Good business on life’s frontier

At $99 million, the capital last year ranked in third spot for life science investment among Canadian cities, ahead of Toronto by more than 20% and in a tight race with Montreal ($111 million) and Vancouver ($109 million).

Cover.jpgBy James Bowen
From SCAN's Print Edition

Biotechnology has been around since people first began raising crops and livestock in the Fertile Crescent region some 10,000 years ago. Animal breeds were crossbred. Plant varieties were cross-pollinated. It is an ancient science; only the word is new. Or relatively so. Hungarian engineer Karl Ereky coined “biotechnology” in 1919 to describe a particular fermentation process. The meaning has since broadened to cover a diverse set of technologies and technical processes used in areas such as drug research, bioprocess development, DNA analysis, gene discovery, agriculture and environmental products. Biotech has only recently begun to reveal its potential. Because life is endlessly diverse, biotech companies have often had many potential product and research directions to go in. The National Research Council estimates that the biotech industry in Canada includes 2,500 life science organizations and over 200,000 jobs, the preponderance of which are in Ontario and Quebec. Quebec is home to roughly 180 private biotech companies, most of them in Montreal. Ontario boasts some 144 companies doing $500 million in R&D, much of which is coming out of U of T. Chaim Birnboim, professor of medicine at uOttawa, says that because biotech is made up of different sectors, venture capitalists tend to specialize in one area or another. This means that support structures, such as financing and go-to-market expertise, often vary from one biotech sector to the next. As a result, biotech clusters such as Ottawa’s and Montreal’s could be, for the most part, distinct.

In 2006 Ottawa companies and institutions engaged in life sciences, of which biotech is a major component, received investment totaling $99 million, according to Michelle Scarborough, director of investment and commercialization for the Ottawa Centre for Research and Innovation (OCRI). She notes that this ranked the capital last year in third spot for life science investment among Canadian cities, ahead of Toronto by more than 20% and in a tight race with Montreal ($111 million) and Vancouver ($109 million). Such support bodes well for the future of local biotech. It speaks directly to the disproportionate amount of life sciences activity in the region, although it is certain that the results this year will not be as impressive unless an unanticipated Christmas present should arrive. Another sign of the strength of the life science cluster is the growing profile of BioNorth, an international biotech and life sciences conference held each autumn in Ottawa.

Ian Curry, president and CEO of DNA Genotek, believes we are entering a new era of biotech research that will take us to new frontiers in terms of changing our own biology. He agrees with the scientists who assert that over the next decade or so, we will see medicine and health treatments tailored to our individual DNA. Drugs will target specific patients, unlike the generic medicine we use today. Dr. Wilfred Keller, research director at NRC’s Plant Biotechnology Institute, sees a boundless future for biotech in the field of medicine. “We are at a point in time where a seamless interface is developing between the plant (flora) and health biotech sectors, offering us new potential for a quality of life as never before,” he says.
The accumulating biotech knowledge is as massive as it is diverse. Professor Birnboim points out that there are over 30,000 academic journals publishing biotech research results. This abundance of information often results in contradiction and confusion. “It’s no wonder,” says Professor Birnboim, “that we are unsure of what’s good or bad to consume, or which treatment is the right one, with all that’s reported in the media.”

Biotech discoveries in one niche can have rapid worldwide impact and staggering success. For instance, a new treatment for diabetes, a disease that affects millions, would quickly find a huge, global market. But although biotech discoveries can spread fast and far, their quick dissemination is often delayed by regulations. This red tape affects marketing strategies and investment needed by startups.

Another problem for startups occurs when narrowly focused research has numerous applications. This can make it difficult to predict where a discovery’s most beneficial and profitable potential lies. Graham Burton, president and CEO of Ottawa’s Chemaphor, knows this problem all too well. He and his staff have been delving into the properties of beta-carotene, found in many fruits and vegetables but most commonly associated with the carrot. They have discovered a wide range of uses for the substance, from human and pet nutritional supplements to skin creams and cancer pharmaceuticals. Promising early research focused on a treatment for cancer and the company initially looked to find funding in that direction. But it eventually scored financing by developing non-antibiotic feed additives for promoting growth in animals.

Another troubling issue, according to Professor Birnboim, is inadequate government support for transferring discoveries from lab to entrepreneur. Even though discoveries in government and university labs come at great cost, little thought is given to how to exploit them commercially through transfer to private enterprise. “What the biotech industry needs,” he says, “are people [in government] who understand both science and its commercial potential.”

Addressing the issue of financing a startup, Mark Adam, CEO and founder of AgaPharm, says that although it typically takes a lot of money to put a biotech company together, a 10 times return on investment is not an unreasonable expectation. But it isn’t easy going. Mr. Adam, a scientist by training, laments spending so much time raising money at the expense of time on product development and marketing. The global aspect of the business means he must know not only the needs of the global marketplace, he must stay on top of everything from research done in Montreal and VC activity in the U.S. to employees who reside in other countries and outsourced manufacturing. Biotech takes more time to develop a product and get to market. A pharmaceutical product might take years and large sums to get regulatory approval, which might still be denied. Biotech companies need investors with deep pockets and patience. ROI in three to five years isn’t typical of biotech.

Peter Brenders, president and CEO of BIOTECanada, points to inherent reasons why Canada should develop a strong biotech industry. Perhaps most important is that biotech draws upon natural resources for material to develop and manufacture products and Canada’s unrivaled natural resource interests would benefit from a strong domestic biotech industry. Because resources are here, manufacturing of biotech products might logically be located here too. And biotech products serve as an entry into many other industries, including automobile, textiles, forestry and food. But Mr. Brenders cautions that as foreign countries develop their respective biotech industries, “it will become increasingly hard for Canadian biotech companies to compete for financing,” noting that Brazil already has a $50 billion biotech strategy in place.

James Bowen, PhD, PMP, CMC is an Ottawa technology entrepreneur and adjunct professor at the University of Ottawa’s School of Management.

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