11 minute read
What’s the buzz in Canadian
wHat’s tHe buZZ In
canaDIan BIOtech?
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This marks our eighth ‘Hot Button Issue’ in which we try to get to the bottom of all the issues facing the biotechnology and life science industries.
Through our surveys, our goal is to engage you, our readers, in the hopes that you provide insight into the happenings in and around the biotech space. We listened to your responses and tailored much of the other editorial to what you said were the hottest topics in Canadian biotech.
Turning back to the survey, this time around we divvied up the responses into two streams: stream one focusing on the Biotechnology Industry, including C-level execs, entrepreneurs, investors, service providers, venture capitalists and other stakeholders; and stream two for researchers, innovators, lead investigators, scientists, research organizations and academia.
While the questions may have differed from survey to survey, the responses showed that despite your various affi liations public, private and other, the majority share the same concerns, face the same challenges and are looking for solutions that will make Canada’s biotechnology sector stand out globally.
so wHat dId our readers Have to say about tHe Industry?
C-Level Executives, Entrepreneurs, Investors, Service Providers, Venture Capitalists and other Stakeholders Results:
Despite the fi nancial challenges the industry as a whole is facing, there is a sense of optimism coupled with hope for new opportunities among those who took part in this survey.
On the research front Canada is making its mark in such areas as DNA diagnostics, next generation sequencing, monoclonal antibody production, vaccine development and regenerative medicine.
As such, the current state of research and innovation (more so the research side) was graded very well, with 17.9 per cent of the vote calling it excellent, 32.1 per cent describing it as very good and 25 per cent choosing the average option. Respondents point to the critical mass of quality research, the country’s legacy in such fi elds as regenerative medicine and medical breakthroughs such as insulin to back their answers. Likewise, many of your comments indicated that there is plenty of money going into research in Canada.
Again the criticism was that the fi nancial support just isn’t there for the development end of R&D. A good refl ection of this is that our academic research in Canada is considered top-notch, but our innovation performance is facing constant criticism. For example, when The Science, Technology and Innovation Council released its report State of the Nation in 2010, it showed that research and development in Canada, specifi cally the latter was low by international standards. The fear is that in many instances just as companies are about to reach a point where they start to contribute to the innovation economy, but due to a lack of funds are forced to decide between closing-down or moving outside of Canada (or if they’re lucky being acquired by foreign interests). As one respondent explained, “this behavior would be akin to the Canadian government paying for the construction of new oil wells, but then abandoning them and letting foreigners use them to pump out and mine all the oil without paying any (or only minimal) taxes to Canada.”
It’s obvious then that industry is challenged by the lack of available capital. This is not surprising to us, as this message has been beaten to death over the course of our past seven hot button issues. Nothing has changed on VC front either with extremely conservative attitudes towards the industry prevailing. The industry is always at a disadvantage in dealing with the VC community, for starters biotech companies typically require more funding over a longer period of time compared to other knowledge-based industries, and it can be quite diffi cult to make VC’s understand the validity of these technologies. With these facts in
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mind, the majority of you responded to our question on how the business of biotech was faring with some troubling statistics. In all, 37 per cent of you said that the industry was faring below average and 25.9 per cent of you gave the industry the lowest possible grade.
Again, these low scores are tied to the funding gap that has come to be known as the “valley of death” stage in financing. This is the stage when they have high capital needs but little revenue. Canada does a good job of initiating start-up companies but as a Canadian biotech company needs more than $10 million to grow, there is almost no way to get it from domestic sources. Put plainly, our capital markets are unable to support growing them into full commercial enterprises and more needs to be done to help companies reach the stage of commercialization. As an example, in 2000, the height of venture capital activity in Canada, $5.9 billion was invested in 1,007 start-ups (Thomson Reuters). Last year, just $1.5 billion was raised by 444 Canadian firms. Clearly with venture capital activity dwindling, the money just isn’t there to help business reach their goal of commercialization.
So, what’s the solution? Our readers made some suggestions starting with finding new ways to revitalize Canadian VC investment, such as policy changes and adding more tax incentives for investors. As one reader put it, “if government was to institute matching funds similar to that used by the New Zealand Investment Fund or the Israeli Heznek Fund as detailed in the recent Jenkins report, it would provide a base foundation upon which the life sciences industry could begin to grow in Canada.”
Suggestions were also made in other areas non-VC related such as flow-thru shares again being proposed, reinstating and expanding the scope of pre TPC (Tech Partnerships Program) and ensuring more money filters through NRC IRAP (under the current model IRAP runs out of money by mid-year).
Readers also suggested forgoing the VC community, and targeting Angel Investors. Many note a very real trend of Angel activity in financing start-up, spurred by FedDev matching Angel and even VC investing through its various programs.
Most importantly, our readers even offered tips to survive during these austere times, such as making sure you network with your peers, seek strategic alliances both in the public and private sector and never be afraid to partner. As the old saying goes, it’s not only what you know, but who you know.
One question we posed to our reader’s was how we can improve public awareness and support of the sector. The first step said many was addressing those who have an axe to grind with the industry directly, dispelling the myths they spread with the facts publicly either through ad campaigns or reaching out to media outlets to emphasize the potential benefits to Canada of investing in life sciences.
Additionally, with the 2012 Budget announcement expected on March 29, 2012, the Jenkins report was also top of mind among our readers. Anticipating this sort of response, we took a preemptive step asking our readers in our survey whether they agreed with recommendations made by the Jenkins report, and most were on the fence. As one respondent put it, the devil is in the details. Specifically, the idea of supporting business oriented research & development should be a priority, but among the many recommendations, changes to the SR&ED model caused the most uproar. One respondent even called these recommendations a travesty, while others said that converting to a labour-based model was ludicrous. “The recommendations benefit large tech companies who have large payrolls, while in biotech, the model is to outsource and have smaller payrolls. Moreover, many biotech companies rely on SR&EDs for equipment purchases that are part and parcel to the R&D and not labour costs,” said one respondent.
Finally, we asked our readers both in this category as well as those that took the other survey whether they thought government was listening to what the sector was trying to tell it. A resounding 70.4 per cent of this group
BuSIneSS SuRVeYS
State of the Industry, how business is faring
excellent: 0% above average: 7.4% average: 29.6% Below average: 37% Poor: 25.9% State of Research and Innovation in canada
excellent: 17.9% above average: 32.1% average: 25% Below average 25% Poor: 0%
25.9%
37% 7.4%
25% 17.9% 29.6% 25% 32.1%
Is Government listening to what the life science field is telling it?
Yes: 29.6% no: 70.4%
70.4% 29.6%
current Industry Job Outlook
excellent: 0% above average: 3.7% average: 33.3% Below average: 37% Poor: 25.9%
25.9%
37% 3.7%
33.3%
Financing Opportunities:
harder to come by: 83.3% easier to come by: 0% the Same: 16.7%
16.7%
83.3%
25.9% ReSeaRcheR SuRVeYS
what is the state of Research and Innovation in canada?
29.6% 37%
excellent: 3.3% above average: 33.3% average: 40% Below average: 16.7% Poor: 6.7%
6.7% 3.3%
16.7%
40% 33.3% 25% 17.9%
Do you feel that 25% government is listening to 32.1%
what the life sciences fi eld is telling it?
Yes: 31% no: 69%
69% 31%
Do you fi nd granting opportunities:
29.6% 70.4%
harder to come by: 82.1% the Same: 17.9% easier to come by: 0%
17.9%
82.1%
said “no” while 69 per cent of the latter group (shown below) said “no.”
For starters, it was surprising to fi nd that the buzz on this side of the divide mirrored the industry’s Hot Button Issues.
Canada strongest attributes according to this lot are our well-educated workforce: some of the best scientifi c minds in the world, leading universities, research institutes and hospitals coupled with great infrastructure. Our weakest attributes are poor translation to commercialization and little or no funds for development meaning research does not often become harnessed into industry relevant products. The culprit, an unfriendly environment for the sustainability of start-up companies in this space. From this one can conclude that the public sector understands the plight of the private sector, but what about their own challenges, concerns and hot button issues?
Many of their issues are directly tied to government’s ability to support research and innovation in Canada. Specifi cally, their concerns aren’t so much how much money is going into R&D in this country but rather how it is being allocated. It is on this point really that their opinions differ from that of their private sector counterparts. Specifi cally, after years of funding basic research they’ve done a complete reversal, funding industrial partnerships while diminishing support for basic scientifi c research. Respondents were insistent that research dollars should be awarded based on the quality of the research proposal (as evaluated by peers) and not simply based on commercialization potential. While this may sound like a mixed message, the suggestion does have some merit in that it recognizes that by making government science enslaved to current technology needs, you run the risk of killing true innovation.
Either way, respondents to this survey did in fact put together a wish list suggesting M ways to improve on current funding models.
The suggested changes begin at the top, where our readers want government to create a senior cabinet post responsible for science. Moreover, they want more transparency and discipline in the funding models. Support projects right through completion rather than abandoning them half way through and increase funding to NSERC for discovery grant programs.
Likewise, industry driven research does still need to be funded. It’s not a case of one or the other. Rather, our readers would like to see a balance struck between basic research and applied research, and perhaps the best way is through collaboration. For example, government can fund partnerships between industry and academia encouraging collaboration through open research agreements. Such a model has worked before as evidenced by the success of the Centre for Drug Research and Development and the NCE Centres of Excellence for Commercialization and Research Programs, as well as organizations such as the Quebec Consortium for Drug Discovery (CQDM), and other innovative public-private partnership models.
25.9%
37%
C Y CM MY CY CMY K Saskatchewan is not just a pretty place. We are a HAVE province, with serious science capacity and a competitive business atmosphere. Starting or growing a bio-based business? Take a look at Saskatchewan. Chances are, we have what you need.
For more survey results information visit our commercIalIZatIon web Portal at www.bioscienceworld.ca
33.3%
83.3%
