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Thursday, April 18, 2024

Finnish health & life sciences sector faces financing challenges despite promising growth

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A new study conducted by Tesi (Finnish Industry Investment Ltd) has shed light on the state of the health and life sciences sector in Finland, revealing both growth and challenges within the industry. Despite significant potential and increasing investments in the sector, financing bottlenecks continue to hinder its progress.

The study, which analyzed data dating back to 2011, unveiled a compelling picture of the Finnish health and life sciences landscape. Over the last twelve years, these companies have attracted over a billion euros in investments, a testament to their potential. However, the study also identified critical issues that need to be addressed.

“Although funding is now more easily accessible, we lag behind our international peers both in terms of the sums invested and the number of international investors,” said Joni Karsikas, Investment Director at Tesi.

The health and life sciences sector in Finland differs from other growth companies in its funding sources. Instead of relying heavily on venture capital, financing has primarily come from angel investors, crowdfunding, and the in-house investment funds of large corporations. Furthermore, the recent emergence of the Life Science Fund established by Finland’s Innovestor reflects a growing focus on the sector.

One challenge facing the industry is the decline in the number of new health and life sciences companies created. While over 50 new companies were established in peak years, this number has dropped to less than twenty in recent years. This indicates the need for better commercialization of world-class research conducted in Finland.

The sector’s importance is emphasized by the fact that one in every ten companies listed on the Helsinki Stock Exchange belongs to the health and life sciences field. Multinational companies have also recognized the sector’s potential, with acquisitions such as Organon’s purchase of Forendo Pharma for over €800 million, Hologic’s acquisition of Mobidiag for over €660 million, and Mindray’s acquisition of HyTest for over €540 million.

“New forms of treatment are desperately needed, and successful solutions have huge economic potential. A good example of this is Denmark, where two new medicines developed and launched by Novo Nordisk have sold so well that the whole country’s GDP has received a boost and the company is now as valuable as the entire Helsinki Stock Exchange,” says Karsikas.

Moreover, Finnish companies like Oura have successfully raised substantial investments from international investors, contributing to the sector’s growth.

However, the study highlights the current economically challenging climate, which has affected the financing environment for health and life sciences companies. As a result, there have been no large financing rounds so far in 2023.

The study underscores the growth and challenges facing the Finnish health and life sciences sector. While significant investments have been made, the need for more specialized funding and an increase in the number of new companies remains essential for the sector’s sustainable development. With a focus on commercializing research and attracting international investments, the sector has the potential to become a global leader.

Key Takeaways:

Tesi’s report unveils an eclectic array of over 550 companies that can be neatly classified into these categories: Digital Health & Software (235 companies), (Medical) Devices & Supplies (159 companies), Biotech & Diagnostics (94 companies) and Services (63 companies)

  • Growing Investment: The Finnish Health & Life Sciences sector has witnessed significant growth in investments over the past 12 years, with a total of €1.1 billion in invested capital during this period. Annual investments have increased six-fold, reaching over €100 million.
  • Diversity in Investor Base: The sector has attracted a diverse group of investors, including angel investors, venture capital (VC) firms, corporate venture capital (CVC) firms, and government-owned investors. Government-backed funding has played a crucial role in supporting the ecosystem.
  • Emerging Large Investment Rounds: Although most investment rounds are small, there has been an emergence of larger rounds, with several rounds raising tens of millions of euros. This indicates the sector’s potential for attracting significant funding.
  • Funding Gap: Despite the growth in investments, the Health & Life Sciences sector in Finland remains underfunded compared to the global average. The sector, particularly biotech and medical devices, requires substantial capital, and the lack of specialized local VC investors has been a challenge.
  • Decreasing New Company Formation: There is a downward trend in the formation of new Health & Life Sciences companies in recent years, following several record years of formation.
  • Successful Exits: Recent years have seen several successful exits, with a focus on biotech and diagnostics. This has improved the sector’s overall exit track record.
  • IPO Activity: Health & Life Sciences companies have been involved in IPOs, with 10% of Finnish IPOs in the past 12 years being raised by innovative Health & Life Sciences companies.
  • Regional Variation: The composition of the ecosystem varies by region in Finland, reflecting local strengths and talent pools. Regions with engineering universities tend to have more software and medical device companies, while biotech is more prominent in regions with medical schools.
  • Focus on Clinical Subsectors: IPOs and M&A activity have been more popular in clinical subsectors, such as biotech and diagnostics, where companies may have limited or no revenue.
  • Need for Sector-Focused VC Investors: A lack of sector-focused VC investors, especially for clinical areas, has been a challenge. However, the situation is improving with the emergence of new sector-focused local VC funds.

The report’s findings not only reveal a sector that’s on the move but also a story of resilience, untapped potential, and a future that promises to be even more exciting. While it may be underfunded, the Health & Life Sciences sector in Finland is ready to script the next epic chapter in its journey.

For more detailed information on the study, please see the Health & Life Sciences Study Finland 2023 by Tesi – Joni Karsikas & Miia Kaye, released on October 12, 2023.

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Nurcin Metingil
Nurcin Metingil
A permanent student, a passionate first reader and nowadays doing master’s degree in Publishing Management. Beside these, I am up for games! I have been playing games since I was 6. Now, I am whispering "Business. Business. Numbers. Is this working?"

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