Bioe News

Published online: 27 May 2004, doi:10.1038/bioent812

Norway goes private to develop biotech

*Sabine Louët is a news editor at Nature Biotechnology

Private initiatives have emerged to support Norway's fledgling biotech industry in the absence of adequate research funding and industry management.

On May 11, the Norwegian government announced cuts in biotech funding as part of its traditional mid-year budget review, which is scheduled to be ratified in Parliament on June 18. Despite fickle support from the government, Norway is attempting to develop a home-grown marine and health-related biotechnology industry that still lacks adequate financing and experienced managers.

Norwegian investors are targeting research from local research institutions, such as the University of Bergen, in hopes of growing its biotech sector to the levels of other Scandinavian countries. Sarsia Innovation AS

The government announced that it would cut the yearly budgets of the country's main research funding bodies. Forskningsrådet (Oslo) will lose NOK55.5 ($8) million from a budget of NOK4,616 ($677) million and Innovasjon Norge (Oslo) will lose NOK174 ($26) million from NOK2.11 billion ($315 million). The cut is likely to hurt technology transfer companies like Forinnova, which uses public funds to support innovative projects from the University of Bergen and the Norwegian Institute of Marine Research (Bergen).

Compared to neighboring Denmark, Sweden and Finland, the Norwegian government took a late interest in developing a biotech industry, partly because of the lack of pharmaceutical tradition in the country. Instead, Norway has been relying on its traditional strengths in oil, gas, fisheries and tourism to drive its economy. The government changed its tune in 2003 when it established a series of measures to help the biotech industry, such as an R&D tax credit. The same year, each university opened a technology transfer office and gained ownership of the intellectual property generated by its scientists.

To build its biotech sector, the country has focused on its strength in marine research: scientists in Norway publish 5%—10% of the papers in that field. "There is room to exploit [the strength of research in marine biotechnology] and establish a new industry," says Erlend Skagseth, Forinnova's managing director.

Norway is also strong in neuroscience, immunology, cancer research and cardiology, with a quality track record in the field of clinical trials. These therapeutic areas could provide room for niche biotech applications while the industry's main efforts could be directed towards applications for marine sciences, namely aquaculture (development of vaccines, fish feed and veterinary products for fish) and bioprospecting from the sea, says Ole Marvik, managing partner of biotech development consultancy 4bio (Oslo).

One of the challenges, according to Steinar Engelsen, partner in Teknoinvest Management (Oslo), is overcoming the lack of experienced managers, who can be difficult to attract from abroad. And Marvik fears that there is not enough money to support biotech projects at an early venture stage, and that international investors may be reluctant to invest in Norway. "We're at a disadvantage because we're not a [biotech] 'hot spot' area," he says.

		"To build its biotech sector, the country has focused on its strength in marine research"

Most efforts to develop a biotech sector in the country are led by private investors and the venture capitalist community because public financing has been scarce. Engelsen describes a previous attempt to create a NOK300 ($44) million high-tech seed fund, called the Start Fund, in 2000 as a "half hearted" effort by the government, which yielded a poor performance. However, the government did establish a fund of funds called Argentum in 2001, which has resulted in indirect investment into biotech firms. For example, Argentum put 28 ($33) million into Teknoinvest VIII, a 60 ($72) million life science fund that then invested in pain management company SantoSolve (Oslo) and in other US and Scandinavian companies.

Clearly, Norwegian entrepreneurs have understood that the private sector needs to compensate for the haphazard public support. "Our goal is to pick up the good ideas developed within our universities," says Marvik. Technology transfer company Sarsia Innovation was born in 2001 in Bergen out of the need to finance innovative projects from proof of concept up until seed-stage, when venture capitalists could step in with funding. Forinnova was launched as a wholly owned subsidiary of Sarsia that September.

Since its creation, Sarsia has gathered NOK110 ($16) million, has managed 127 biotech projects (out of 144 in its portfolio) and has spun off 20 companies—including 15 biotech companies, four of which have a link to marine sciences. Today, the University of Bergen owns 34% of Sarsia, and SIVA, the government-led industrial development corporation, and industrial investors respectively own 20% and 46%.

So do investors think that a competitive biotech sector in Norway could soon emerge? Marvik's goal is for Norway to become part of the Scandinavian biotech cluster. But "it will take at least ten years before we reach the level of Sweden," warns Engelsen.