Growing imagenenation: securing Canadian biotechnology leadership with the Canadian Life Sciences Industry Forecast.

As the biotechnology revolution of the last 20 years overtook innovation and discovery worldwide, Canada has systematically built a framework of research and development aimed at securing Canadian biotechnology leadership. Our theme of growing "imagenenation" isn't just a play on the words "I'm a gene nation" (humans are composed of approximately 25,000 genes). It's recognition that Canada's industry is growing up on a number of fronts including scientifically and economically.

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Industry overview

The Canadian biotechnology industry is comprised of more than 500 companies, spending $1.8 billion a year on research and development, which is more than 12 percent of Canada's total business research and development spending. In the world of biotech, Canada matters.

For the past two years, BIOTECanada has partnered with PricewaterhouseCoopers to publish the Canadian Life Sciences Industry Forecast. Through an on-line survey, stakeholders from corporate, academic, government, and other organizations along the life sciences and biotechnology value chain were asked a series of questions intended to capture development milestones, outline issues impacting the industry today and in the future, and showcase business opportunities. The report directly reflects where the industry sees itself in the coming years, and identifies the challenges in achieving optimal success in Canada. The new 2007 report offers important perspectives regarding long-term sustainability of Canadian companies, while showcasing the industry's evolving maturity.

In keeping with our global competitors, financing remains the most critical success factor for companies in Canada. Most respondents will be seeking more than $10 million in their next round of financing, however, approximately 40 percent will be looking for $20 million or more. Moreover, the source of funding is shifting beyond that of venture capital to now include strategic partners.

Maturing industry

The financial results of the Forecast respondents indicate the gradual maturation of the Canadian life sciences industry. An increasing number of companies are generating revenues--2006 saw almost 52 percent, while 2007 offers almost 58 percent. The revenues are being generated primarily in Canada and the U.S. Forty percent of respondents currently have products for sale and 50 percent will have products available in the next two years.

This is a good sign for our industry. A successful industry has the ability to commercialize its products and generate revenues to expand its operating capacity. Canadian biotechnology companies are also seeking to grow their operations into other countries. As they expand, so does their capacity to build sales and manufacturing components of their operations in larger marketplaces. This growth will include increasing their research and development both in Canada and abroad.

Competitive advantages--the bio-industrial economy

The diversity of the Canadian industry offers Canada a competitive advantage as biotechnology applications continue to expand at an unheralded pace. Rising energy costs, efforts to reduce carbon burden, consumer demand for green technologies, and greater economic value from agriculture and forest products all serve as key drivers for the next growth cycle of the industry in Canada.

The global marketplace is increasingly competitive, but industrial biotech is advancing quickly and providing new tools for innovation and most importantly, cost reduction and improved environmental performance. Five percent of global chemical production is already dependent on biotech processes. McKenzie and Co. estimates show that in 2010, about 20 percent of the chemical market (worth $280 billion) could be involved with biotech production. The total value creation potential in the chemical industry alone could be as high as US$160 billion by 2010.

The opportunities for Canada are vast. According to Agriculture and Agri-Food Canada, Canada is well positioned to advance because of our resource land base and production capabilities, our skilled workforce, and our R&D infrastructure. Industry and government recognize that environmental sustainability can offer economic opportunities.

We've witnessed a host of federal investments into the sector. A near $500 million federal government investment program includes:

* $200 million for the ecoAgriculture Biofuels Capital (ecoABC) Initiative;

* $145 million for the Agricultural Bioproducts Innovation Program (ABIP); and

* $134 million for the Agri-Opportunities Program to support the commercialization of agricultural bio-products.

Industrial biotech and the chemical industry

Industrial biotech provides biological systems for chemicals production. The technology converges seamlessly with other scientific disciplines such as process control, genomics, and molecular biology. It is a powerful source of innovation for new products and processes. But adopting industrial biotech methods means a shift in traditional chemical manufacturing practices.

Industrial biotech can mean shorter R&D cycles, lower capital expenditure, and lower raw material costs. Its ability to create new functionality and renewable-based products means companies will leave a better environmental footprint. We've seen corporate images enhanced through the adoption of environmentally efficient practices, and companies can enter a whole new realm of marketing opportunities for their products.

The future of Canadian discovery and commercialization has never looked better. There are certainly challenges--securing capital, improving the public policy environment to enable this technology, and ensuring we have a skilled workforce to supply the industry are all vital. These issues are first and foremost for BIOTECanada advocacy efforts as we work toward meaningful solutions. BIOTECanada has also introduced the Industrial and Environmental Committee to work on behalf of member companies to realize Canadian economic potential in the development of industrial and environmental biotechnologies. For more information on these initiatives and industrial biotech in Canada, visit our Web site at www.biotech.ca.

CANADIAN BIOTECH 101

* Canada is home to 532 biotechnology innovative companies and those companies spend over $1.8 billion annually on R&D. Most of that is spent by companies pursuing human health products and processes.

* Canada is second only to the U.S. in the number of biotechnology companies and, with total 2005 biotech revenues of approximately $3.8 billion, Canada ranks third in the world.

* The number of companies has almost doubled since 1997, which was the first year Statistics Canada compiled the industry data.

* The market capitalization of Canada's pubic biotech companies is almost $22 billion.

* Most of Canada's companies are relatively small--almost three quarters of Canadian biotechnology companies have less than 50 employees. Approximately 65 percent of the people employed by small firms are either directly involved in scientific research/direction or are technicians.

* Canadian biotechnology companies employed approximately 3,700 people in full-time scientific research/direction in 2003 with, in addition, approximately 2,800 people employed as technicians.

* Small firms have minimal cash flow and may be years away from having approved products on the market. The great majority (approximately 84 percent) of biotechnology revenues are generated by larger companies (more than 150 employees). Canada's small biotechnology firms are actively advancing research projects and are seeking financial support. In 2003, Canadian biotechnology companies had approximately 17,000 products/processes under development or on the market, with more than half of those owned by large firms.

* At the R&D stage, small firms saw their number of products increase 49 percent from 2001 levels to a total of 3,345 products/processes, with almost 600 additional products/processes in pre-clinical and clinical trials.

Reprinted with permission from BIOTECanada

Peter Brenders is the president and CEO of BIOTECanada, the national industry-funded association representing the broad spectrum of biotech constituents in the health, agriculture, and industrial biotech sectors. Previously, he was the health affairs executive at Genzyme Canada and vice-president of Market Access and Health Economics for Schering Canada Inc. where he was responsible for the company's external and government relations. Brenders has also worked in the Ontario Ministry of Health and in the health consulting practice at KPMG.