The life science industry is of great importance for Sweden since it among other things offers highly qualified jobs and contributes to exports and innovations in health and medical care. This report addresses two issues. How has the Swedish life science industry evolved in recent years and what are the prerequisites for innovation-driven growth among Swedish life science companies?

The development of the life science industry

In 2016, the Swedish life science industry consisted of approximately 42,000 employees in just under 3,000 companies. Of these companies, approximately two thirds conducted research, development, production or consulting activities. The remaining third was marketing and sales companies. The life science companies had a net turnover of SEK 164 billion and exports amounted to SEK 88.9 billion in 2016.¹ Between 2014 and 2016, the life science companies’ net turnover increased by 27 percent, exports by 15 percent and the number of employees by 1.7 percent.

Viewed over time, however, Swedish life science² has lost production and export shares compared to other countries. A possible turning point is that several companies have announced investments in advanced manufacturing facilities in Sweden. The United States and Germany were the country’s largest export markets in 2015 but the highest percentage increase in exports, between 2011 and 2015, was to China and Japan.

In terms of employee numbers, the greatest increase between 2014 and 2016 was seen in the business segments “Contract Manufacturing Organisations”, “Contract Research Organisations” and “Biotech tools and supplies”. Over a longer period, it is above all in the business segments “Contract Manufacturing Organisations” and “Information and communication technology” that the number of employees has increased the most, while the largest decreases have occurred in “Pharmaceuticals” and “Implantable devices”. During the years 2014–16, the number of small and medium-size companies increased by 12 percent while the number of large companies remained unchanged. The number of employees in small and medium-size companies increased by 8.4 percent whiles the number of employees in large companies decreased by 2.2 percent over the period.

Between 2012 and 2016, most new companies were registered in the business segments “Pharmaceuticals”, “Information and communication technology”, “Contract Research Organisations” and “Biotech tools and supplies”. A comparison of the 2007–11 and the 2012–16 periods shows that the business segment “Information and communication technology” was the only business segment in which both the number of newly registered companies and the proportion of venture capital funds increased.

Over the past ten years, the proportion of employees with post-secondary education at the life science companies has increased. The proportion of employees born in other countries increased over the same period and in 2015 one in five employees in the life science companies was born in another country. Of the employees in the life science industry in 2015, 48 percent were women and the gender distribution has remained stable over the past ten years. In micro-enterprises, however, only 42 percent of the employees were women in 2015.

The prerequisites for innovation-driven growth

In recent years, global competition in life science has increased and countries such as Great Britain and Denmark have developed national life science strategies. The purpose of these strategies is among other things to promote investments in life science and reinforce the countries’ skills provision and entrepreneurship.

Compared to other countries, Sweden invests relatively large amounts in life science related research and innovation. With regard to research results, Sweden has a compara­tively large proportion of highly cited life science publications and this proportion has risen slightly in recent years. Several of Sweden’s comparison countries, however, have seen a greater increase in highly cited publications.

Every year a large number of new life science companies are registered in Sweden. There is also a trend that global life science companies and digital giants are opening up their innovation processes and are looking for companies to acquire. Given this development it might be warranted to investigate the growth effects of governmental investments in life science more closely.

Growing exports to China and Japan indicates a development where these countries are becoming increasingly important export markets, especially in relation to the United States and the European Union.

The number of clinical trials of pharmaceuticals increased slightly between 2014 and 2016 but viewed over a longer period, the number of trials has decreased in Sweden while they increased in for example Denmark. This is despite the fact that extensive efforts have been made in Sweden to increase the number of clinical trials. Moreover, substantial govern­mental investments have been made in national quality registers but few of these registers are being used for scientific research or have a functioning collaboration with industry.

Sweden is expected to move in the direction of a deficit in terms of people with post-secondary education in chemistry, which is problematic since this educational background is one of the most common in the life science industry. There is also a need to recruit process operators to manufacturing facilities but forecasts indicate that Sweden is moving towards a possible deficit in certain relevant personnel categories. Another potential challenge is that the number of doctoral students in life science related areas has declined in recent years, at the same time as the proportion of PhDs in industry has increased. There is also potential for improvement in the Swedish migration system that might benefit skills provision within the life science industry.

The report shows how the governmental venture capital funds have come to invest increasingly in later phases. Here, there is a risk that governmental venture capital does not address market failures that create funding gaps in early phases. An international outlook shows that other countries are working to improve access to venture capital for life science companies in early phases.

Two new EU regulations concerning medical devices and in vitro diagnostics were adopted in 2017. The new regulations are expected to lead to higher costs for the companies through changes to classification rules, stricter requirements concerning documenta­tion and clinical studies, and availability of regulatory expertise. Two additional changes are the EU’s new regulatory framework for clinical trials and a new data protection regulation. The implementation of these regulations, in relation to implementa­tion in other European countries, may affect preconditions for innovation-driven growth in Sweden.

¹ Exports consist of pharmaceuticals and certain medical devices.

² The pharmaceuticals industry has without doubt lost ground but probably also the medical devices industry.