Editor's Note: This is part two of a two-part series on biotechnology growth in Sweden. Part one ran in Wednesday's issue.

GOTHENBURG, Sweden - Located on the Baltic Sea, Sweden is known for more than its vodka, the pop group ABBA, or its famous Ice Hotel in the northern region.

Think the pacemaker, growth hormone therapy or Losec for stomach ulcers, which was at one time the world's best-selling drug. Alfred Nobel, the inventor of dynamite, lived in Stockholm and bequeathed his fortune to establish the Nobel prizes in 1901, one of which is given out by Stockholm's Karolinska Institute each year. The institute's researchers invented all three of those mentioned health care products and have won five Nobel prizes for physiology and medicine.

Each year, 50 of its professors decide on the winner.

Because of that, "our scientists are forced to read up" on research being conducted throughout the world, said Harriet Wallberg-Henriksson, president of the institute, which has 8,000 students. "I think that has fostered this attitude of really being there at the cutting edge of science."

Sweden has formed biotech clusters that contain a large chunk of the 350 biotech companies that reside in the Nordic region. Several of those companies are spin-outs from university research.

One such company, called Q-Sense AB, was founded in 1999 in Gothenburg - or Göteborg, in local parlance - the country's second largest city where Losec developer AstraZeneca plc keeps its research and development headquarters.

Q-Sense offers QCM-D (Quartz Crystal Microbalance with Dissipation monitoring), an instrument that allows researchers to study the formation of proteins, polymers and cells onto surfaces in liquid.

"We can study over time how molecules can absorb on top of different surfaces," said Goran Zelander, the company's marketing director.

A short drive from Q-Sense is Cellectricon, where CEO Jakob Lindberg and his staff are working on technologies like Dynaflow, a response analysis system for ion channel drug screening, and Cellaxess, a target validation instrument for siRNA. So far, Cellectricon has 20 Dynaflow customers, and is looking for a U.S. partner to market the product. Lindberg hopes the company will become profitable by late 2006 or early 2007.

"I think in today's market it's more important than ever to reach cash flow positive and show you can get money out of your products," he said.

Companies sometimes have to be self-sufficient in order to survive, especially when government funding in Sweden is not what it used to be. The support here, however, is still better than other countries. In Sweden, about 4 percent of the gross national product goes into research and development, while the figure in the U.S. is 2.9 percent, said Carl Johan Sundberg, manager of the Karolinska Investment Fund. And despite a high personal income tax rate of about 50 percent in which citizens receive free health care and a university education, the business taxes are low - about 28 percent.

"The U.S. is 1.7 times more expensive to do the same R&D and at the same quality," Sundberg told BioWorld Today.

The support of the government is a major reason why in 2001 the stem cell company Cellartis AB set up its operations in Gothenburg.

"We have the expertise and the Swedish law," said Boo Edgar, who is stepping down from his post as CEO to become the head of business development at Cellartis so he can focus on a new goal for 2005. He plans to help start the Gothenburg International Bioscience Business School, the first school of its kind in the world. Affiliated with Gothenburg and Chalmers Universities, it will offer a two-year master's program for entrepreneurs who want to focus on biosciences.

At Cellartis, researchers use fertilized eggs leftover from in vitro fertilization attempts to develop stem cells that could help in repairing knee joints or the cornea in the eyes, or that could restore function in stroke, diabetes and Parkinson's disease patients. The company has created the world's largest pool of stem cells with 30 lines, Edgar said.

"The fertilized eggs that remain in the dish are surplus," he said. "They either get put in the dustbin or put in the freezer."

While stem cell research remains highly controversial in the U.S., it is more readily accepted in Sweden.

"Our government has taken a totally different standpoint than the American standpoint," Wallberg-Henriksson said. "We've taken a more liberal view, allowing it under certain guidelines."

At the Karolinska Institute, scientist Jonas Frisén is researching the potential of adult stem cells. He discovered at the end of the 1990s that new cells can form in the brain. (See BioWorld Today, Jan. 12, 1999, and June 7, 2000.)

He co-founded in 1998 a Stockholm company called NeuroNova AB, which is aiming to exploit adult neural stem and progenitor cells to treat stroke and Parkinson's and Alzheimer's diseases.

Edgar believes that adult stem cells are a "dead track," because they do not form every cell as blastocysts do. Cellartis is using blastocysts, not human embryos, in conducting its research, said Edgar, who believes that embryos only exist inside a woman's uterus.

Sweden's support of the research does not suggest the country isn't concerned over the ethical implications surrounding the science, Sundberg said.

"Nobody's interested in reproductive cloning," he said. "No sensible scientist is. There are maniacs. There will always be maniacs."

In order to produce near-term revenues, Cellartis intends to market its cell lines for research purposes, which could bring the company €700 million annually. Stem cells can allow researchers to do toxicology studies in animals to determine the effects of drugs on the brain.

"I think that's a substantial market to be in," Edgar said. "For therapies, you can add two zeros after that."

Cellartis' competitors include Israel's Institute of Technology, Technion; Singapore Embryonic Stem Cells International; and Geron Corp., of Menlo Park, Calif., a state in which the November ballot includes a vote on whether to spend $3 billion in public funds on stem cell research.

Edgar believes the world will see the first transplants of human blastocysts stem cells next year. It will be tested in Parkinson's patients sometime in 2006, he said. And countries that support the research will benefit in the long run if clinical studies show the therapy works.

"There will be an outcry of people who will want this support," Edgar said. "They will want it, and they will pay for it, and they will travel for it."

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