The secret behind Denmark’s success

The magic of the Danish biotech scene is enterprise foundations

Something is cooking in Denmark. And it’s not just the bacon, beer, butter and pastry the country is so famous for. It’s also the vibrant life science and biotech scene, with its many leading healthcare companies that have put Denmark on the map as a hot spot for international investors and collaborators.

As head of Lundbeckfonden BioCapital, I have seen first-hand the power of Denmark’s enterprise foundation model — also known as the ‘steward ownership’ model in some European countries — in building new companies and driving public-private innovation and advances in biomedicine and med-tech in the country.

Creating a sustainable life-science industry in any region requires a range of “raw materials” including world-class research with an associated financial funding environment, ample access to academic and industry talent, and substantial financial investment over an extended period of time. Without these elements, the outcome will be sub-standard or not possess the required staying power. Denmark’s experience shows enterprise foundations can play an important role in creating a strong life-science industry, fostering a healthy environment for innovation as a result.

Other countries could stand to benefit from greater adoption of the model, harvesting the substantial value returned to their societies in the form of innovation and economic growth, while benefitting from the insights gained from Denmark’s 50+ years of experience with the model. There’s also benefit to be had in partnering with the companies in the relatively stable ecosystem that enterprise foundations have helped create. 

The three defining elements of an enterprise foundation are its self-sustaining nature and independent board; its long-term perspective as a business owner and investor; and its philanthropic partnership with society. Unlike traditional VCs that are under pressure for quick return on investment, enterprise foundations have no owners and typically have a social mission and stable funding source that allow them to take a longer view when needed. However, generating a return aligned with other investors and shareholders remains the key goal, while delivering in parallel on the philanthropic contribution. In fact, studies of long-term ownership of large companies in Denmark have shown that business and philanthropy go well together.

Importantly, enterprise foundations can do what they’ve done for Denmark in other regions, although in some places it may take work to put the legal framework in place to get model off the ground.

The long view

The long-term ownership perspective is critical to the success of an enterprise foundation’s portfolio companies because it secures their survival, growth and development through volatile markets and other sequential business challenges.

The long-term perspective leaves room for scientific discoveries, innovation and development in R&D intensive industries. The model has been instrumental for the success of Denmark’s largest life science companies — Novo Nordisk A/S (CSE:NOVO B; NYSE:NVO), Leo Pharma A/S, ALK-Abello A/S (CSE:ALK B) and H. Lundbeck A/S (CSE:HLUN) — as well as a seed forest of young biotech companies, which are making progress despite difficult markets. All this has made life science one of the leading export industries in Denmark and has shown investors that the Danish biotech scene is not a fairy tale but a real and growing market for investors and collaborators.

The success of Danish biotech is, of course, not only due to the enterprise foundation model. The government supports innovation and entrepreneurship, and progress is driven by the country’s scientific strengths, which enable discoveries that pave the way for new products and treatments. Denmark’s big enterprise foundations are important financial supporters of its eight universities through a wide range of philanthropic grants, in particular, though not exclusively, for life science.

So, how could the Danish model inspire life science sectors outside Denmark? By demonstrating the importance of the long-term ownership perspective for nurturing discovery, innovation and business success, the model amplifies what we already knew: that successful development of new biomedical products and treatments requires finances, time and a lot of staying power. Companies owned by enterprise foundations cannot be bought unless their private owners and the board of directors support this decision, and they may not support an acquisition if, for example, it is not aligned with their statues.

Considering the value generated to Danish society by enterprise foundations, they appear an excellent opportunity to bring innovation and economic growth to more regions. Today, the model may not be accessible in every country, but where it’s not, its benefits suggest that societies should lobby to make it available. This would enable successful founders of companies, for example, to apply their wealth to the benefit of society for generations to come, by enabling these individuals to create enterprise foundations.

While the barrier to entry may be high in many countries due to strict policies, long-term ownership and the application of the steward ownership model has caught on in Europe in the last few years. In the U.S., recent signs of change are starting to show, with Patagonia and Bloomberg announcing their venture into foundation ownership. However, it’s not as easy as in Denmark to hand over companies to philanthropic foundation ownership. In other Nordic countries, such as Denmark’s neighbor, Sweden, there is also a long history of foundation-owned companies, where one of the most successful examples is the Wallenberg Foundation. More companies could certainly follow their example, as well as the Danish template.

How enterprise foundations set the scene in Denmark

Denmark’s enterprise foundations such as the Lundbeck Foundation, the Novo Nordisk Foundation and the Leo Foundation not only hold the majority shares in the country’s largest and most successful pharmaceutical companies — making medicines for neurology, psychiatry, diabetes, obesity and skin disease — but we see the same picture in other industries. Carlsberg Foundation, for example, is behind a world-leading brewery building on a strong foundation of scientific advances in refining yeast for centuries of beer-brewing. The A. P. Moller Foundation is behind the world’s largest shipping company, Maersk.

In addition to the staying power of these large companies, enterprise foundations have been instrumental in supporting start-ups and emerging companies in the biotech scene. They provide seed and venture funding, support innovation, and facilitate collaborations between academia and industry.

Unlike the corporate venture arms of pharma companies, which typically invest aligned with the pharma’s strategic areas, enterprise foundations such as Lundbeckfonden have no such restraints, as they are not a part of the pharma but its major shareholder. This means enterprise foundations can support their biotech ecosystems broadly.

Hence, Denmark’s biotech scene is a fairy tale come true, with a business ownership model that secures a long-term business perspective, thereby creating a fertile environment for innovation. I believe that international investors and collaborators stand to gain a great deal from investing in this vibrant and innovative hub.

As the famous Danish author Hans Christian Andersen once wrote, “To move, to breathe, to fly, to float, to gain all while you give, to roam the roads of lands remote, to travel is to live.” It’s a fitting sentiment for Denmark’s biotech industry, where the country’s biotech companies are traveling far and wide, innovating and giving back to society while also gaining in return.

So, there’s definitely something cooking in Denmark — and I suggest that the world of venture capital, biotech investors and entrepreneurs should take notice. There is a good chance the Danish model could inspire how to develop the sector in your geography.

Christian Elling is managing partner, SVP at Lundbeckfonden BioCapital, an enterprise foundation in Denmark that is a long-term owner of several international healthcare companies and an active investor in biotechs based on Danish research. It provides philanthropic grants to scientists and programs at Danish universities. 

Signed commentaries do not necessarily reflect the views of BioCentury.