Canada’s biotechnology sector has been hit by the same economic malaise as the high-tech markets and is facing several immediate challenges — including the loss of promising young companies because of the low dollar, industry experts warn.
“From our standpoint, I don’t think there’s any doubt there is a brain drain,” says Dr. Eric Swanson, an industrial technology adviser with the National Research Council’s Industry Research Assistance (IRAP) Program in Edmonton.
“The biotech sector is less affected than IT, but there’s no doubt that the whole sag in the market is negative to any high-tech aspect” of business.
Swanson joined Ottawa colleague Bob Reichert last week in Calgary to speak to university students about the health of the biotechnology industry in Alberta and nation-wide.
Swanson believes that to survive and prosper, Canadian companies must jump on the “convergence” bandwagon, working together to promote and develop their innovations in both health and agricultural biotechnology.
“We don’t have have the large companies with 1,500 employees who can go it alone. We must use our infrastructure base and collaborate to make ourselves bigger than we are,” he says.
A Statistics Canada survey released earlier this year showed an overall increase of 19 per cent in biotech-related research and development expenditures from $699 million in 1998 to $833 million in 1999.
By 2002, projected revenue is expected to exceed $5 billion. There are now 361 biotech companies in Canada, second only to the United States, and they employ more than 62,000 workers.
Large companies make up the smallest portion of the biotech industry in Canada, representing about 11 per cent of the total number of businesses, according to the national biotechnology lobby group BIOTECanada. Most of these companies are based in Ontario and Quebec.
The NRC’s IRAP program works to match promising research innovations with venture capital, and funds up to 40 young companies in Alberta each year in partnership with the private sector.
Its mission is to stimulate innovation in small and medium-sized biotech businesses, most of which have less than 50 employees.
Well-known university spinoffs in Alberta have included Isotechnika, Biomira, AltaRex and Big Bandwidth Inc.
“Part of my frustration is trying to get enough entrepreneurial energy in our province to establish a real strong cluster of companies in this area,” says Swanson.
He adds only a “tiny fraction” of the profits currently being realized in the province’s booming oil and gas industry could be used to create a vibrant cluster of biotech companies in Alberta — similar to what has been realized in Saskatchewan’s ag-biotech industry and Montreal’s cluster of pharmacy companies.
It’s estimated that a single health-related biotechnology product, from the research and development stage to market, requires seven-10 years and $200-350 million US dollars to develop.
According to BioAlberta, a non-profit industry group that promotes the growth of biotechnology-based businesses, the province’s bioindustry will generate $500 million in sales, employ 2,500 people by 2005, and continue to grow at a rate of 10 per cent per year. There are currently eight publicly-traded biotechnology companies in Alberta, with a market capitalization of about $1 billion.
But Reichert warned that Canada is losing control of some of its most promising biotechnology, in part due to the low dollar which creates “fire-sale” conditions where Canadian companies which commercialize drugs and treatments become attractive takeover targets.
Recent examples of the loss in primary Canadian ownership in the sector include Allelix Biopharmaceuticals (to the U.S.), BioChem Pharma (to the U.K.), Connaught (to France) and Yves Veggie Cuisine, a Vancouver-based company specializing in soy-based meat alternative products which merged with a U.S. group earlier this month.
“This is a trend of real concern,” said Reichert, adding that some government agencies and departments may even be making the situation worse by promoting Canadian innovations abroad as great investments.
Swanson agrees, adding: “We have a lot of people who mine in Canada — they come here mining for a good opportunity. Because of the low Canadian dollar, the resistance to those mining efforts might be less than they could be.”
Swanson believes Alberta can still become a leader in promising new innovations like microsystems — chip-sized technology including diagnostic biochips and software — and nanotechnology, systems for transforming matter, energy and information at a molecular level.
“The wheel is turning in Alberta, and more people are looking here to set up firms,” Swanson says. “We have to work pretty hard in ensuring these firms do come to Alberta and more of them stay here, so we have proportionately a stronger biotech sector.
“We have a real opportunity in Alberta to lead in microsystems and nanotechnology,” he adds.
“In Alberta, (these) businesses will succeed because of their effectiveness in collaborating and pulling together a virtual larger company. There’s a tremendous reservoir of talent if we can find better mechanisms for allowing the companies to utilize them.”
Meanwhile, representatives from several provincial biotechnology companies, along with Alberta Innovation and Science Minister Victor Doerksen were in San Diego this week at BIO 2001, the world’s largest biotechnology conference.
The Alberta delegation includes 70 representatives from 12 companies, industry organizations and government.
“The BIO 2001 conference is our best opportunity to market our industry, our research capabilities, and our infrastructure to a global audience,” said Myka Osinchuk, executive director of BioAlberta.
Web Watch:
www.nrc.ca/irap/home.html
