Survey says: Help is needed for Canada’s Biotech industry, and fast.

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By Shawn Lawrence

In a follow up to our previous Hot Button Issues, Biotechnology Focus has once again turned to readers asking for their comments and thoughts on the state of Canada’s biotech sector. This time we created two surveys, one meant for C-Level executives, the other for researchers at the bench. The goal, to see if industry and academia share the same concerns, the same ideas, to better understand what they believe the Canadian government needs to be doing when it comes to biotech.

So what exactly can we pull from the survey? Well for starters Canada’s biotech industry is in crisis. In fact the big topic of discussion among our readers was the number of Canadian companies going out of business. We anticipated that things were bad, but we never expected things had gotten this dreadful. In terms of what’s gone wrong, the economy has done the industry no favours, in fact while there are positive signs that we may be coming out of this recession, the effects of the global economic downturn are still being felt everywhere in biotech, both in the market and at the bench.
So what questions did we ask? In our researcher survey we asked researchers five questions. First, what is the state of research and innovation in Canada? Second, what personal top three priorities would they like to get before government? Third, in what ways can government help to encourage creativity and innovation in Canada? Does government recognize the important role science can play in the economy of the future? And last, how has the current economic crisis affected them in terms of getting grants and operational funding?
Their response was loud and clear, cutbacks in operational funding have indeed taken a major toll in our labs and research institutes. Of those researchers polled, 66.7 per cent stated that they were significantly impacted, while another 20.8 per cent said they had seen some negative effects. Moreover, 83.3 per cent of our readers said that they found granting harder to come by.
“Government pretends it is investing, but the operational budgets are getting smaller,” said one of our readers in direct response to government’s claim that it is dedicating more funds than ever to research. He went on to say while the $5.1 billion (the amount allocated in the budget), sounds impressive, a lot of this money is being dedicated to bricks, mortar, equipment, repairs and operations (electricity, water, etc.). “All of these are important but this is funding for infrastructure and does not mean that research of any type will be conducted,” he said.
Earl Brown, a professor at the University of Ottawa also had much to say about the Canadian government’s claim stating; “In order to stimulate scientific productivity and maintain a healthy competitive scientific establishment, government must fund research in a concerted way that demonstrates an understanding of the scientific enterprise. For example, pumping money into infrastructure without increasing operating funds are the actions of an ill-informed government.”
Luc Bissonette, Centre de recherche en infectiologie de l’Universite Laval said much of the same, stating that while he believes that the level of Canadian research is comparable to the best countries in the world, the recent position of the government to invest in infrastructure does nothing to help this research go forward towards commericalization.
“Scientists don’t need new laboratories, they need sufficient funds for maintaining their research teams and projects, to see them through to finish,” he said.
Despite the negative feedback, 54.2 per cent of researchers polled said that they did feel that government recognized the important role science, technology and innovation could play in the economy of the future. Such confidence from the industry side however was no where to be found.
Of those readers polled in our C-level survey, approximately 79 per cent believed that the government wasn’t listening at all to what the life science field was trying to tell it. Complicating matters is the fact that over the past few months many biotechnology companies have been forced to massively scale back, cut jobs, gone dormant, some have even gone out of business. The picture that has emerged is bleak and demoralizing. These are very difficult times indeed.
BIOTECanada and PricewaterhouseCoopers recently announced findings of their own in a survey released this summer confirming these facts. Specifically, the survey found that seven out of 10 biotech’s wouldn’t have enough cash to fund a year’s worth of operations. In this same survey, 78 per cent of respondents said raising capital was the greatest challenge for the Canadian biotech industry.
The questions we posed in our C-Level survey were designed to try and get to the heart of this problem. We asked C-Level execs how the business of biotech was faring in Canada, what personal top three priorities C-Level execs would like to get before government and lastly, in what ways can government help to ensure that Canada doesn’t get left behind by its competitors
“We need cash quickly,” said Axela president and CEO Rocky Ganske in response to all three questions. “More than half of Canada’s biotech companies are operating with less people due to lay-offs; most have less than six months of cash left. While I do think government is aware of the issues, I don’t think the urgency of the situation is understood based on the timetables of solutions we’re seeing.”
Ganske wasn’t alone in his desperation. The majority of CEO’s that took our survey provided similar answers and even investors that took the survey said that they were finding that there was no money out there in both domestic and foreign markets for Canadian biotech’s.
“To see how bad things have gotten one only has to look at the recent Desjardins Securities report where the flow of venture capital fell from $637 million a year ago to a paltry $150 million in this years first quarter,” said one investor who wished to remain annonymous.
This VC shortage has directly played a role in the downfall of many of Canada’s small and medium biotech enterprises (SME’s). Those that are surviving are using what little money they have to protect Intellectual Property (IP) and retain key talent. As such, many C-Level execs commented that the creation of better support programs for SME’s was among their personal top three priorities they’d like to get before government. This includes finding new sources for funding, increasing foreign investment interest by removing tax barriers from outside investors, addressing weaknesses in current IP laws and creating more attractive science policies for big pharmas. Overall, the general consensus was that government not only needed to do more to support the Canadian life science industry in these areas, but also make more well-informed decisions when dispersing new funds and perhaps being more open to industry input when it comes to dictating Canada’s science strategy.
As Eric Cook, CEO and executive director at the Research & Productivity Council explained, generating ideas is not Canada’s challenge, getting those ideas to the commercialization stage is. The culprit says Cook is an out-of-balance strategy that results in the majority of research funding targeting fundamental research and very few programs designed for applied research.
“We are under performing with the conversion of ideas into value. For that we need a balanced innovation strategy that funds both academic and applied research. At the moment, IRAP is the number one business ranked applied research program. Its budget was just doubled to $200M. That was a good move but the total federal investment in R&D this budget will be $5.1B. meaning the majority of the remaining $4.9B will be spent on fundamental or academic research, but it is business and industry that have the best ability to convert ideas into value. Universities’ number one contribution to Canada’s innovation performance is, and should be, the production of top quality graduates that industry can hire. However, our current situation has universities receiving the most research funding, prioritizing research interests while business is being held accountable for innovation performance. Accountability for performance needs to be married to the funding recipients,” he said
Transition Therapeutics CEO Tony Cruz added to this idea stating that industry as well as government needs to get serious about this issue by better identifying the winners and the losers, and by turning to experienced individuals for the answers.
“We need to build on our great science and scientific institutions in Canada. It’s time to get serious about creating wealth in the industry by increasing support for applied research; that is research that is stimulated by market-identified, industry-lead opportunities. This means funding for research through National Centres of Excellence, ABIP programs and the like need to be streamlined. The current bureaucracy of the system has failed; it has lead to the funding of mediocrity and almost guaranteed failed programs that have done nothing to help the industry at all. We need to create funding opportunites with experienced and successful people as the decision makers,” he said.
Another key area in which readers felt that government could actively aid the industry in is with the current human resources shortage. Readers suggested more targeted initiatives to bring foreign experienced executives to come work for Canadian companies, as well as the development of internal mentoring programs or support networks that provide training opportunities in business planning. Research grants used specifically for training purposes wouldn’t be out of the question. The goal they said is to keep technology and scientists in Canada.
Likewise, many readers felt that the monetization of tax credits as proposed by BIOTECanada would be a huge help to saving jobs and allowing return on Canadian investments. To help early stage companies readers suggested that Canada initiate Small Business Innovation Research (SBIR) grants. Under this plan, Canada would establish a SBIR program similar to the U.S. program in which a small percentage (currently 2.5%) of the total extramural research budgets of all federal agencies in excess of $100 million are reserved for contracts or grants to small businesses. Such a program would go a long way to helping with the pressures Canadian biotech’s face when it comes to finding financing.
The last section of our C-Level survey gave readers the chance to offer up some of their own tips to survive the economic crisis. Suggestions were fairly moderate and included providing services for hire, being open to M&A, and although not conducive to keeping companies and products here in Canada, some readers suggested that companies move their operations to greener pastures.
Overall, the message is clear. Both the industry and academia are feeling the crunch. Likewise, both are turning to government for some sort of sign that they are not alone. Perhaps, Ulli Krull, a member of our editorial board sums it up best; “Creativity and innovation should be treated as goals for both academia and industry, while recognizing that the route to sucess for each is distinct and different. Both need active support, with a clear signal that the federal government sees building the life science industry as a priority.”