Capitalize on the biotech revolution

Much has been said and written about the importance of innovative biotechnology for the Danish and European economy, competitiveness, climate, and health, and how we, as a society, can capitalize on the upcoming “biotech revolution”

The government has stated that it is working purposefully on a new life science strategy aimed at “developing and supporting life science in Denmark in the coming years.” At the same time, the upcoming Danish EU Presidency provides a unique opportunity to prioritize and focus on biotech and life science, aligning it with the vision of a European Biotech Act. According to Ursula von der Leyen, this act aims to make it easier to bring biotech from the laboratory to the factory and the market. To realize this ambition, there is a particular need for venture capital.

Access to venture capital is a fundamental prerequisite for creating a thriving ecosystem of new and viable pharmaceutical biotech and start-up companies that can drive innovation and the development of new medicines.

Unfortunately, Europe cannot keep up with the level in the US, where there is much greater risk tolerance and availability of venture capital. If the EU and Denmark want to compete in the biotech race, there needs to be a strong focus on greater mobilization and better utilization of venture capital. From the EU’s side, this can broadly happen through three different types of initiatives:

·      Direct investment/financing from EU funds
·      Incentives that make it easier and more financially attractive for private investors
·      Better frameworks and platforms that increase the “utilization rate” of venture capital

Although there are strategic plans for a “European Competitiveness Fund” to enable targeted investments in biotech and “Important Projects of Common Interests,” it is hard to imagine a large portion of EU funds being earmarked for direct investments in pharmaceutical biotech and start-ups without sparking debates, negotiations, and disputes over which types of companies and countries are most deserving recipients. Loan financing options via the European Investment Bank (EIB) are probably more realistic, though it may not be exactly what the sector needs – unless the terms are favorable and can act as a catalyst or “de-risking” for private investments.

If private capital is to be mobilized for risk-taking investments in biotech, there need to be economic incentives. In addition to de-risking private capital via the EIB, political ideas from Brussels suggest “risk-absorbing” measures to make it easier for banks, investors, and venture capital to finance growth companies. Furthermore, the 2024 report by former Italian Prime Minister Enrico Letta on “the future of the Single Market” mentions that the EU should consider facilitating the establishment of a European stock exchange for deep-tech companies. The reason for this proposal is that European start-ups, unlike their American counterparts, are currently unable to raise sufficient and cost-effective capital by listing on national stock exchanges.

Another proposal from the report calls for the establishment of a “European Savings and Investments Union” – this is also one of the concrete political proposals from the Commission aimed at ensuring that the large amounts of private capital in the EU are invested in European innovation rather than flowing to foreign markets.

Finally, there is a third type of initiative, which may represent the low-hanging fruit. Strengthening the framework conditions, including improving infrastructure and streamlining regulatory pathways, seems obvious. But with a more detailed understanding of market dynamics and what it takes to make it attractive to start, run, and invest in innovative and risky life science ventures, new political initiatives can better meet the objectives.

Therefore, the recommendation to the government ahead of the upcoming life science strategy and the upcoming EU Presidency is this: Seize the opportunity and engage in dialogue with Danish universities, future life science entrepreneurs, new start-ups, established biotech companies, and, not least, potential investors about what can and should be done to optimize the use of available venture capital. After all, it is better to have quick, simple, effective, and tangible initiatives rather than high-flying, complex, slow, and unachievable ones.

If the conditions and frameworks for pharmaceutical biotech and start-up companies are optimal, the investments will surely follow.