BioWorld International Correspondent

The Karolinska Institute, Sweden's renowned biomedical research facility and home of the Nobel Prize in physiology or medicine, established an SEK100 million (US$12.5 million) fund to seed early stage firms spun out of research at the center.

The new fund will work with Karolinska Innovations AB (KIAB), the technology transfer arm of the institute. In the past four years, the organization has worked on the development of 400 projects, 50 of which have undergone commercialization through outlicensing or new company formation. KIAB CEO Conny Bogentoft will lead Karolinska Development AB, the vehicle that has been established to manage the fund.

It will finance a portfolio of 16 companies, all but one of which have been spun out of the institute. Ten of them are engaged in pharmaceutical development; two more are engaged in other areas of biotechnology; three are developing medical technology; and one is developing a nondrug-based therapy. Cancer therapeutics is a particular focus for the portfolio, said Folke Meijer, managing director of Karolinska Institute Holding AB, the parent company of the new venture.

The 16 firms range in age from less than two months to more than two years. Some of the more established entities already have raised up to SEK60 million, Meijer said, but the newer companies, in particular, face severe difficulties in obtaining seed financing.

"The venture capital market worldwide has moved away from very early stage investment," he told BioWorld International. "This is a way to put the boats out on the water."

Meijer said he is unaware of any precedent for this initiative. "We didn't have any model to look at."

The funding was raised through Stockholm-based EFG Fondkommission AB. The oversubscribed issue was supported by institutional investors, most of which are not biotechnology specialists, he said. The Karolinska Institute retains a 51 percent stake in the fund, while the institutional investors hold the remainder.

Karolinska Development will seek local and international co-investors on particular deals. But portfolio companies will have to secure follow-on investment themselves from other sources. Meijer said if the model proves successful, the Karolinska Institute would consider establishing a second vehicle to fund another batch of companies.

The institute boasts the largest concentration of biomedical researchers in Sweden. It has an annual budget of more than SEK2.5 billion (approximately US$313 million) and accounts for about 40 percent of Sweden's medical research output.