Sana Alajmovic is an unusual life science cofounder. She is young, she is a woman, she is outspoken and she’s more business than science. And she is not relying on Big Pharma to acquire her company.

Sigrid Therapeutics, which she founded together with Professor Tore Bengtsson in 2014, is developing an engineered silica powder that can decrease the risk of developing type-2 diabetes. The product slows digestion and cuts down on glucose peaks.

“I have heard many stories of investors asking for a quick exit within one or two years.”

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Although it will be another couple of years before the product will be on the market, the company has raised $9m from investors in Sweden and the US. According to Alajmovic, this is rare for small life science startups.

American companies like Livongo, Omada Health, Virta Health and Glooko have all attracted big-time investors and high valuations.

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For medtech startups in the Nordics however, it is a different story.

“I have met life science companies that decide to do an initial public offering to raise 10m SEK [about €1m],” says Sigrid Therapeutics’ chief executive Sana Alajmovic. “The venture capitalists are not seeing the potential of life science startups and therefore, the companies do not have much choice.

“In comparison to many others, I have put myself out there. I am always attending tech events and presenting Sigrid to a range of investors, from private wealthy individuals to venture capital funds. But people believe it is really risky to invest in life science. For health tech startups, it seems to be a completely different story.”

Investors asking for quick exits

In Sweden, health tech is a popular investment area for venture capital companies. During the last five years, companies such as Kry (Livi), Min Doktor and Natural Cycles have collectively raised more than €200m, according to Nordic Tech List. The top three medtech startups — Calliditas Therapeutics, Surgical Science and Vironova — have raised €72m during the same period. Today, all three of them are listed on small stock exchanges in Sweden.

Life science is in part perceived as high risk but is also favoured by investors who want to fund companies that they can exit from quickly.

“I have heard many stories of investors asking for a quick exit within one or two years, either through a public listing or the company being acquired by Big Pharma. Being acquired is almost always what investors suppose is the end goal for life science startups. To say that one wants to become a sustainable business is almost unheard of.”

Big pharmaceuticals such as Bayer, Pfizer, AstraZeneca and Novartis are all involved in medtech or life science startups in one way or another. One reason is that the startups have proven themselves to be better and cheaper at developing drugs. According to ‘Eroom’s Law’ (Moore’s Law in reverse) the R&D of Big Pharma has become more expensive in the last 30 years.

The power of Big Pharma

At the same time, developing a drug takes years, which means that most medtech startups have no alternative but to turn to one of the big pharmaceuticals for investments and partnership. However, the sales cycles are long and can be detrimental to an early-stage life science startup.

“I have seen these long sales cycles really making it difficult for startups to survive. For me, I think it could have killed my company, were I to rely solely on Big Pharma to buy our project,” said Alajmovic.

Sigrid Therapeutics was offered a collaboration with a big player listed on the New York Stock Exchange in 2017 but turned it down. Instead it found a way to continue developing its product with external capital.

“But for many, investments of tens of thousands of euros are enough to pull them in,” said Alajmovic.

“I have seen the long these long sales cycles really making it difficult for startups to survive.”

Alajmovic mentions Alligator Bioscience as an example of a life science company that suffered from a tricky relationship with Big Pharma. The publicly listed company, which is working on a medicine for cancer, had an exclusive deal with American bioscience company Janssen Biotech, a subsidiary to Johnson & Johnson, which it signed in 2015.

This summer Janssen returned the rights for the drug to Alligator Bioscience, even though the results of the phase one tests were positive. Since then Alligator has lost more than half of its stock market value. The deal that would have been worth $695m if the medicine was to reach the market, now needs to be replaced by finding another pharma company to work with.

“That won’t be easy since other big pharmaceuticals surely want to know why Janssen quit the deal with Alligator,” said Alajmovic.

Medicine or medical device

It isn’t easy for life science startups to manage without assistance from a big corporation.  Sigrid Therapeutics has not turned down Big Pharma for good and would consider a strategic collaboration in the future.  But medicine for diseases such as strokes and diabetes take a lot of investment and are difficult to get through the drug administration, pricing and sales processes.

To cut through some of this, Sigrid Therapeutics decided to turn its research into a medical device rather than a drug.

The route to market is faster and the Swedish startup will be able to sell the powder straight to consumers. The process of becoming a medical device is much quicker than for drugs but it has become more strict in the last couple of years because of a a number of faulty products, such as leaking breast implants.

“To say that one wants to become a sustainable business is almost unheard of.”

A stricter process has meant a delay for Sigrid in getting the preventive powder to market, but this means that the products that are approved have a better future ahead. Alajmovic hopes that the ecosystem for life science startups will improve. There is no shortage of good products being developed.

“Just look at Moberg Pharma or BioGaia, both billion SEK companies listed on the stock exchange. Unfortunately, those life science companies go more or less unnoticed.”

Now Sigrid just has to win the faith of a few more investors.

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