Across borders: Medicon Valley

Part 4 of our series on clusters considers how to remove the barriers to create a trans-national cluster.

Back in the mid-1990s, when development agencies in Copenhagen, Denmark and the Skåne region at the southern tip of Sweden decided to pool their strengths in life sciences and present a common face to the world, they adopted the neologism Medicon Valley to market the area. California’s Silicon Valley was the obvious inspiration. But the roots of life sciences research in the region predate by several decades the birth in 1939 of Silicon Valley, in the now iconic garage in Palo Alto where Hewlett-Packard was established.

Those deep roots remain very much relevant to this day, as some of early pioneers, such as Novo Nordisk, its sister company Novozymes, Carlsberg, Danisco (now the parent company of US industrial biotechnology firm Genencor), Astra (now part of AstraZeneca) and Lundbeck are global leaders in their particular markets and a source of finance, expertise and, in some cases, new spinouts and new technologies that help to continue the tradition of innovation in the region.

Carlsberg, for example, has spun out two companies in the present decade, Combio (now part of Swiss firm Arpida) and VersaMatrix, to apply bead-based purification technologies developed in-house to drug discovery. Novo A/S, the venture capital arm of Novo Group (the holding company for Novo Nordisk and Novozymes), is an active local and global biotechnology investor.

These companies and the region’s universities, notably Copenhagen University and Lund University, have acted as the wellspring for the growth of the cluster, which took off in earnest during the mid-to-late 1990s.

Towards the top

“Ranking and benchmarking clusters is a difficult – and, some would argue, an impossible – exercise,” cautions Stig Jørgensen, CEO of the Medicon Valley Alliance (MVA), which promotes the development of the Medicon Valley cluster. Nevertheless, he argues that Medicon Valley is now at the top of the European pile. “It is one of the top three or maybe top two clusters in Europe.” This view is borne out by a steadily maturing drug development pipeline, supported by a recent spate of partnering deals and funding transactions.

Recent partnering deals involving Medicon Valley companies include Bavarian Nordic and the US Department of Health and Human Services for a smallpox vaccine stockpile (€1,200 million), a BioInvent and Genentech link-up over cardiovascular disease (€147 million), BioInvent/Thrombogenics and Roche over cancer (€500 million), GenMab  and GlaxoSmithKline over cancer and immunology (€1,610 million), a deal between Santaris Pharma and GlaxoSmithKline over virology (€485 million), and Symphogen’s link up with Genentech  on infectious disease (€212 million).

The physical link

Crucial to Medicon Valley’s emergence was a decision by the Danish and Swedish governments to build a physical connection between the two countries. The Oresund Link, a 16-kilometre bridge and underwater tunnel system linking Copenhagen with Malmö, opened for traffic on 1 July 2000. Jørgensen jokingly observes that Medicon Valley now has the highest “intelligence per square metre” of any biotechnology cluster. But a serious point underlies the claim. All of the players in the region share a close physical proximity, which is further enhanced by its excellent public transport links.

The development of a unified biotechnology cluster spanning the two jurisdictions remains an ongoing project, however. The sub-clusters on either side of the Oresund strait retain their particular characteristics. “I can’t really identify it, but there are still some barriers between Denmark and Sweden. They are not fully integrated,” says Svein Mathisen, CEO of Lund-based antibody developer BioInvent International.

The Danish component of the cluster is by far the larger, with around two thirds of the workforce and about 85 per cent of the capital invested. In general, its companies are bigger and more mature than those on the Swedish side. This is largely inevitable, as around 95 per cent of Denmark’s life sciences sector is concentrated in the greater Copenhagen area, whereas, within a Swedish context, Lund and Malmo contend with Stockholm and Uppsala, the country’s single largest biotechnology cluster, and with other centres, such as Gothenburg and Umeå.

This assymetry may not be a bad thing. “We have a surplus of skilled scientists and employees on the Swedish side, and we have a shortage on the Danish side,” says Jørgensen. Competition for skilled employees in Denmark is therefore intense. “I think one of the limitations we face right now is there’s a very low unemployment rate in Denmark,” says Lisa Drakeman, CEO of Genmab, the region’s flagship biotechnology firm. The ability to tap into the Swedish skills pool “really does matter”, she says.

The traffic is not all in one direction, however. Some Danes continue to work in Copenhagen but opt to live in Skåne, because of the lower cost of living and lower personal taxes there. The personal tax regime in Denmark is “terrible” says Kirsten Drejer, CEO of Copenhagen-based Symphogen. “You need to be a Dane to accept it.” Commuting from one side of the Oresund Strait to the other is, for an increasing number of both Swedes and Danes, part of the daily routine therefore.

Money flows, but not evenly

But the flow of investment, which doesn’t require any heavy-duty physical infrastructure, has been less obvious than the flow of workers. “It would certainly help to have [in Sweden] a more long-term, dedicated investor base familiar with biotechnology,” says Mathisen. “I think Denmark has been more successful at attracting international investors.” Around 40 per cent of Genmab’s shareholders are located in the USA, Drakeman notes. “I think we have very good liquidity.” The company is among the top 20 most heavily traded stocks on the Copenhagen Stock Exchange.

Funding deals recently involving Medicon Valley include three venture capital rounds (7TM Pharma, €17 million; Ace Biosciences, €12 million; Santaris Pharma, €20 million), six rights offerings (two for Active Biotech, €26 million and €16 million; Bavarian Nordic, €60 million; Curalogic, €41 million; Neurosearch, €98 million; TopoTarget, €48 million) and an IPO (Exiqon, €49 million).

As elsewhere in Europe, public funding of cross-border projects is also problematic. “That’s a major issue because it’s very difficult to have projects that support Danish scientists funded with Swedish money and vice versa,” says Jørgensen. To address that issue, the MVA and other stakeholders are investigating the possibility of establishing a cross-border research foundation that could support joint projects from the public purse. “For many projects and programs it's an unnatural border,” says Jørgensen.

Despite the increasingly intimate association between the two jurisdictions, it is noteworthy that each remains outside the Euro currency zone. “In practice, it doesn’t matter a lot,” says Drejer. Individuals just use card payments for most of their transactions, while, at a macroeconomic level, the Danish krone and the Swedish krona trade within narrow bands. The Denmark’s krone is pegged to the Euro via the European Exchange Rate Mechanism (ERM) II, and, although Sweden’s krona is not part of ERM II, its rate of exchange has varied little over the past decade.

As Medicon Valley's international profile grows, the MVA is looking to establish a global network of linkages with other biotechnology clusters, in the US and Asia, as well as in Europe. It is in the process of setting up a “life sciences ambassador programme”, a series of in-depth exchanges with the world's top dozen or so clusters to foster the identification of new business opportunities. Bridge building is obviously in the region’s DNA.