More IP commercialization and VC-like incentivization will supercharge European biotech startups
by Sergey Jakimov, Founding Partner at LongeVC | Originally published on EUVC.
Guest post by Sergey Jakimov, Founding Partner at LongeVC | Originally published on EUVC.
Not many countries, European or otherwise, would turn down the banner results Novo Nordisk (and its Ozempic revenue) has brought to Denmark. Their success drove a 2% GDP increase in the last quarter of 2023 - and the country’s largest bank expects a repeated 2.1% growth this year. It’s certain that European prime ministers and MEPs are seeking to attract their own biotech or pharmaceutical darling that can bring this level of economic growth (not to mention the tax revenue and employment boost). And their countries come built-in with two advantages: Regulation and resources.
First, the EU can regulate supranationally. That is a big bonus to a global (or globally aspiring) biotech. They’ve laid the groundwork already - European leadership is demonstrably keen to continue growing the continent’s investment in artificial intelligence and biotech. Supportively, European regulators have proved appropriately protective of patient data with the passage of the EU AI Act. Second, the EU is already home to the most well-funded, well-known names in healthcare, pharmaceuticals, and biotech. Besides Novo Nordisk, we have Bayer, GSK, Merck and plenty of others. These are the companies that have the capital, scale and resources to bring next-generation drugs to market (the kind that drives GDP explosion).
So the question becomes: Which company, and from where? The answer to the “where”, for now, is clearly Europe. The EU is home to some very impressive healthtech, medtech, and biotech startups and growth-stage companies - and with its clearer regulation, Europe can attract even more of them. One area where there’s plenty of economic promise is in AI-powered drug discovery. More than 500 companies are working on discovering new drugs and treatments with artificial intelligence, with many European names among them. One of the most successful unicorns in AI drug discovery, Insilico Medicine, was founded by a Latvian. They have several preclinical drug candidates in their pipeline and the first-ever phase 2 clinical treatment for pulmonary fibrosis. This is the “candles to lightbulbs” moment for AI drug discovery. (Author note: founder Alex Zhavoronkov is on our board). The speed AI brings to finding potential treatments means a much shorter time-to-market for the next Ozempic.
So if Europe’s member states have the companies, capital, and regulation in hand, finding the next biotech boom shouldn’t be that difficult. And in doing so, Europe is thinking too small.
Novo Nordisk is a landmark case. They found a category-defining drug that put Denmark on a rocket ship. Finding another drug (or Novo Nordisk-in-training) would be great. But what Europe should be focused on is how to multiply by hundreds or thousands the Ozempic economic effect - because it is simply the consequence of long-term research done right. In order for any ecosystem to produce innovation from the ground up, the culture needs to focus on upbringing. And our upbringing for biotech companies needs work in how it incentivises and commercialises.
We need to incentivise biotech and pharmaceutical companies of every size to continue investing in and producing, en masse, new treatments, drugs, and biotechnology - even if it isn’t as profitable yet - and bring some accountability to this funding. Europe has the funding mechanisms already, like grants, subsidies, direct investment through entities like the European Fund for Strategic Investments. This does well at providing economic incentives without promising immediate profit. We will see more innovation success stories if we can align multiple stakeholders on this point - from the accelerators to early VCs to big pharmaceutical companies. Still, funding is not enough. We need efficient supervision of the funding - if it doesn’t consider how the research can continue when the grant ends, it is not scalable. We need to evaluate the feasibility of the long-term picture for these startups when the EU allocates (rather generously) its early startup funding.
Apart from incentivisation, Europe has to foster a better IP commercialisation culture. A big share of research that gets commercialised in the future comes from universities. What European universities do well is create environments for robust technology and discovery. What needs work—and needs to be taught—is how to commercialise that IP.
Compared to their US counterparts at Stanford, MIT, Harvard, and others, EU research institutions still lack a repeatable playbook for creating spinoffs.
At a US research institution, researchers are trained and told to embrace, for example, the practice of rapidly signing licensing agreements to make them even more attractive to specialised early-stage investors. Some institutions have technology transfer teams dedicated to this purpose.
In contrast, an EU research team would be more likely to continue applying for grants instead of contacting potential licensors.
This culture has to start at universities because as much as we praise internal R&D, a significant portion of innovation in big pharmaceutical companies comes from external acquisitions. Again, this requires strategic thinking to create a framework that allows for a spinoff and IP commercialisation that remains universally attractive for early investors and M&A partners. We can borrow from the US in this regard and learn from their repeatable, scalable IP commercialisation culture - if only to replicate their remarkable track record of bringing innovation from the lab to market.
Europe has the pieces; we just need to put them together. We are well-capitalised and well-resourced enough to invest in, develop, and deliver world-changing, GDP-boosting biotech. If we can get the incentives and the commercialisation right, there is no doubt that Europe will be home to the world’s most impressive, advanced, and accessible ecosystem of biotechnology and next-generation healthcare, as well as some of the most economically stable countries.
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Sergey Jakimov is a founding partner of LongeVC, and a serial entrepreneur, having co-founded 3 deep-tech ventures and raised more than $25M in venture funding. He has advised several other startups in the therapeutics space, and since 2018, he has led the medical tech startup Longenesis. Sergey is a visiting lecturer at several universities, and he co-authored a master’s program in technology law at the Riga Graduate School of Law. He holds a BSc in International Affairs and two MScs in Political Science and Government and Law and Finance. He was named a Forbes Latvia 30 Under 30 in technology and healthcare in 2020.
