speaker-0: My name is Jennifer Smith Parker, Director of Insights at Biospace, and you're listening to De Nature. In this episode, you'll hear from Esther Sklarski, Principal at Sound BioVentures, and Jean Rebas, partner at Noble Holdings Seed Investments. In this episode, we explore the diverging trajectories of Nordic biotech and what it will take for the region, including Norway and Finland, to compete more cohesively on the global stage. Hi everyone. Thank you so much for joining this episode of Denatured. Really pleased to have you here, Esther and Joanne. If you can please introduce yourselves, that would be great.

speaker-1: So my name is Esther Sklarski and I'm a principal with Sound BioVentures. So I represent a Scandinavian venture capital fund with offices in Stockholm, Mama and Copenhagen. And we invest ⁓ broadly into biotech therapeutics across the Nordics, but also broader Europe and to some extent UK, US as well. And our niche is to invest in companies that are About to go into the clinic, as we say, so around less than twelve months from the clinic and completely agnostic in terms of therapeutic areas and modalities. We're a relatively small fund compared to the fund or the the entity Huawei's ⁓ representing. ⁓ we're currently investing from the second fund. The first fund was around 116 million euros.

speaker-2: Thanks, Jennifer. It was great to be here with you on this podcast. I've listened to quite a few episodes. Great work that you're doing, going around Europe and and getting the message from the entrepreneurs and investors. My name is Joel, very difficult to pronounce Phoebus. ⁓ I'm a partner in the Novel Holdings seed investments team and we're the team that does the company building and early stage investing all within the biotech therapeutic space. I have a little bit of a dual role where I act as an investor. with the holdings, but I also sometimes take operational roles in portfolio companies, helping build these companies up from the early days until they get to a series A.

speaker-0: Perfect. Well, thank you so much, both of you, for those introductions. And ⁓ as you mentioned, ⁓ I'm working on the series here about the European investment landscape. So ⁓ now we're gonna be focusing on the Nordic area. We've discussed how Denmark has surged ahead in biotech creation over the past decade, while Sweden faces a shortage of early stage venture capital. So what structurally explains the divergence? And can Sweden realistically close that gap?

speaker-1: Yeah, I think this is a question I'm faced with daily and of course I don't have a solution for it. I can kind of identify problems. It's hard to know where they exactly stem from, but I think there are things that could be done differently to improve the landscape. And speaking about Sweden specifically, we have a history of strong pharma industry with pharmacia and AstraZeneca been Swedish companies and then later sold out. But the generation that grew up within these companies are active in the biotech space. So we we have plenty of companies. Sweden Bio has an annual pipeline report where they list all the active drug development projects within Sweden. And there's more than 500 different projects and 130 companies within biotech only in Sweden. So There's massive amounts of companies. Unfortunately, I think we're a bit spread too thin. We're still a small country and doing a lot of things on a lot of angles. It's not always the best idea. And I think it it stems from a financial problem. We have a lot of early stage funding, governmental funding, which gives the initial boost to get things out of academia or get ideas going, but there's not that much private capital ⁓ willing to invest in biotech and there's not many of people like myself and funds like ours that are investing in biotech in Sweden and hence companies have to rely on capital flows from outside.

speaker-2: And ⁓ Esther, to pick up what you're saying, historically Sweden has been very good at investing and building companies on the tech side. And I think Denmark has had that mindset on the biopharma side. So several large pharma companies that had a specific foundation model that maybe allow them to keep them in Denmark rather than ⁓ what happened in in Sweden. So that could be one aspect. And I think there's several key ingredients that allow the ecosystem here in Denmark to be flourishing. And it's thinking about the key ingredients needed to build successful companies from the talent side of the people to the novel science to the capital allocation. I think we've done a good job here strengthening all these key three things. So on the people side, we've had talent that's been maturing, people that have been through the first, second companies and now on the third companies that they built just because it's been the past ten years a lot of startup companies being formed. Some of them fail. It's just the name of the game in biotech. And then these people are rotating, learning and and growing. We also have a lot of people that are in the big pharma, medium sized biopharma, CROs here in the Nordics that then go into these biotech companies and bring that knowledge. So on the talent side I think it's it's getting better and better. Of course, still gaps toward some other places in Europe and in the US. Then from a government perspective, from foundation perspective, there's been continued investment in novel academic science. So we see more and more initiatives being funded, great science coming out of Denmark. So that's the the funnel of anything that you want to do from a company standpoint is financing that early academic research. And finally, of course, as noble holdings have had a strong role to play on the capital side. And ⁓ we have done so in the past ten years and more, will continue to do so, and we've also helped strengthen the landscape of investors within the Nordic ecosystem to try to bring some more of that capital to finance the early innovation that that we're seeing here. So I think those have been the ingredients that have made Denmark go a little bit more ahead of of ⁓ Sweden. But I do realize that Sweden has a lot of history as her, as you mentioned from AstraZeneca and others. And oftentimes I consider the t two countries almost kind of the same hub because physically they are so close to each other, specifically in the southern part of Sweden, that to me they're c they could be almost kinda the the one hub with two different countries.

speaker-1: I agree. I mean sometimes you forget Sweden is a very tall country. Geographically very spread out. I mean if you would put Sweden on a European map, it would go from north of Germany down to Rome. So geographically we're a huge country. Even though we're only ten million people, there's the regions are quite separated, which is to some degree unfortunate. And we have a strong ecosystem in the south of Sweden with Lund and Lund University. And together with Copenhagen it's sometimes referred to as the Medikon Valley or village valley. So there is a strong collaboration. Of course, plenty of especially Swedes with the salaries being higher in Denmark, go to Denmark and work and still live in Sweden. Stockholm region with Karolinska Institute and Uppsala and Gossenburg, I still feel are quite separated from From the collaboration we see with the southern parts of Sweden, with Denmark. And even if it's an only a 50-minute flight, it it tends to feel like there is, you know, geographical barrier to some degree. So ⁓ there's still room to to improve, I think, the collaboration between the countries. And of course, you shouldn't forget there's two other, or if Nordic, if we speak about Nordic, we also have Iceland, three other countries included in in the Nordics. And many times we do. end up speaking, of course, I'm based in Stockholm, so it's easy for me to speak about the Swedish perspective and I work with Danes and while you're in Copenhagen. But there are things some things happening in Norway and Finland, but those are definitely smaller countries when we speak about biotech. Norway has the largest sovereign wealth fund in the world. And ridiculously it's not allowed to invest in Norway. So the money has to be invested elsewhere.

speaker-0: That's fascinating.

speaker-1: So it it it doesn't help ⁓ Norwegian entrepreneurs. And they also have a lot of weird tax barriers. So wealth tax. So you're taxed on unrealized gains. So if you're an entrepreneur owning shares in a company valued at three hundred million, you you get taxed on that value. And of course that makes it difficult for entrepreneurs and there's Also added tax now. I think when you transfer companies from Norway to another country where you have to pay 30% in tax on unrealized gains. So Norway has made it quite difficult, I would say, to start companies. And they also don't have the same legacy, I would say, that Sweden and Denmark has with pharma. The one thing they are strong in is radio pharma. Of course, Bayer bought Algetta, and there's still a part of that left in Norway. And they're building somewhat of a cluster around radio pharmacy. Actithera got ⁓ financed earlier this year or end of last year for their development of covalent radio pharmaceutical products. So they are building somewhat of a cluster around the radio pharma background and history and talent they have there. So it's kind of a micro cluster you can call. ⁓ Finland has been strong in other aspects, you know, with Nokia They have a lot of engineers, so med tech is something they're strong in and also manufacturing. But the only real pharma company they have is Orion. So there's there are attempts, but they're still very, very early stage to kind of create biotech clusters in Finland.

speaker-2: And as if I may add here, because of the geographical proximity and cultural proximity of all these different Nordic countries, I think we have an opportunity in the Nordics to lead the way, to show what an effective model for cooperation within the region could look like. Because we know that at a broader European level things will take time to move because there's many different cultures and opinions and whatnot. I think here we could model how we could work things out. We could be fast decision makers, think about what are the key hubs that we have in the different countries to not try to duplicate every single capability in each one individually, but coming together so we can move fast forward and show the rest of the world that at least in in some places in Europe, decisions can be made quickly, things can move faster.

speaker-0: I wanted to ask you about the powerhouse aspect. Now, when we had our first conversation, Esther, you had particularly mentioned the importance of Novo Nordisk. So I'm just curious to speak about that more to our audience and how decisive has the Novo Nordisk Foundation and Bioinnovation Institute been in shaping Denmark's biotech pipeline and is that model replicable elsewhere in Europe? Or is that a uniquely Danish ⁓ phenomenon?

speaker-1: Maybe Hua, it's definitely a question for you. You sit yeah right within that cluster.

speaker-2: Exactly, the same building. And I think the foundation model is is very unique to the Nordics. I think the implications for Denmark have been great because this this way of thinking about the ecosystem has really worked out well. From the foundation funding the early academic research, then spinning out the Bioinnovation Institute as a separate foundation to help translating some of the early academic research into companies. than us Noble Holdings and other investors, Lundback, Sanson and the likes, financing those companies and helping building them further. So you you can't really think about doing these initiatives without coordinating. And I think the Noble Norris Foundation had a had great impact doing that. They've done other initiatives that I'm not even talking about here, but just so that you think about how how deep and long term they're thinking about. There's a different foundation that they spun out called Life, which the entire goal is to get little kids excited about. STEM careers. So they can go into these labs, do experiments, learn about these, of course, thinking that 25 years from that point, they will end up in STEM careers and help continue fuel the pipeline of talent that the country needs to maintain these companies here. So having that foundation ownership allowed them to have a deep impact in the ecosystem by thinking really long term about these things. And then being able to concentrate all of these initiatives in a relatively small footprint. It's a small country, few people compared to other countries in Europe. And that has has really worked out very well in my opinion. But I believe it is quite unique to the Nordics. The foundation model has been existing for a hundred years or so. I don't think it's easy to to replicate, but you can replicate at least how how to think about long term as an ecosystem and not necessarily like a one individual approach from this company or that company. How do you take a step back, see the big picture, and try to move forward collectively in one direction?

speaker-1: Yeah, I think I mean the Bioinnovation Institute that you mentioned, Jennifer. I mean, I was vis visiting BII as it's called back in I think twenty nineteen when it was just getting started and it was a great idea, but of course you were wondering are they are they really gonna achieve what they were setting up to achieve. And just five, six years down the line, they've created hundred and thirty companies. Of course, not all of the companies are gonna get funded down the line, but there has really been a pull to ⁓ identifying novel ideas and creating companies. And I think this is the big difference in many, many situations and instances where we see hubs being created. You expect you expect the professor or researchers to come with their ideas. And of course that happens from time to time. But there also has to be a pool and then there has to be a system around it with people who can help the companies formalize their scientific discoveries and set them into the context of a business idea and creating a company. So BII is working closely with venture investors across Europe and US to give feedback very early to these companies. So they know already from the start if this is an idea that would be likely to get funded. I think many times that realization happens too late in the process of venture creation. I think BII employs over a hundred people now. So it's a massive machine of essentially creating companies, but creating investable companies. And I think that's the big difference many times that we see with other TTOs, for example. It's more about supporting the researchers than creating commercial scalable companies. And I think that model could be recreated in many in many places. I mean, I would love to have a something similar around the Karolinska hub. For example, I know that Kirolinsia Innovations are doing the best they can, but they have very limited resources. I mean, BII just got funded with seven hundred million euro plus for the next decade. I think KI Holdings has one million or ten million. I mean, it's not even comparable. Of course, having one backer no go and now being an independent foundation and having multiple potential backers, there is the Wallenberg family. It's not biotech focused, but they have a strong history with all being owners in AstraZeneca and they are funding a lot of the basic research across Sweden and medical research. So having a f a foundation like that and maybe some additional backers, you could see something similar being put together in, for example, Stockholm or Gotsenburg to complement the BII. Because what I see now is a lot of Swedish companies are actually applying to the BII and moving headquarters to to Copenhagen. And that is a shift. Historically Sweden has been the the pharma and biotech nation in the Nordics. And now we have two nations, which is good, but we of course don't want to ⁓ lose one nation. We wanna maintain a strong Nordic biotech innovation landscape.

speaker-2: To give you an idea of the impact of and this is just the Nova Nordis Foundation. There's other foundations that help finance science. And in twenty twenty five alone, the Nova Norris Foundation awarded eleven point eight billion Danish kroner. Wow. For research brands. That the dimension of that is is very large. So compared to the amounts that Esther was mentioning. So the the volume and talking about the key ingredients, the capital, the talent and the science, here we're really pouring a lot of money. behind these innovations, whether that's through the BII or the translating academic research to companies, but also just the core science budgets have been increasing. So then of course i it helps you attract people from places that are not Denmark. You can attract people from Sweden. You can attract international PIs from the United States that want to move because they can see that there's a long term vision. There's a lot of money to the research. It's great great ⁓ infrastructure as well. So that's that's a plus. Mm. And of course it's on us, noble holdings and the ⁓ assets that that we manage to generate those returns for the foundation to be able to give that. So over the past ten years, we've generated about eight point nine percent returns on a constant currency, and that helps continue f fueling the grant giving activities of the foundation. And that's been kind of a a snowball that's been growing, and that's why I think particularly the Danish ecosystem is is thriving. because of the contribution of the Nobel Nordic Foundation as well as other foundations and where where things have been just going very very well. So I think overall in the other Nordic countries, you just need more of that financing, whether that's for basic academic research as well as translating that research through funds like the one ESSER represents and others to keep funneling this innovation.

speaker-1: I I think it should be replicated because the risk of having only one party, or now I mean the BII is a separate foundation, but still it's it becomes a strong gatekeeper. So if you're not ⁓ getting accepted to the BII or you don't get, you know, you go through the venture lab to the venture house, I think it's called, and you don't get selected in that cohort, of course you get questioned why weren't you selected for the BII? And I mean sometimes There there's there's competition, right? There's not gonna be room for everyone. So I think there is a need to maintain a competitive system, also multiple players, so not one single player becomes the gatekeeper of biotech innovation. And I don't think I mean that's the intention, of course, of BI, but that this is on the rest of the ecosystem to kind of catch up as well.

speaker-0: Well, on that end, we have come to a close. Time does fly. But thank you so much, Esther. And thank you so much, Yao, for discussing what's happening in the Nordics. There's so much potential. But you also both nicely laid out the challenges as well, ⁓ to operating in this environment. And if you'd like to listen to more episodes of Denatured, please turn to biospace dot com. Thank you very much.

speaker-1: Thank you so much.