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Moving the Industry forward

By: Grant Tipler - Grant Tipler is the head of the Life Sciences & Health Services team of the Knowledge Based Industries group at RBC Royal Bank and past President of TBI
Let's face it - the last year has been a period of retrenchment for the life sciences industry. Whether you consider this to be a positive or negative turn of events depends on which side of the fence you're on. On one side, for example, a number of companies without access to significant capital have had to lay off employees to preserve their programs and to protect their intellectual property. On the other hand, some weaker companies have merged with stronger partners to create new organizations that offer a greater depth and breadth of programs to their customers.

Going forward, I do not believe the rising tide of economic improvement will raise all boats. The reality is that there are a number of organizations that will need to access more capital over the next year, and certainly investors, whether they are angels or venture capitalists, will remain cautious. So what can companies do if this is the case?

No matter what the state of the economy, the basics of raising equity money still prevail and you will still need to consider the following:

What pain are you curing or what un-met need are you solving?
What is truly unique about your business?
What evidence in terms of clinical studies or new outstanding partners validate your science?
What milestones have you achieved with the money raised to date?
What are you hoping to achieve with the new capital?
What is the background and experience of the leadership team?

It is critical to focus on who will buy your product. Ask yourself whether or not you can identify your buyers and how you will compete when you go to market. Doug Barber, Distinguished Professor in Residence at McMaster University did a study on 18 high technology companies that have disappeared, and he was shocked that eight of the eighteen companies had no sales. Moreover, seven of the companies could not identify a potential customer for their product, let alone what price a customer would pay. Remember, revenue excites investors and bankers!

In my view, things will improve over the next year. For example, many of Canada’s provincial governments have created and announced new funds for investment in technology companies and a few venture capitalists have received commitments from investors.

There are a number of changes to existing government programs that can help substantially alter the operating environment across Canada, and promote and encourage Life Science companies to operate. However, as an industry it is up to us to decide what we truly want.

Here are four ideas that have been discussed by a number of the industry’s top CEOs, CFOs and CSOs:

1. In Ontario, amend the Biopharmaceutical Investment program to a lower threshold. This would enable Ontario-based contract manufacturers and research organizations to do work for Canadian and international companies if it creates new jobs and/or capabilities. It would also enable the fund to invest in collaborations between Pharma and Life Science companies or Life Science companies and researchers.

2. Extend research grants to companies for applied research to move programs forward. At the moment, companies must find a university partner to do the work.

3. Provide programs to fund Post Docs in companies, not just university and research institutes.

4. Redirect money from pavilions and booths at trade shows to companies for entry fees and/or travel expenses to partnering programs.

In addition, I believe we should support the efforts of BIOTECanada to lobby Industry Canada and the Canada Revenue Agency; and we need to make changes to the Scientific Research and Experimental Development Tax credit program for eligibility, amount and capital gains reductions on investments in the innovation industries to create a tax loss loan program.

The CEOs, CFOs and CSOs have the answers to the questions of where we should place our focus. As I write this, there are 38 CEOs who have volunteered to come together in numerous working groups to arrive at recommended solutions. I would like your opinion as to how we think government can help our industry. It’s up to us to tell them how.