2020 stands out as having been the best year yet for Swiss biotech. Not only did fundraising register its highest ever tally to date – over 3.4 billion Swiss Francs – but the segment’s R&D spending was up an impressive 10 percent, while the volume of FDA and EMA approvals awarded also hit record levels.
“Looking at the overall picture everything looks pretty rosy right now. I’m proud to say that Switzerland can these days lay claim to more than a thousand biotechs: many of them clustered around various specialist areas such as antibody technology, immuno-oncology, cell-based therapies and diagnostics applications, driven both by proximity to our elite technical universities, world-class infrastructure and the presence of big corporates,” explains Michael Altorfer, CEO of the Swiss Biotech Association.
According to biotech veteran Brian O’Callaghan, the global perception of the Swiss biotech sector has also come along in leaps and bounds. “When I was heading up BioPartners a couple of decades ago, I found myself having to spend a lot of time in the United States raising money and trying to drum up support, and the majority of the investors I spoke to really didn’t know much about Switzerland at all. It just wasn’t on their radar,” he recalls.
Founding and stewarding women’s health biotech, ObsEva, in more recent times, however, has been an altogether different experience for him and demonstrates how much the situation has changed. “The image of Swiss biotech has manifestly undergone a dramatic transformation for the better: both within the US, and more broadly across the globe,” he stresses.
“Much of this stems from the successes of big pharma and elite contract manufacturers based out of Basel such as such as Novartis, Roche and Lonza and the rich and fully-fledged ecosystem they have managed to generate over the years, which has rendered our country a honeypot and magnet for entrepreneurs seeking to establish new healthcare start-ups,” he reasons.
The profile of the Swiss biotech sector has further been boosted by the meteoric rise of many of these homegrown outfits and the manner in which some of these brands such as Actelion, Basilea and Crispr Therapeutics have managed to attain global reach, acclaim and renown. “What is beyond question is nowadays it’s universally appreciated both within the US, and elsewhere internationally, that there exists a vibrant and thriving European biotech scene, with Switzerland lying right at the very heart and epicentre of it!” enthuses O’Callaghan.
What is it, though, about the Swiss biotech scene that makes it just so appealing and internationally competitive? For a start, what was already considered by many to be an excellent funding environment has continued to strengthen over time with the emergence of a plethora of Swiss-based funds specializing in life science investments such as Medicxi, ND Capital, Pureos Bioventures, and Bernina BioInvest alongside an ever-expanding array of foreign derived financing vehicles now active on the local market.
These days, there’s actually so much fund liquidity within the local marketplace that some life science entrepreneurs have been reconsidering their growth trajectories and rewriting their business plans so as to take advantage of these rich financing opportunities.
“We’ve been noticing that Swiss-based start-ups these days tend to go public at a much later stage of maturity compared to their peers in other markets simply because of the sheer volume of private funding available, which hands them plenty of alternatives,” muses Fabian Gerber, Senior Relationship Manager Primary Markets at SIX Swiss Exchange. “That’s certainly something that really can’t be said of most other countries, where many companies are compelled to IPO merely to sustain their growth momentum.”
In fact, there are now examples of ambitious and promising biotechs opting for Zurich over Boston for precisely these sorts of reasons. Pre-clinical obesity specialist EraCal is a good case in point. “We evaluated various biotech hubs around the world and eventually selected Switzerland due to its founder-friendly mentality, supportive infrastructure and the fertile landscape for fundraising. We considered Zurich to be an excellent fit for developing EraCal’s novel biologic mechanism to control appetite. There is simply much more margin for error here and the Swiss ecosystem truly has fantastic initiatives to push first-time entrepreneurs, not to mention the prospect of non-dilutive funding availability,” recalls the company’s founder and CEO, Josua Jordi.
“Looking back with hindsight, we can say our funding strategy has actually played out very well. We closed a CHF six million seed round in 2019 and supplemented this with roughly two million CHF in non-dilutive money from grants and awards,” he confirms.
“Our plan now is to select EraCal’s first clinical candidate by the spring of next year and close our series A next summer. We will essentially be seeking an additional cash injection of 15 to 20 million Swiss francs to finance the early clinical development, and I am confident that that is a realistic and perfectly achievable target in the prevailing climate out here,” he elaborates.
Meanwhile, an increasing number of biotechs are also making a conscious decision to list on the Swiss stock exchange owing to the regulatory benefits of going public in Switzerland. “IPOs or capital market transactions tend to be considerably more expensive in the US. For instance, the Swiss stock exchange only charges CHF 19,000 for a capital transaction of CHF 100 million, a pretty low figure in comparison to other major exchanges,” opines Fabian Gerber. “Going public on US exchanges would entail higher costs, greater risk and considerable complexity.
It’s perfectly logical that increasing numbers of life science entrepreneurs are now beginning to wonder whether it’s worth it when a no-hassle listing in Zurich can hand you access a deep vault of capital and ongoing access to one of the leading financial sectors in the world,” he reckons.
Even for those companies that seek to access US investors, the route of a 144A/RegS transaction may be of interest. “Under this exemption rule, a company can list on the Swiss stock exchange and access US Qualified Institutional Buyers simultaneously. In a nutshell, this means that you benefit from the best of both worlds: access to US investors without being under US regulatory compliance,” he argues.
An additional pulling point could also be the size of the peer group. The smaller, but no less attractive volume of companies also means that firms are more likely to get their time in the spotlight as opposed struggling to make themselves heard by being just one among many.
“The healthcare sector represents about 33 percent of the total market capitalization of the Swiss stock exchange which equates to around CHF 535 billion worth of value. Biotechs realise they will benefit from a strong peer group and are helped by the fact that the listing and maintenance requirements on the Swiss stock exchange are market-oriented and balance the needs of the companies as well as the investors,” concludes Gerber.
Coming of Age
Then there is the rather unique enabling ecosystem that has been carefully and deliberately nurtured over several decades. Thomas Bohn, executive director of the Greater Geneva Bern area (GGBa), provides an interesting insight when he describes his organization’s strategy for enticing biotechs to establish themselves in his region.
“We very much see our role as building up the sort of life science landscape that biopharma and medtech entrepreneurs are going to want to gravitate and flock towards. They are much more likely to select us as the place to open their businesses if they can see that the entire life science value chain is present. This means providing them with easy access to incubators, accelerators, research institutions, clinical trials labs, contract manufacturers, venture capitalists and angel investors, not to mention the sorts of corporates that they might eventually want to partner with or even be acquired by,” he explains.
Ensuring access to a deep enough talent pool where they can readily find and recruit the sorts of qualified personnel they need across all core competencies is another important aspect according to Bohn as this is one of the pressing considerations when setting up and growing a medical science company from scratch.
“Being comprehensive and systematic in engineering the right sort of enabling environment has been absolutely key to triggering the sort of snowball effect and virtuous circle where more and more companies want to establish a footprint and put down roots,” he insists.
In other words, though international pharma giants such as Roche and Novartis might act as the cornerstone of the local life science industry, Swiss policy makers and boards of trade have paid great attention to cultivating a fully fleshed out and well-rounded ecosystem that co-exists around them, one that fosters seamless interactions between smaller companies, established pharma, medtech, financial institutions, and academia.
Nor should it be neglected that Switzerland’s thriving biotech scene is becoming ever more strategically relevant as a locus and hub for M&A activity. “From a big pharma perspective, with the sheer amount of innovation going on over here, this country has developed into a stellar place for acquiring new assets and refreshing the pipeline,” reveals Pfizer’s country manager Sabine Bruckner.
Switzerland’s biotech hub has certainly been delivering a steady flow of large mergers, acquisitions and licensing transactions. The recent big-ticket Amal, NovImmune and Therachon deals are all testament to this fact.
“Whichever way you look at it, the country today provides concrete and rapid solutions both in terms of establishing JVs and acquiring cutting-edge capabilities. Irrespective of whether you want to buy, build or opt for a blend of both, Switzerland has the answers,” agrees Bohn.
“It has been frankly amazing to witness how well Swiss biotech is maturing. We have the large players, world beating universities, deep-pocketed investors and so on – all the different components required sustain a really thriving biotech universe – and all without the need for large-scale government or public sector intervention,” remarks Michael Sidler co-founding partner at Redalpine Venture Partners.
Certainly, one of the defining hallmarks of the Swiss biotech sector is how it has been built up from the bottom-up with an emphasis on collaboration, joining the dots, and bringing together the optimum constellation of stakeholders. “From very beginning, the main public funding body, Innosuisse, has always focused on fostering public-private parentships as the main driver through which the government is supporting and encouraging this translation of early, sometimes basic, research into applications that can be used by the industry,” confirms Altorfer.
“This transfer is almost exclusively happening through this public-private partnership forum. The Swiss government categorically does not want to interfere in the market and fund new emerging biotechs by itself,” he insists.
“I really do admire the manner in which Switzerland has cultivated its biotech sector,” concludes Sidler. “Had it been artificially inflated with government money or other structures, it could have imploded as soon as that funding source dwindled. Instead, Swiss biotech has managed to successfully establish itself organically and sustainably. It’s a hub with deep roots that looks set to endure.”
Indeed, with around a hundred new life science start-ups established over the past three years – a growth rate of approximately 10 percent – the Swiss biotech sector continues its steady and relentless march.