Political courage to boost the life science industry?

There is a recognition from the government of the crucial role of the life science sector in the Danish economy, including through the export of pharmaceuticals, and there is a strong appetite to create more growth stories like Novo Nordisk.

Date: January 16, 2024

Author: Jonas Hink

Published: Børsen

When the government announces the new life science strategy, it will reveal whether there is sufficient political courage, ability, and willingness to create a foundation that can further elevate the industry. A foundation that can stimulate, accelerate, and strengthen the formation and development of commercially viable health solutions and products for the benefit of patients, investors, and the Danish society.

Numerous concrete inputs and recommendations have been provided by interest groups, experts, and committees on what areas are important to focus on. Recently, the Life Science Council presented an ambitious vision for Denmark to become the European leader in forming and developing viable life science start-ups through a cohesive innovation environment. And an analysis from the Ministry of Business and Industry indicates that despite Denmark’s strength in life science research, there is room for improvement in translating research into new companies.

Need for three things

To stimulate, accelerate and strengthen the formation and development of viable life science start-ups, three things are particularly needed:

1.     Incentives for researchers at the universities and hospitals to commercialize new knowledge, ideas, and inventions.
2.     Access to expertise in all critical areas necessary for life science company formation and growth.
3.     Opportunity for sufficient capital/financing at all development stages.

The first prerequisite is, of course, that there is something to commercialize. World-class research at our universities and hospitals is not enough. There also needs to be appropriate frameworks and structures, as well as a thriving entrepreneurial culture. Analysis of commercial viability and valuation, support for proof-of-concept experiments and patenting, as well as industry contacts and network, are important framework structures that should be strengthened and harmonized at a national level.

But does this create entrepreneurial incentives? Perhaps there also needs to be a change in the researcher patent law and employment and taxation conditions towards more attractive terms for entrepreneurs if the number of spin-outs is to be significantly accelerated. And even with an increase in the number of new life science companies, success is still a long way off.

For new life science start-ups to scale and reach subsequent levels, there is a need for the right skills to select, test, develop, and mature various potential products and solutions. Denmark already has a good starting point with the presence of many established life science companies, several life science and innovation clusters, and life science-focused investment and venture funds that together possess the necessary skills to make life science start-ups viable.

A new unique model

There should be a more cohesive competence structure, where ideas and knowledge are exchanged and shared more across companies, with a greater focus on the overall value creation rather than primarily utilizing skills within each company. Overall, this can increase the success rate and viability of all new life science start-ups in Denmark.

However, it is not always straightforward to determine when a life science company is viable. Generally, the criterion for whether a company is viable is dependent on its age, growth in the number of employees, and/or revenue. Another success criterion besides transitioning to a scale-up is whether the individual start-up manages to be acquired or listed on the stock exchange.

If Danish life science start-ups end up being acquired by foreign companies, it may not necessarily be a gain for the Danish society, and it will not result in new companies like Genmab or Zealand Pharma. And a stock market listing, which for biotech companies often aims to raise necessary capital for further development and launch of the company’s drug candidates, is not a real option in light of the current stock market conditions in Denmark. To eventually turn new life science start-ups into well-established Danish companies, there is a need for alternative financing options.

Couldn’t it be enticing to create a unique life science model that combines public, venture, and institutional investments with a cohesive incentive and competence structure that leverages synergies between Danish life science research, the need for innovative health solutions, and commercialization opportunities?