THE LAST WORD Very few existing venture capital teams have the requisite experience and motivation to navigate the intricacies of early stage drug development. One needs to recognize that managing development of an Alzheimer’s disease drug is not the same as for a cancer drug and requires deep experience and specific expertise. Hunger and perseverance is also a key factor in the equation which may account for many abandoned drugs that later re-emerge under a new team to great commercial success. As far as investments go, patience and perseverance are not typical characteristics of venture capitalists. The funding gap for a start-up biopharmaceutical company is as wide as it has ever been. This funding gap now refers to the financing required to advance a new therapeutic (generally from a hit molecule discovered in an academic institution) to the point of being able to file regulatory applications to initiate clinical trials. On average, $2 to $3 million is required for this purpose per drug
“The sustainability of the biopharma sector depends on a continual flow of new startups to both feed Big Pharma’s pipelines and to create the next generation of emerging mid-cap companies…(and)…we aren’t starting enough new companies…” – Bruce Booth candidate. A novel oncology drug candidate is probably the cheapest to develop due to a reduced requirement for several safety studies. Prior to company formation or securing matching funds, there are no individual government programs that can come close to filling this financing need. But the landscape is not barren for Canadian researchers. There is early stage proof-of-principle funding available from the CIHR. In addition, the Canadian government has continued to build sizeable infrastructure through the Centres of Excellence program. A staggering $451 million has been awarded through this program to current initiatives in health and life sciences. Several of these Centres of Excellence are able to deploy resources to de-risk novel therapeutics originating from academia. However, to an outside observer, it seems that many of these Centres favour channeling opportunities to large pharmaceutical companies rather than engaging entrepreneurs and creating new companies. In select situations provincial programs to address this funding gap have also been established. Once a company is formed and matching funds are available, other government programs can be accessed. As highlighted in the Jenkins Report, navigating the full breadth of government programs available in Canada for any entrepreneur is a time-consuming and daunting task and simplification is urgently needed. Given the current prevailing response to economic realities by focusing on out-licensing drug candidates to multi-national pharmaceutical companies and bypassing the process of company creation or supporting 30 BIOTECHNOLOGY FOCUS DECEMBER 2011 / JANUARY 2012
company growth, is the dream of building a sustainable biopharmaceutical industry in Canada dead ? As Bruce Booth (Partner, Atlas Venture) wrote in his Sept 9th blog (lifescivc.com) on Our Shrinking Biopharma Ecosystem: “The sustainability of the biopharma sector depends on a continual flow of new startups to both feed Big Pharma’s pipelines and to create the next generation of emerging mid-cap companies…(and)…we aren’t starting enough new companies…”. Imagine that if this is the situation in the U.S., our policies in Canada have further exacerbated the problem. Given that we all depend on the biopharmaceutical sector to deliver new therapeutic innovations, and that this sector represents only 25 per cent of BIOTECanada’s membership, perhaps we need a dedicated voice to represent the interests of home-grown Canadian biopharma companies. We also need to fill the gap left by the demise of labour sponsored investment funds. Some measures to strengthen an ecosystem that can boost start-up activity include: 1. Universities need to recognize the efforts of researchers in patenting their discoveries through the tenure process. 2. Universities and granting agencies should devote a suitable percentage of research grants/budgets to the protection of intellectual property. 3. Universities should engage entrepreneurs to help manage the commercialization of inventions. 4. The federal and provincial governments can create start-up loans with no interest and generous repayment provisions for experienced entrepreneurs. 5. Universities should engage alumni towards the establishment of seed funds for university-originated inventions. These funds would only support proof-ofprinciple research and preclinical development. 6. The federal and provincial governments should support professionally-managed university seed funds through direct investment and tax incentives for other investors. The above is not unique to the biopharma sector and can only help to rebuild the start-up pipeline. True sustainability of the biopharmaceutical sector will depend on learning from the past and establishing new models, new approaches, and new paradigms. (See Bruce Booth’s October 12th blog for interesting perspectives.) Perhaps we need to learn how to consistently hit singles and load the bases before aiming for the bleachers. Our primary focus needs to be on generating investor returns in a relatively short period of time, say 5 years from seed investment. Happy investors will snowball and will direct more risk capital for the sector. Cognovie Inc. is engaged in life science business development consulting and start-up company formation. It readily identifies with Bruce Booth’s tagline - “a biotech optimist fighting gravity”.
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