Tesi’s latest study: Health and life sciences companies still encountering financing bottlenecks although sector has significant potential

The study examined the performance of health & life sciences companies using data going back to 2011. Over the last twelve years, these companies have attracted over a billion euros of investments.

“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,” comments Tesi’s Investment Director Joni Karsikas.

“Financing health & life sciences requires risk-taking and specialised expertise from investors. It nevertheless produces strong returns: according to the latest review by the European Investment Fund, many of the best performing funds are focused on the health & life sciences sector,” Tesi’s Investment Director Miia Kaye points out.

Companies in the health & life sciences sector are usually capital-intensive, development timelines are long, and regulatory requirements are stringent. This has an impact also on the funding side. The financing of health & life sciences companies in Finland has generally differed from the financing of other growth companies. Instead of being VC-funded, health & life sciences financing has mainly come from angel investors and crowdfunding, and the in-house investment funds of large corporations. The Life Science Fund established by Finland’s Innovestor last year also invests exclusively in health & life sciences companies.

There is more financing available now than in the past, but the number of new health & life sciences companies has declined. In peak years over 50 new companies were created, but over the last few years that figure has dropped to less than twenty.

“Finland produces a lot of world-class research in health & life sciences. However, in order to succeed globally, we need to become better at commercialising this research,” Kaye comments.

One of every ten companies listed on the Helsinki Stock Exchange is a health & life sciences company

The importance of the health & life sciences sector is highlighted on the stock exchange: over the last ten years or so, one in every ten listings on Nasdaq Helsinki was a health & life sciences company. Examples include, Optomed, Faron Pharmaceuticals, Nanoform and Nightingale Health.

Multinational health & life sciences companies have also spent hundreds of millions of euros on acquisitions in Finland over the past few years. Organon acquired Forendo Pharma for over €800 million[1], Hologic acquired Mobidiag for over €660 million, and Mindray bought HyTest for over €540 million.

As an other example of a global success story, Oura has raised large investment rounds from international investors.

Currently, the economically challenging climate is reflected in the funding environment of health & life sciences companies, and one result is that no large financing rounds have been raised so far this year. Kaye and Karsikas, who are responsible for Tesi’s health & life sciences investments, nevertheless believe that investment activity has remained at a relatively good level at the earlier stages.

“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.

Oura, TILT Biotherapeutics, HVR Cardio, BC Platforms and Algorithmiq are some of the health & life sciences companies Tesi has invested in.

”Health & life sciences is one of Tesi’s strategic investment themes. We invest in venture capital and private equity funds investing in health & life sciences and we also invest directly in companies operating in the sector. In this way we develop the venture capital and private equity industry, accelerate companies’ growth, and strengthen the Finnish health & life sciences ecosystem,” sums up Tesi’s CEO Pia Santavirta.

Read more about the study.

The study comprises data from over 550 companies operating in Finland’s health & life sciences sector. The study focuses on startups and companies that have received venture capital or other growth financing. The study is focussed on equity financing and excludes, for example, subsidies, grants, and debt financing. Large corporations and the subsidiaries of foreign companies were excluded from the study. Already well-established service companies were also excluded. 

[1] Transaction included upfront payment of USD 75 million, assumption of USD 9 million of Forendo debt, and payments linked to achievement of regulatory, development and commercial milestones.