Canada's biotech firms burning through their remaining cash
http://www.nationalpost.com/story.html?id=1768556
Giuseppe Valiante, Financial Post
Canada's biotechnology companies are burning through their remaining investment capital, firing highly skilled workers and suspending promising research due to the lack of funding, industry experts say.
At the beginning of 2009, 50% of Canada's biotech companies had less than one year's worth of cash left and more than 25% had less than six months' worth, according to a poll by BioteCanada.
A new report on the industry is expected before the end of the summer, and if capital markets remain closed, more of Canada's biotechs will sell out to multinationals and the country risks losing more skilled science workers, said Peter Brenders, president and CEO of BioteCanada, the Ottawa-based umbrella group that represents Canada's biotech sector.
"From a financial health point of view, it is extremely difficult right now," he said.
Mr. Brenders said the vast majority of investment capital for Canada's biotechs is now coming from outside the country.
BioteCanada lists 840 biotech companies in the country, employing directly and indirectly 103,000 people. The industry has $78.3-billion annual revenue, 6.4% of Canada's GDP.
Quebec's industry is faring especially badly. According to BioQuebec, the Quebec setor, formerly No. 1 in the country, has fallen behind Ontario and is quickly losing ground to British Columbia. Sixty-six per cent of Quebec's biotech firms polled claimed to not have enough cash to last through to 2009, said Frank B?raud, director of policy and strategic development for BioQuebec, which says it represents companies and R&D centres in the province.
"It was always difficult to raise funds for our industry, but since the middle of last year, it's been dramatic," Mr. B?raud said.
Six Quebec biotechs closed in 2008, many of the ones left have cut jobs and dramatically scaled back research, and Mr. B?raud said he expects the 2009 stats to be just as bad.
Canadian biotech companies are usually entirely funded by venture capital firms and are small, with 15 to 20 employees, who are responsible for the early stages of drug research. Many biotech firms that received funds a few years ago when the economy was better have discovered there is no longer any money available to continue their research.
David Lank, Director Emeritus at McGill University, and co-founder of Helix, Canada's oldest venture capital firm, said the industry's problem is a matter of the "pigeons coming home to roost."
Mr. Lank said when many of these firms were being financed five to 10 years ago, "everybody was flush with venture capital money. Biotech was going to solve all the problems of the world. We had this idolatrous worship of science," he said.
Now many of these firms are in serious trouble. BioQuebec's annual report cites that out of 110 "healthy" biotech firms in 2001, 67 are left.
Mr. Brenders said government can do three things to help the industry:
- Institute a restricted loan program for biotech companies to tap into when the market is down, which will be paid back when venture capital picks up. The money will be reserved solely for biotech firms to keep Canadian jobs, and the government will make a little profit on the loan and keep skilled workers who will offer a higher tax base;
- Exempt all direct investment into biotech industries for a specified period of time from capital gains tax; and
- Strengthen the incentive to keep jobs in the country by gutting the Canadian Controlled Private Company rules that restrict tax breaks for foreign companies investing in the industry.
Mr. Brenders said the first idea is getting traction at the federal level, but the last two less so.
Mr. Brenders said if market trends continue, "we will see some companies disappear. Hopefully we will see the talent stay, but there is no guarantee of that."
http://www.nationalpost.com/story.html?id=1768556
Giuseppe Valiante, Financial Post
Canada's biotechnology companies are burning through their remaining investment capital, firing highly skilled workers and suspending promising research due to the lack of funding, industry experts say.
At the beginning of 2009, 50% of Canada's biotech companies had less than one year's worth of cash left and more than 25% had less than six months' worth, according to a poll by BioteCanada.
A new report on the industry is expected before the end of the summer, and if capital markets remain closed, more of Canada's biotechs will sell out to multinationals and the country risks losing more skilled science workers, said Peter Brenders, president and CEO of BioteCanada, the Ottawa-based umbrella group that represents Canada's biotech sector.
"From a financial health point of view, it is extremely difficult right now," he said.
Mr. Brenders said the vast majority of investment capital for Canada's biotechs is now coming from outside the country.
BioteCanada lists 840 biotech companies in the country, employing directly and indirectly 103,000 people. The industry has $78.3-billion annual revenue, 6.4% of Canada's GDP.
Quebec's industry is faring especially badly. According to BioQuebec, the Quebec setor, formerly No. 1 in the country, has fallen behind Ontario and is quickly losing ground to British Columbia. Sixty-six per cent of Quebec's biotech firms polled claimed to not have enough cash to last through to 2009, said Frank B?raud, director of policy and strategic development for BioQuebec, which says it represents companies and R&D centres in the province.
"It was always difficult to raise funds for our industry, but since the middle of last year, it's been dramatic," Mr. B?raud said.
Six Quebec biotechs closed in 2008, many of the ones left have cut jobs and dramatically scaled back research, and Mr. B?raud said he expects the 2009 stats to be just as bad.
Canadian biotech companies are usually entirely funded by venture capital firms and are small, with 15 to 20 employees, who are responsible for the early stages of drug research. Many biotech firms that received funds a few years ago when the economy was better have discovered there is no longer any money available to continue their research.
David Lank, Director Emeritus at McGill University, and co-founder of Helix, Canada's oldest venture capital firm, said the industry's problem is a matter of the "pigeons coming home to roost."
Mr. Lank said when many of these firms were being financed five to 10 years ago, "everybody was flush with venture capital money. Biotech was going to solve all the problems of the world. We had this idolatrous worship of science," he said.
Now many of these firms are in serious trouble. BioQuebec's annual report cites that out of 110 "healthy" biotech firms in 2001, 67 are left.
Mr. Brenders said government can do three things to help the industry:
- Institute a restricted loan program for biotech companies to tap into when the market is down, which will be paid back when venture capital picks up. The money will be reserved solely for biotech firms to keep Canadian jobs, and the government will make a little profit on the loan and keep skilled workers who will offer a higher tax base;
- Exempt all direct investment into biotech industries for a specified period of time from capital gains tax; and
- Strengthen the incentive to keep jobs in the country by gutting the Canadian Controlled Private Company rules that restrict tax breaks for foreign companies investing in the industry.
Mr. Brenders said the first idea is getting traction at the federal level, but the last two less so.
Mr. Brenders said if market trends continue, "we will see some companies disappear. Hopefully we will see the talent stay, but there is no guarantee of that."