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the last woRd
By Brad Thompson
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Brad thompson Chairman, BioteCanada President & CEO, Oncolytics Biotech Inc.
There is no doubt that the Canadian biotechnology industry is experiencing sustainability issues in this challenging economic environment. In June 2011, Ernst & Young published a report entitled Beyond borders: Global biotechnology report 2011 explaining that Canadian biotech companies did not capture their share of the global capital raised in 2010, while private biotech financing in Canada is at its lowest level in 10 years.
Capital comes from four basic sources – government, public capital markets, venture capital (VC) funds, and industry partners. If the funds available from any of these sources are substantially reduced, then a gap is created in the continuum of funding necessary for a strong industry. When funding is obtained it comes with a price tag, as each source of funds expects something in return.
Government can provide funding in a variety of ways: academic funding provides the science and technology that is essential for the long-term success of the industry, while commercialization funding has more potential short-term impact and acts as a supplement to capital market funding. The federal and provincial governments can also stimulate funding directly through investment initiatives or indirectly through tax incentives. In return for its funds, the government expects job creation, revenue from personal and corporate income tax, as well as return on their direct investments.
In the public capital markets, funds flow to where there is an acceptable balance of risk and reward. The biotechnology industry is an inherently high-risk investment opportunity which generalist investors tend to shy away from in uncertain economic climates such as these.
Canadian venture capitalists dedicated to biotechnology are a source of funds, but have faced several challenges in recent years including a decline in funds earmarked for Canadian biotech, with VC money being allocated towards technology companies with shorter development timelines than traditional biotech. In addition, institutional and retail investors have grown increasingly reluctant to invest new funds in biotech in the current economic climate, opting instead for lower-risk investments.
In these less than ideal circumstances, it is our job to identify what we can do to spur the future success of the Canadian biotech industry. It is our responsibility to encourage renewed interest in all of the incredible leadingedge science and technology we develop in Canada, and bring the funding from the capital markets back into Canadian biotechnology. While we cannot do anything about the sovereign debt crisis and all-time-high gold prices, I am confident that we have the power to successfully develop new products and companies which will generate value for shareholders and will bring investors back to the sector.
Capital alone is not sufficient to create a successful industry - it needs to be properly combined with science, people and partners. Ernst & Young’s report identifies four complementary tactics biotech companies should use to ensure their survival despite a challenging environment. One of these tactics is to “build new competencies”, with suggestions to “look inward” and “get business into fighting form”, so why not look inward and take advantage of the wealth of experience we have in our industry veterans?
Current and former Canadian biotech executives represent an invaluable resource to our biotech companies, both private and public. I believe that it is our job to give something back and get involved. Experienced executives can bring immense value in an informal or formal manner, by providing mentorship, participating on advisory boards or even at the board director level. I would encourage companies, no matter the size, to seek advice and involvement from experienced biotech executives, and I encourage my colleagues to take the time to help out our industry by providing their knowledge and expertise.
There is no simple solution to the Canadian biotechnology industry’s problems. While increased funding is the simplest solution to enable Canadian biotechnology companies to emerge from this challenging environment, funding on its own doesn’t guarantee success. The industry will have to build on its strengths to develop short-term and longer-term strategies for success, and one of those strengths is the accumulated experience of the people in our industry.
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