s Sweden is a global leader in biotechnology. With a population of only 9 million, Sweden has the highest number of biotechnology companies per capita and GDP in the world.

Why Sweden? One element of success is the Swedish government’s proactive commitment to biotechnology. Changes to the tax structure make Sweden a competitive European "exit market" for U.S. biopharmaceutical and biotechnology companies. Sweden’s intellectual property laws, which offer the benefits of ownership of inventions directly to their inventors, including academic professors and students, have provoked significant debate as a potential deterrent to foreign investment. Swedish/U.S. partnerships argue to the contrary, noting this system allows investors an easier route to capitalization by bypassing the traditionally cumbersome negotiations process with large universities. Regulatory barriers to market entry, such as complicated and costly drug-approval processes, have been greatly reduced.

Another essential element is the recent surge in the Swedish private equity and venture capital market. Leading U.S. law firms have entered the Swedish market, bringing with them more internationally focused standards of deal-making. In the last decade, this presence has facilitated a 400 percent rise in membership of the Swedish Venture Capital Association. The amount of available capital exploded to approximately $21 billion in 2001, the majority of which was associated with biotechnology. The Invest in Sweden Agency currently ranks the Swedish venture capital market as the third largest in the world, behind only the United States and the United Kingdom.

This influx of capital has fostered unique partnerships between private industry and academia. The Karolinska Institute in Stockholm has an annual budget of $338 million, only 2 percent of which originated from private industry in the mid-1990s but which by 2001 totaled 7 percent. The institute anticipates that 20 percent of its funding will come from private partnerships by 2004.

U.S. biotech companies and investors have good reason to believe that the Swedish future looks bright, considering the prevalence and proficiency of the use of the English language in Swedish businesses, the Swedes’ commitment to higher education, and their willingness to participate in funding and clinical trials.

Swedish/U.S. partnerships are increasingly fueled by Sweden’s position as the world leader in stem cell research. The ISA notes that Sweden is one of few countries to support all areas of stem cell research, including embryonic, fetal and adult stem cells. Of the 78 eligible stem cell lines listed in the NIH Human Embryonic Stem Cell Registry in 2001, Sweden’s leading research universities together possessed 25. While many other countries face moral and ethical strictures or focus on costly, high-risk, long-term cure-seeking programs, the Swedish biotech market has found ways to achieve both short- and long-term progress and profitability. Licensing opportunities, proliferation of existing lines and capitalization on the rapid introduction of diagnostic technologies to the consumer market are all ways to fund continued development without losing sight of the ultimate goal of therapeutic breakthroughs.

The success of foreign investors and newcomers to the Swedish market depends upon an understanding of the local regulatory and political climate. With the guidance of knowledgeable advisers, foreign companies and investors in the biotech sector will continue to capitalize on this uniquely conducive environment of public, academic and private collaboration.

Reprinted with permission from Biotech Tech

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