Kasim Kutay discusses how Denmark has become a hub of innovation-led growth across industries including life sciences, creating clusters of high-growth enterprises and its foundation ownership model for the most successful companies.
Full speech transcript
It’s a pleasure to be here, my first time in Glasgow. So I’m really delighted that I’m here today. I’ve very often flown into Glasgow Airport, but it’s always to then head out to the beautiful countryside around here to play golf or fish or do something like that.
So to be in the heart of the city, in this wonderful campus with this group, is a true pleasure. And I want to also extend a big thank you to Gordon Brown for inviting me to participate in today’s conference. And Gordon, I have to say that your tireless efforts in support of innovation, growth, and very importantly, economic inclusion, are a true inspiration.
So thank you for everything that you do. So I’m Kasim Kutay. I’m the CEO of Nova Holdings.
I’ll say a few words about that, just to put things in context before sharing a few thoughts with you about how we make the most of the great innovation that does reside in Scotland and in the UK more broadly. I’m a UK national. I grew up in London, but left London nine years ago to take up the post of CEO of Nova Holdings.
So I am now based in Copenhagen, which is a lovely city, but I do make it back to the UK very frequently. And Nova Holdings, just to give you a sense, and Nova Holdings is in the middle of the picture here, is a holding and investment company that manages all the wealth and assets of the Nova Nordisk Foundation, which has assets of about $140 billion, which makes it one of the top three foundations in the world, along with Gates and with Wellcome. And last year, our foundation gave out 1.4 billion euros, most of which went to medical research.
So what does Nova Holdings do? Nova Holdings is the controlling shareholder of Nova Nordisk, which is Europe’s largest pharmaceutical company. For a long time, the world leader in insulin and diabetes, and more recently, of course, with Ozempic and Wegovy in obesity. Novo Nessus, which is a very exciting area that people don’t talk about, which is bioindustrials, which is biotech solutions for industry.
And then about 180 other companies that we invest in through our venture team, through our growth equity team, and through what we call our private equity buyout team. And together, if you add all that up, we are probably the largest and most active investor in health care, in life sciences, on a global basis, with offices in Asia, Europe, and the US. And this is the ecosystem that we have.
On the left, you’ve got education, research, innovation, et cetera. That’s all carried out by our foundation. And then everything that’s investment-related, seeds, venture, growth, principal, and then, of course, the two operating companies.
That is all through our investment. And somebody earlier on here, I think it was Dan, mentioned the company Exantia. We were one of the largest and earliest backers of the Scottish company, Exantia, which is AI-enabled drug discovery.
You can see it. It’s the second from the top under our growth investments pillar. So just a few words about Europe, the UK, and Scotland.
And I’ll be making some comparisons and some observations about Denmark, with one big caveat, please, please. Comparing a country of 5 and 1 half million people to a country with close to 70 people is not a fair comparison. But nevertheless, I do think there are some lessons learned.
I think, as we heard this morning many times, Europe and Scotland and the UK more broadly needs to become stronger at scaling and translating basic science. The innovation is here. That’s not the issue.
The issue is translating it. Scotland is already doing a pretty good job at that, and the UK, as Kate said. But then the scaling becomes an issue.
And you can see that even though we innovate and translate, the translations, it’s not just scaling. There is a translation issue. So if you look at the chart here and look at the amount of VC funding that’s taking place in Europe versus the US, whether it’s at the seed stage, early stage, and later stage, it’s a huge gap.
And it’s not justified, because the innovation that’s taking place in Europe is on par with the US. There are as many research publications coming out every year in Europe as there are in the US. So our ability to translate that into companies and to scale those companies to a commercialisation path is the big issue for Europe.
And that leads me to this notion that’s been talked about today, which is an industrial policy strategy. And I like to think about it in terms that I will get to in a second. But just to make the comparison with Denmark, drivers of strong biotech ecosystem in Denmark.
And ecosystem is a word that I like to use frequently. Because if you are talking about innovation and scaling, you have to ask, what are the pillars of that ecosystem? What do you need to deliver on that promise? And let me tell you some of the things that they have in Denmark. And then we’ll get to Scotland and the UK.
One thing that Denmark has, which is very difficult to replicate, is this concept of the foundation ownership. So what I just showed you earlier, with a foundation at the top that controls Nova Holdings 100%, and then we, in turn, Nova Holdings, control these operating companies. That is a very common structure in Denmark.
So Nova Nord is by far the largest company in Denmark, is foundation-controlled. Maersk, the largest shipping company in the world, also based in Denmark, foundation-owned. Carlsberg, the third largest brewer in the world, foundation-controlled.
A very common structure. So what does that mean? It means protection. It was the point that the lady made earlier.
Those companies didn’t leave Denmark. They stayed. And that is a key pillar of any ecosystem or cluster that David was talking about earlier.
And if you wind the clock back 30 years ago, it wasn’t Denmark that was the life science or biotech hub of Scandinavia. It was Sweden. But they lost Astra to Zeneca.
Today it’s called AstraZeneca. They lost Pharmacia to Pfizer, both of which got acquired. And a key pillar of the cluster disappeared, because those companies had provided so many of the management teams for the startups.
There were several spin-offs that came out of those companies, historically, in Sweden. Denmark, on the other hand, because of the foundation ownership, Novonordisk stayed. Novonordisk would have been acquired many years ago if it was an independent company.
So one lesson for the UK, and I’ve made this very clear. It’s not very fashionable, because it sounds protectionist, and it’s perhaps not very Anglo-Saxon. But if GSK and AstraZeneca were to leave this country, that would be a big blow to your ecosystem.
So if you think about clusters, you think about the golden triangle, you’ve got to think about, and I think Rachel Reeves refers to it in part as secure economics. Again, not fashionable to be protectionist, but there are certain critical industries where you need to think about protecting your interests. And life sciences, particularly for the UK, is critical.
This country will not achieve its growth ambitions without life sciences. As a reminder, the sector is the second largest industry in the UK after financial services. The other benefit, of course, we have in Denmark is the long-term perspective.
So when you have a long-term owner, a foundation, you’re able to make long-term bets, not worry about activists coming into your share price and saying, give us all the cash on your balance sheet as dividends, etc. But, of course, we also have a public share price, and it creates a really nice positive tension between short-term and long-term. And then there’s one thing that the country is blessed with, which, of course, is very difficult to replicate, which is investment recycling, because the foundations take a big chunk of the dividends from these companies, whether it’s Carlsberg or Nova Nordisk or Maersk, because they own them or they control them, but then they put it back into society, and they fund further research, etc., etc.
One thing that we do in Denmark quite a bit, and certainly we as Nova Holdings do a lot of, and this is something, perhaps, that the UK and Scotland can learn from, is what I call quid pro quo investing. So a lot of funds come to us, like Kate’s fund, and say, please invest. And we’ll say, yeah, we’ve got a lot of money, so we’ll not only invest, we’re going to give you a big check.
But we will sit on your advisory board, and we want to make sure that you will review X number of Danish opportunities a year. Sometimes we even go further. We’ve just asked a fund to set up a presence at an office in Denmark.
And I think that’s one thing that the UK, perhaps, can do better. Perhaps some of your pension funds can think about it. If they’re going to write a big check to a growth equity fund, tell them, yeah.
Particularly now, actually, it’s a very tough fundraising environment. You want 50, we’ll give you 100, but this is what we want you to do in Scotland. This is what we want you to do for our cluster, as David was referring to earlier.
STEM talent, Denmark is full of it, so that’s not an issue. And then collaboration between universities, hospitals, and industry. And that’s where the UK is really falling behind, I’m afraid.
And I’m going to get to that in a second. So what has Denmark achieved? I’ll go through this very quickly, because how am I doing on time? Am I already five minutes? Perfect. But basically, this is Massachusetts, of course, Boston, the leading cluster for life sciences.
You can see in the top chart, and that is basically the number of publications that lead to startups. And as I said, publications in Europe are on par with the US. Pre-BII, BII is a bioinnovation institute.
It’s an incubator that was spun out of our foundation with the mission to incubate. So this is even before any venture funding. This is for the professor, for the researcher that has a brilliant idea, but is at a loss.
Who do I talk to? Where do I work out of? Who guides my business plan? They come to this incubator, and we provide them incredible support. And post setting up this incubator in 2017, if you look at what’s happened now, Denmark has overtaken Massachusetts as a translation hub. The translation gap has been totally closed.
So we really need to think about what incubation means. I think if you’re going to have a cluster for life sciences in Scotland, in Glasgow or Edinburgh or whatever it may be, you really need to make sure that you have an incubator in this country with the right mission and capitalised in the right way. Let me say a few words in conclusion about what I think the UK can do.
And that is really to build a holistic life science industrial policy strategy. And let me tell you why I think it’s holistic. I read Dan’s innovation report, which he went through this morning, which I thought was excellent, Dan.
I would stress one thing. I think the one thing where we do need to do a little more thinking, and perhaps where the report didn’t focus enough on, but you can’t focus on everything, is to me it sounded very government led. You know, the government should do this.
For me, an industrial policy is not about government. Industrial policy strategy means building consensus around three or four key priorities, having a clear view about who’s going to be involved around the table for that consensus, and then executing together. And if we’re talking about life sciences, there is no industrial policy strategy if it’s just government.
It’s government, it’s industry, it’s academia, and it’s the NHS. And unless those four are joined up and agree on what the key challenges are and agree on what the solutions are, you don’t have an industrial policy strategy. And the way I like to think about it is long term.
I think you need to have an eight to ten year strategy, and I think you need to do things as Kate talked about in bite-sized missions. I think a lot of these strategies fail because people are overwhelmed. It’s ridiculous when I see strategies with sort of a task list of ten things to do.
No, you take a couple of items every two to three years, you execute on that really well, and you move on. So what would an example be? So for example, what would government be? What can government do? First, regulation. Many of us don’t like Brexit.
I don’t like Brexit. It’s a reality. Let’s make the most of it.
The most obvious area to make the most of it is regulation. There is regulation in Europe that we can easily live without, and frankly, Europe can live without.
Bad news out of the EU yesterday. They have shortened the exclusivity period for certain drugs. I hope the UK does not follow suit, and if the UK doesn’t follow suit, it can go to industry and say, by the way, we’re going to develop an industrial policy strategy together. Europe has cut your exclusivity period, your patent period by two years.
We will stick to the original timeline, but this is what we want from you. Speed up approvals. I’m worried about the MHRA, Kate, and I’ll tell you why I’m worried, because whenever you have a small regulator next to a big one, the small one gets crowded out, because the small one always has a tendency to want to wait to see what the big one does first.
But we’ll pick that up, and I hope it’s going to change, because the leadership has changed, but that is another critical one, because you need to go to industry with two or three chips and say, I’m going to give you this, and this is what you’re going to do for me. I can go on and on and mention a lot of examples, but government can do a lot. Industry can… Two minutes? Yeah.
Okay. Industry can do a lot, and industry will step up if there is a bargain. I’ll give you a great example.
We lobbied industry very hard, along with a couple of other institutions, to set up something called the Action Fund, which is an antimicrobial resistant fund for $1 billion. It came on the back of a fund we set up called Repair in 2018 to tackle antimicrobial resistance. It was a $100 million fund.
That wasn’t enough. We went to industry, and we said, you failed. Because there’s no money in antimicrobial resistance, you didn’t invest in it, and now we’ve got this silent pandemic in the world.
We raised $1 billion. GSK put $100 million. Novartis put $100 million.
There is a corporate social responsibility that industry does have, and you need to play on it. What does that mean? Get industry to allocate part of their venture funding, not for their own strategic interests, but for the growth scaling that we’ve been talking about. Why not go to GSK and say, you’ve got a $200 million fund.
Can you please have another one next to it that scales, but not for your strategic reasons, for the cluster, for the ecosystem, because eventually you will benefit from that ecosystem as well. And they will benefit, because that’s the lesson of Denmark. Denmark is so focused on ecosystem, because with a long-term view, everybody at the end benefits.
There’s a few other things, but I’ll stop there, because I realise that I’ve gone way ahead of time. But suffice to say, I think there’s a lot more that we can do, and given that the underlying innovation is here, there is no reason for us not to succeed.
