The growth of the Swedish Life Science industry 2012–2014
– continued decline or revival?
The Life Science industry is of importance for the long term competitive edge of Sweden and the products manufactured by the companies play a central role in meeting health-related needs and contributing to quality of life and well-being. For many people, it was a shock when both St. Jude Medical and Astrazeneca decided to close down large parts of their business activities in Sweden during the 2010–12 period. This report describes the growth of the Life Science industry in Sweden from 1998 to 2014, focusing particularly on developments from 2012 to 2014. Is the industry heading for further decline or will there be a revival?
Decline continued but at a slower rate
In 2014, the industry had 1,391 companies with 40,143 employees in Sweden. Of these companies, 890 did research, product development, consultancy or manufacturing. These companies had 28,948 employees in 2014. Several of these enterprises conducted a large share of their operations outside Sweden. The other 501 companies were marketing and sales companies with 11,195 employees. This meant that the decline in the number of Life Science employees that started around 2006 continued. However, the decline slowed down somewhat. Between the years 2012 and 2014, the number of employees went down by 1.7 percent compared with a decrease of 3.7 percent between 2010 and 2012.
Astrazeneca’s shutdowns caused anxiety as regards the prerequisites for the development of pharmaceuticals in Sweden but in hindsight, it appears the closures were part of a global decline linked to changed research models within “Big Pharma”. During 2015, Astrazeneca announced it was going to build a new manufacturing plant for biological pharmaceuticals in Södertälje and invest in research on human proteins and the production of biopharmaceuticals in Sweden. Along with other factors, these two announcements indicated that, despite the closures, Sweden still has competitive strength. If Astrazeneca is excluded, the number of employees in Sweden’s Life Science industry increased by 1.4 percent between 2012 and 2014 (not including market and sales companies).
Increased number of employees in medium-sized companies
Between 2012 and 2014, the number of employees in large enterprises decreased by 9 percent at the same time as the number of employees in small and medium-sized enterprises increased by 6.7 percent. Above all, there was an increase in the number of employees in medium-sized companies (+16%). In 2014, 54 percent were employed in large businesses and 46 percent in small and medium-sized Life Science companies. The positive trend as regards the number of employees in small and medium-sized companies can be seen as a trend reversal after a 12.5 percent decline in this segment between 2008 and 2012.
Many new companies
Statistics on the number of newly started Life Science enterprises indicate that three times as many micro-companies were started between 2012 and 2014 compared with 2010 and 2012. The business sectors with the largest number of micro-companies were “CRO”, “Pharmaceuticals” and “Biotechnical tools”. The reason why there were so many new companies in precisely these sectors could be that former Astrazeneca employees who worked with research and development started up their own companies.
Several expanding business sectors
Nine of the fourteen business sectors studied in the report developed positively with regard to number of employees between 2012 and 2014. The business sectors that increased the most were “Information and communication technologies”, “Agro-, environmental and food related biotechnology” and “Biotechnical production”. It can be noted that “Information and communication technologies” is by far the business sector that increased the most, both in percentage and in absolute figures.
The three predominant Life Science clusters in Sweden are still Stockholm, Uppsala and Södermanland (51 percent of the employees), Västra Götaland and Halland (20 percent) and Skåne (16 percent). After Astrazeneca’s and St. Jude Medical’s closures in Stockholm, the situation changed somewhat. In 2014, Uppsala and Västra Götaland increased their share of the total number of Life Science employees in Sweden by one percentage point each compared with 2012.
Between 2012 and 2014, Sweden’s Life Science exports went down somewhat. According to the trade association, pharmaceutical exports increased by almost SEK 2 billion (+3.5 percent) while exports of medicine technology decreased by about SEK 4 billion (-16.7 percent). The decrease in medicine technology exports was primarily because of St. Jude Medical’s closure in Sweden.
Cautiously optimistic vision of the future
This report concludes that the decrease in the number of employees in Sweden’s Life Science industry continued between the years 2012 and 2014. At the same time, the decline slowed down, primarily thanks to a growing number of employees in medium-sized enterprises. This trend together with other factors such as Astrazeneca’s long-term research investments, investments in advanced production at e.g. GE Healthcare Biosciences and Octapharma, and growth in several business sectors give a cautiously optimistic picture of the Life Science industry’s growth during the coming years.
During the spring of 2014, Pfizer made a bid for Astrazeneca and in the future, this kind of bid will continue to be a potential threat to growth. However, there is no general trend that jobs disappear when Swedish companies are bought up by foreign players. The results indicate that small and medium-sized companies with foreign parent companies have had a positive development with regards to the number of employees during the last years. Another possible threat to growth is that Sweden loses the battle for investments in research, development and advanced production. In particular production of biopharmaceuticals is an area where many other countries are pursuing comprehensive initiatives.
The results strengthen the picture that Sweden needs a growth strategy that creates good prerequisites for both large and small companies. At the same time, a central component of such a strategy should be to continue to strengthen the prerequisites for innovation promoting collaboration between large and small players and among companies, the academic community, as well as the medical and healthcare sectors. There are already several interesting ventures underway, for example, Astrazeneca’s BioVentureHub and the Vinnova projects SWElife and Medtech4Health.
Other central areas for strengthening growth are the prerequisites for research and skills provision, access to venture capital, competitive tax policy, and the medical care sector’s compensation system. Growth Analysis is in the process of developing an analysis plan for Sweden’s Life Science industry based on several of these areas.