Lund University Bioscience AB is not a typical investment company or VC.
As a kind of hybrid between a company, an incubator and a VC, LU Bio seeks out technology with commercial potential from academic institutions all over Sweden, providing management for startup companies and outsourcing everything else.

Indeed, unlike most investment companies with university-derived names, LU Bio isn't even tied exclusively to Lund University-a situation that is the result of Swedish IP law, under which scientific inventions are owned by individual researchers, not their academic institutions.

Still, LU Bio does maintain close ties with Lund University. It was founded in 2008 by the university and collaborates with Lund's technology transfer office (TTO), LU Innovation, to commercialize the university's science.

According to LU Bio CEO Thomas Andersson, formerly an investment manager at Karolinska Development AB, LU Bio has the right of first refusal on science coming from LU Innovation.

But it also hunts elsewhere.

Although LU Bio prefers to collaborate with the local TTO whenever possible-for instance, to gain access to a database of researchers-the company doesn't rely on TTOs to provide LU Bio with potential leads, Andersson said. Swedish IP law allows LU Bio to interact directly with-and even seek out-researchers at Lund and other institutions in the country.

LU Bio's first step in identifying promising science is to conduct one-on-one meetings with researchers. Ideally this is done under confidentiality agreements before they have published their findings, Andersson said.

From these meetings, LU Bio selects promising projects for further evaluation. This could include funding in vivo and other experiments that LU Bio thinks are needed to better assess the potential of the science.

"We generally do this under an agreement where the scientists are committed to form a mutually owned company with us," said Andersson. "During this process we might also commit to invest in the new company to an agreed valuation."

He added: "LU Bio has pharmaceutical industry experience, resources and the ability to recognize commercializable science," all of which a TTO might lack. "Thus we can identify strong research and initiate the process of starting up a company more efficiently than the local TTO-or the scientist-could do alone."

Andersson has 25 years of experience managing biotech startups. The LU Bio team also includes investment managers Ann-Christin Malmborg Hager, former VP of business development at protein therapeutics company Alligator Bioscience AB, and Eskil Söderlind, who has more than 20 years of experience as an executive at multiple biotech and pharma companies.

Additionally, LU Bio CFO Per-Ola Forsberg was formerly EVP at nutraceuticals company Probi AB and head of administration at peptide
synthesis company PolyPeptide Laboratories AB, a former subsidiary of Ferring Pharmaceuticals A/S that is now an independent company known as PolyPeptide Laboratories Group.

Initially an LU Bio startup has just one employee-the CEO-who is often, but not always, from LU Bio. "The key concern here is that the chosen CEO has the right development and industrial experience for the new company," Andersson said.

Under the CEO's direction, all of the startup's business and scientific functions are then handled by LU Bio's team of three full-time employees, two consultants and a contract/clinical research organization partners, based on what Andersson called a "virtual development model."

LU Bio typically holds 40% ownership in the startup and prefers to retain the lead role in managing the new company.

"We definitely think that our model is appreciated by the scientists" because it enables the development of their science from concept to company in a rapid, cost-effective manner, Andersson said. "We are now finding that scientists contact us to discuss their potential translatable innovations."

Martin Malmsten, professor of physical chemistry in Uppsala University's
Department of Pharmacy, agreed. "We have had a good collaboration with LU Bio," he said. "We feel that we share with LU Bio a common view on pharmaceutical development based on high-quality research and the necessity to build such a development on sound findings and processes but without being rigid in the latter."

Malmsten and Artur Schmidtchen, professor of dermatology at Lund, are cofounders of
DermaGen AB, a former LU Bio portfolio company that is developing topical antimicrobial peptides to treat atopic dermatitis and other dermatological indications.

In November, LU Bio sold its position to dermatology company Pergamum AB. The terms haven't been disclosed.

"LU Bio has also been helpful in various hands-on contexts, most notably formation of the company, IP support and in various investment aspects," Malmsten said.

Most importantly, LU Bio managed DermaGen with minimal overhead-a factor Malmsten thinks is an essential element of LU Bio's success as a drug development partner. "We brought DermaGen to a successful Phase I/IIa trial of our lead candidate-an antimicrobial peptide to treat atopic dermatitis-in only four years, with only one employee" and less than SEK 40 million ($5.6 million) in total investments, he said.

"We are now focusing on our second joint venture, XImmune AB," Malmsten added.

Malmsten, Schmidtchen and LU Bio launched XImmune in 2009. The startup is developing anti-inflammatory peptides based on endogenous peptides to treat both acute inflammatory indications, such as sepsis, and chronic inflammatory indications, such as chronic obstructive pulmonary disease (COPD).

Crossing frontiers

In addition to the DermaGen exit, LU Bio divested three other companies in 2010 at a loss, leaving it in the red, with XImmune and two other startups-ProNoxis AB and Cantargia AB-in its current portfolio.

ProNoxis is developing anti-inflammatory therapies targeting
 NADPH oxidase 2 (NOX2), and Cantargia is developing antibodies against
IL-1 receptor accessory protein (IL-1RAP) to treat chronic myelogenous leukemia (CML) and other leukemias.1

Since its start in 2008, LU Bio has evaluated about 130 research projects-74
from Lund University and the rest from other Swedish institutions. It has invested in 7 of those projects and has 16 under detailed review, from which it anticipates investing in 1-3 more, Andersson said.

LU Bio's startup rate has varied from five new companies in 2009 to zero in 2010, but "we believe that we will form at least three new companies during 2011," he said.

LU Bio is also conducting discussions with scientists in Denmark and is considering projects and investment proposals from undisclosed parties in Germany and the U.K.

The company has made previous forays outside Sweden. In 2008, LU Bio and Karolinska Development co-invested in Danish startup Cytoguide ApS, which was established in 2007 with a grant from seed fund Novo Seeds. Last year (2010), LU Bio divested its position in Cytoguide at a loss, but the latter company continues to develop a drug delivery platform that targets CD163 expressed on macrophages to treat inflammatory diseases.

Also last year, LU Bio announced collaborations with Sahlgrenska Science
in Gothenburg, Sweden, and investment company Bio-Medisinsk Innovasjon AS in Oslo, Norway. "We envision co-initiating projects with both organizations as well as investing in one another's established projects," Andersson said.

He added: "At the moment it is difficult to say precisely how LU Bio's expertise and experience in Sweden will carry over to its investment activities outside our country. But I think that our virtual development model is sound and that we can do high-quality development work for very little money."

Outside Sweden, Andersson noted, LU Bio must collaborate with the local TTO because it owns the IP, and the company must adapt to the specific terms and conditions required by in-country investors.

Lund University holds a 45% stake in LU Bio. Andersson declined to name the company's other investors.

Haas, M.J. SciBX 4(1); doi:10.1038/scibx.2011.2
Published online Jan. 6, 2011


1.   Lou, K.-J. SciBX 3(36); doi:10.1038/scibx.2010.1080


         Alligator Bioscience AB, Lund, Sweden

         Bio-Medisinsk Innovasjon AS, Oslo, Norway

         Cantargia AB, Lund, Sweden

         Cytoguide ApS, Aarhus, Denmark

         DermaGen AB, Lund, Sweden

         Ferring Pharmaceuticals A/S, Saint-Prex, Switzerland

         Karolinska Development AB, Solna, Sweden

         Lund University, Lund, Sweden

         Lund University Bioscience AB, Lund, Sweden

         Pergamum AB, Solna, Sweden

      PolyPeptide Laboratories Group, Hilleroed, Denmark

         Probi AB (SSE:PROB), Lund, Sweden

         ProNoxis AB, Gothenburg, Sweden

      Sahlgrenska Science Park, Gothenburg, Sweden

         Uppsala University, Uppsala, Sweden

         XImmune AB, Lund, Sweden