Survey says: We're not out of the woods yet

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Compiled By Shawn Lawrence

This marks our sixth Hot Button Issue where we turn to you, our readers, to get feedback on the happenings in and around the biotech and life science sector.

Entering 2011, all signs were positive with biotech seemingly rebounding from the lows of 2009. Financing was returning to more normal levels and the companies that had weathered the storm appeared to be healthier than ever. However, it turns out the optimism that the worst was over was a bit premature.

Based on the results of our latest Hot Button Issue survey, capital is as elusive as ever for our homegrown companies. Fear and caution as opposed to excitement and growth permeates through the sector.

C-Level Executives, Entrepreneurs, Biotech Companies, Contract Research Organization’s and other service provider perspective:
In terms of innovation, Canada continues to enjoy rave reviews as a nation of brilliant scientists conducting groundbreaking research. While we go above and beyond in terms of coming up with great ideas, there’s a catch, we’re not very good at turning these ideas into commercial products. As one reader explained, innovation is not the problem, it’s the process of commercialization and the ability to generate value from our innovations that causes us problems. This, he adds, is why we don’t rank very high on the innovation scale.

It’s interesting to note that on the industry side, there was a definite feeling that Canada doesn’t make use of its own innovations. The potential for making a huge impact is there, but the results are lacklustre.

By most accounts Canada is providing substantial funding in terms of grants to its innovators and this is perhaps why we’re scientifically innovative. But when we asked our readers how the business of biotech is faring in Canada, their response is that it is anemic. Overall, biotech is surviving here, but our SME’s much like in 2009, continue to feel the biggest pinch. Even big pharma has scaled back its operations in Canada.

As far as financing goes, while times have improved since 2008 and 2009, it’s still a difficult task to find capital. With fewer biotech companies and difficulties to access cash, the outlook isn’t great and many of our readers suggest that companies are best served looking elsewhere to foreign markets for assistance.

The sector’s main challenge is obviously still lack of capital. There are fewer and fewer investors willing to take a chance on our industry champions. Moreover there is a lack of comfort at the most senior levels of equity investors, and those that still remember that Canadian biotech is a complex field with a large graveyard of failures.

Not all is bad with our SME’s, especially if you are a private company, the tax system is considered good with such programs like SR&ED’s. But even SR&ED’s alone aren’t strong enough to offset all the financial obstacles SME’s face and for public companies. For them, there is no SR&ED policy in place even though such a policy would help greatly.

An interesting yet controversial notion raised by several responses to our surveys centred on the idea of implementing private health care. Specifically, Canada’s inability to export its new and improved goods and services is matched by its inability to implement its own homegrown technologies. Moreover if we refuse to use our own ideas domestically, how are we supposed to sell our ideas globally? In theory, privatizing health care would encourage the implementation of our own homegrown technologies, while at the same time create a market for our products. Many of our respondents want to see a dialogue across the country on how to adopt and implement innovative technologies as well as a multi-payer system that allows patients to pay out of pocket not only for “unnecessary procedures”, but also for necessary ones.

Another question we posed to our reader’s was whether government was listening to what the industry was trying to tell it. More than 80 per cent said no, while those that said yes, added that while government is listening, they are very slow in taking action.

No matter what the solution is to what ails Canadian biotech, there is no denying that industry is in need of some positive momentum. It should be noted also that industry is not looking to government to solve its problems entirely, but there are many ways government can help. Here are some of the more common answers we were able to gather:
•     As much of a commitment to support commercialization as is given to discovery, “reward your winners”
•     Adopt a flow-through share like vehicle
•     Open up SR&ED to small publicly traded companies
•     Fast track clinical trials based on data from other jurisdictions
•     Quicker response time of Health Canada and patent offices
•     Favourable reimbursement for Canadian innovations
•     Provide incentives for universities to commercialize IP
•     Be open to facilitating capital formations, grants for companies conducting clinical studies, R&D grants for universities for translational research
•     Give investors tax breaks based on amount invested
•     SBIR grants to ease the risk of technology investors

The academic research perspective :
The business side of biotech isn’t the only one feeling the pinch of tightened purse strings. While many exceptional researchers continue to be well supported and make a global impact in many areas, scientists at the early stages of their careers aren’t getting their piece of the proverbial financial pie.

In all, 83 per cent of those who took our survey said that they found granting opportunities harder to come by.

One reader explained it as such: “The downsizing of key government programs such as NRC and the changing of the funding model for NSERC, has made it harder for researchers with a lower publication output to get funding. Researchers at small universities have very small teams, therefore lower overall output than researchers at larger schools. The previous NSERC model was the envy of many other countries and this current model is likely to ensure that research is eventually conducted at only the larger schools.”

As another respondent explains, “the worry is that we’ll start to lose a lot of scientists with solid research but who have not yet reached “rock star” status. Many young students are seeing the writing on the wall and are leaving the sciences for more lucrative and less stressful careers in business, law or medicine.”

The reality is that outstanding researchers and research is going unfunded.

Making matters more difficult is the fact that Life science companies through no fault of their own aren’t willing or able to hire co-op students because of the current economic climate.

Related to this, 61 per cent said that they felt the Canadian Biotechnology and Life Science sector isn’t doing an adequate job of recruiting and retaining talent.

In addition to raising their concerns several respondents suggested ways that government can help. Here are some of the more common answers we were able to gather:
•     Providing tax credits to companies that give these opportunities to students
•     Bigger grants, less piecemeal programs
•     Strategies for the development of strong partnerships between academia and industry
•     Strategies to enhance networking and collaborations among scientists across the country
•     Better equipment for universities for the purpose of training the next generation’s workforce

Most importantly, if government truly wants research and innovation spun out of universities this message must be transferred to granting panels.