Several Danish life science companies have taken to Sweden’s Spotlight Stock Market to raise capital for their developments. Here, investors are more willing to bet on smaller- growth companies – propelling business innovations forward.
Rather than develop a shiny new app or a fancy gadget, the young Danish company – Scandion Oncology – is developing a drug to help people living with cancer to win the fight.
According to Nils Brünner, the company’s CEO: “The biggest challenge in cancer treatment today is resistance. It’s a known challenge for antibiotics, but few people know that cancer cells also develop resistance to treatments. Our goal is to develop a drug that can block that resistance.”
The building blocks of the company’s drug emerged from basic research undertaken at the University of Copenhagen. This drug is expected to be used in a phase II trial on patients later this year. Of course, the journey from basic research to commercial medicine is long and expensive – very expensive.
Saddled with the challenges of raising capital from private Danish investors, the company turned to the Swedish Spotlight Stock Market last November and has since raised 26 million Swedish kronor.
Scandion Oncology isn’t the only Danish company to do so. To date, 10 up-and-comers in the field of life sciences have turned to the Swedish stock exchange to help make their ambitious projects come to life.
Life science researchers are looking to Sweden
The consultancy, Sedermera Fondkommission – based in Sweden – has helped close to 100 growing companies raise capital since the company’s inception in 2003. Back then, the company decided to offer start-ups with a full-service solution to make their transactions and IPOs as seamless as possible.
Fredrik Rahl, director of sales and capital markets at Sedermera, explains: “We saw the same problem everywhere: a lack of growth capital. At the end of the day, that’s a pretty big problem, as it slows down growth in all countries. One way to help solve this problem is by making it easier for growth companies to raise capital from the stock market.”
Following their initial success in Sweden, Sedermera looked beyond the border and saw a lot of interesting growth-companies in Denmark facing the same challenges as domestic businesses.
In Rahl’s words: “The key was to give Danish companies access to the Swedish ecosystem to get more liquidity. As a result of that, start-ups would be in a good position to raise more growth capital as a listed company. From a global standpoint, we have a unique ecosystem in Sweden for growth companies.”
Back in 2014, the first Danish company Sedermera helped to secure its IPO on Spotlight was the medical startup, Saniona. Since then, Sedermera has been the financial advisor for 15 Danish companies – 10 of which are life science companies. These companies have raised approximately 200 million SEK from their IPOs and approximately 900 million SEK in total.
Rahl is careful to point out that “an IPO on Spotlight isn’t like a large IPO in the United States, which looks more like the founders selling their company. On Spotlight, it’s all about access to capital – both in the short and long term.”
Lured by the Swedish investment culture
Scandion Oncology is the third company that Nils Brünner has taken to the Swedish stock market.
For Brünner, “It has been a viable way forward when we didn’t want to raise venture capital. My two previous experiences raising capital in Sweden demonstrated that the liquidity is high, in stark contrast to the Danish First North exchange. Specifically, we have been able to raise an additional 29 million Swedish kronor this summer.”
If we had the same rules and opportunities in Denmark, we might not have moved to Sweden. We only did that because the investment environment is much better there
He attributes much of their success to Sweden’s investment culture, which is fueled by the ‘Investingsparkskonto’ – a special new account that gives investors favorable tax breaks when investing in growth companies. Investing in growth is now an appealing option for many people who would not have considered it even a decade ago. And, for Scandion Oncology, this has resulted in successfully raising money from somewhere between 1500-1600 investors.
No silver bullet
According to industry analysts, a lack of risk-capital is slowing the development of life science start-ups in Denmark. While Sweden offers a viable framework for this problem, it cannot be replicated overnight.
Rahl explains: “A lot of different components came together to create Sweden’s ecosystem and trust in the market. It wasn’t like this when we started in 2003, but over the years the investment culture in Sweden has shifted. There is much more liquidity now, and companies have to follow the liquidity to be well-positioned for further capital injections.”
More broadly, competition between stakeholders has raised the quality of start-ups across the investment landscape. Larger investors are now daring to bet on new start-ups, and, thanks to the introduction of the ‘Investingsparkskonto’ in 2012, smaller retail investors now have a better opportunity to follow initial investments in growth companies.
Rahl compares this to a ‘Folkesport,’ where “almost everyone is actually investing in the small- growth companies, and they are getting covered and analysed in a way that was traditionally reserved for big companies.”
A Better Danish Ecosystem
Small start-ups may be incentivised to move substantial parts of their business out of Denmark, given their deep involvement with the Swedish market early on. Despite the fact that Scandion Oncology is successful in the Swedish stock market, they still think the Danish ecosystem needs to be developed.
Brünner remarks: “If we had the same rules and opportunities in Denmark, we might not have moved to Sweden. We only did that because the investment environment is much better there. But how you handle investments is a political decision. In Sweden they make the rules to create jobs and growth, but in Denmark I feel a resistance toward what we are trying to do.”
Denmark’s stock market rejection may have severe consequences in the long run, once start-ups take off and become really successful.
…almost everyone is actually investing in the small growth companies, and they are getting covered and analysed in a way that was traditionally reserved for big companies
To stave this off, Brünner envisions “a mechanism that makes sure the companies stay in Denmark. Today they are moving out of the country or getting bought once they achieve success. As a country, we can’t be satisfied with that. The initial funding and the company ending up somewhere outside Denmark is very much 2 sides of the same coin. The next Novo Nordisk will never come, if all the small companies are being moved out of the country.”