Biotechnology Focus March 2013

INSIGHTS FOR THE LIFE SCIENCE INDUSTRY

MARCH 2013 VOLUME 16, NUMBER 2

HOT BUTTON ISSUES

Publication Mail Registration Number: 40052410

LEADERSHIP SUMMIT 2013 LEADING MANAGEMENT CHANGE IN THE CANADIAN PUBLIC SECTOR

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1. Strategy Execution 2. Leadership in challenging times 3. Managing complexity through knowledgeable application of technology • Celebrate noteworthy management change implementations by public sector colleagues.

• Gather lessons learned from case studies of important management transformations undertaken by these organizations and by the Canadian Blood Services.

• Interact with their public sector peers, association and private sector thought leaders to identify how certain common management challenges and opportunities can be addressed in a collaborative fashion.

JOIN US AND HEAR FROM LEADERSHIP EXPERTS SUCH AS Dr. Robert Kaplan Marvin Bower Professor of Leadership Development Harvard University Dr. Graham D. Sher Chief Executive Officer Canadian Blood Services Corinne Charette CIO of the Government of Canada Treasury Board of Canada Secretariat

Jill Dyché Vice President SAS Best Practices

Ken Cochrane Consultant, GCPedia founder, former CIO Government of Canada

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contents

MARCH 2013 – VOLUME 16 – NUMBER 2

Hot button Issues

www.biotechnologyfocus.ca

FEATURES

10

s

Industry Trends

Readers Report Hot Button Issues for 2013

By Daniela Fisher

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Jobs, Productivity and Innovation

How health care drives the economy

By Gabriela Prada

JOBS, PRODUCTIVITY AND INNOVATION:

CANADIAN LIFE SCIENCE

TABLE 1: CURRENT VALUE OF A 10 PER CENT REDUCTION IN MORTALITY FROM MAJOR DISEASES (US$2004 BILLIONS)

and health care costs over the same period by orders of magnitude. For example, at the turn of the 20th century, an individual had a life expectancy of 50 years. In 1961, the average Canadian could expect to live to age 71, and in 2006, the estimated average life expectancy in Canada was 80 years. This represents an impressive gain of 30 years of life over one century. These health gains represent the benefits of improvements in determinants of health (e.g., education, income) but also health advancements which were the product of research and innovation that was properly translated into health-care services. In the U.S., 1970 to 2000 life expectancy gains have been estimated to be worth US$95 trillion (US$3.2 trillion per year). Further improvements in the treatment of cancer and cardiovascular diseases are estimated to bring additional value in the magnitude of billions of dollars to the United States. (See Table 1) A 2008 report from the United Kingdom also highlighted the value of advancements resulting from medical research. It found that public investments in cardiovascular research in the U.K. – conducted from 1975 to 1992 – yielded returns of about 39 per cent. In other words, for each £1 invested in public cardiovascular research, the U.K. earned £0.39 per year in perpetuity. This demonstrates that when health research and development leads to health innovations that are appropriately and timely integrated into health and health care systems, it results in healthier and longer lives, which creates more value than the investments they require. Combined with the shift over the past century from physical labour to

Males

Females

Total

$10,651

$7,885

$18,536

Cardiovascular Diseases

$3,254

$2,471

$5,725

Cancer

$2,415

$2,261

$4,675

Diabetes

$237

$249

$486

Infectious Diseases

$500

$148

$649

Accidents & Adverse Effects

$977

$421

$1,398

CANADIAN LIFE SCIENCE

GOING PUBLIC: 368 biotech & life science firms have gone public in Canada by an IPO or RTO, but in the long term, what route should life science firms take?

IPOs AND RTOs The data has been broken down into two main pools – those firms with Initial Public Offerings (IPOs) in one pool, and Reverse Take Overs (RTOs), Cap Stocks & Québec’s SPEQ (herein abbreviated to just RTOs). In the literature, there are many definitions of life science firms and biotechnology firms, so awareness is needed of the data sources for this analysis.

The public firms identified are covered in Table 1.

The vast majority of firms came from Ontario (148), BC (92), and Québec (75), with the balance from the Prairies and Maritimes. The number of IPOs and RTOs per year both peaked in 2000. The accumulated numbers of life science and biotech issues are seen in Figure 1.

Just a small handful of biotech and life science firms have gone public since 2010 – one of which was excluded (Pacific Therapeutics) because it did not have a prospectus to get listed on the CNSX exchange in 2012.

HOT BUTTON ISSUES

EXECUTIVE SUMMARY This study looked at the presence and growth of a broad group of biotech and life science firms which have gone public in Canada – in all 368 cases. There is a significant drop in lag times from date of incorporation to the date of going onto a stock exchange, but also for the times to take overs and even closures. The drop in market cap values over five years and low profitability for most of these firms have hurt at the time when there is a large need for financing to cover R&D, clinical trials and commercialization before they can move ahead. However, the number of high growth firms - gazelles - is significant.

This paper is the first to have identified that

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the surface it might seem that the cuts apply primarily to large corporations that are foreign- or public-owned. However, the majority of the changes are cuts in expenditure eligibility that apply to anyone making a SR&ED claim. The biotechnology and pharmaceutical industries are going to be particularly hard-hit by these changes for a couple of reasons. Firstly, an unusual portion of start-up companies in this sector are publically funded which means they’ll see a five per cent cut in their benefit rate. Secondly, because of the 20 per cent cut in eligibility of contract research which is so prevalent in this sector. And thirdly – perhaps worst of all for biotech – is the total elimination of SR&ED on any capital equipment whether purchased or leased. Biotech can be a very capital intensive sector of industry.”

According to Hearn, changes to SR&ED implemented by Canada’s Federal Government will end up altering science and technology policies of various provincial governments, some of whom could have priorities somewhat different than those of Ottawa.

“For example Ontario offers the OITC which provides s a 10 per cent cash refund to all corporations and the ORDTC, that provides a 4.5 per cent non-refundable ITC. Other provinces offer similar and in some cases much greater benefits than above. Both of these credits

# Firms

% Firms

Pharma

121

33%

#IPOs: RTOs 66 : 55

Biotech and Diagnostics

73

20%

39 : 34

Medical Devices & Ear. Eye, Dental

59

16%

27 : 32

Agric / Food / Beverages / Aquaculture 65

18%

50 : 15

Bio Environment / Energy

6

-1%

0:6

Other: Hospitals, Software, Services

44**

12%

21 : 23

Total

368

100%

202 : 166

# Firms

FIGURE 1: GROWTH IN ACCUMULATED NUMBERS

BY YEAR OF IPOS AND RTOS

Sector

** Includes 3 firms with no confirmed date or even decade of IPO

Year

Going Public: IPO or RTO, which way to go?

By Denys G.T. Cooper

showed that profits of $1.2 billion in 27 IPO and 11 RTO firms (average of $32 million) were offset by losses of $1.4 billion in 164 firms for a net loss of $280 million. The main contributor to profits was Shopper’s Drug Mart at $614 million. The three sectors of biotech, pharma and medical consisting of 145 firms, had similar performance per firm for an average net loss of $6.6 million per firm. The three highest profits for the pharma sector were from Cardiome, Interimune and Paladin for an average net profit of $69 million each. With the high costs of bringing a new drug to market (revised up to over $1.2 billion), there is insufficient net cash flow for pharma firms so they must seek outside financing and/or set up strategic alliances. Both lead to stock dilution. The 18 agro sector firms showed net profits of $159 million for a $9 million average per a firm.

In comparing the change in profitability of 65 firms from 2000 to 2010, only 34 firms had reduced losses or turned to profitability compared with 32 firms with increased losses. The net losses of $85 million in 2000 turned to a net profit $687 million in 2010. However, $614 million of this profit was credited to one firm, meaning the rest combined showed only a net profit of $73 million. The five agro firms were profitable in both periods. For 31 pharma firms the $49 million in losses rose from 2000 to $286 million a decade later.

Takeovers: There is a high churn rate of the firms via take overs

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RTOs are a relatively new financing tool – present since the late 1980s, but in eight of the past 10 years there have been more RTOs than IPOs found in this biotech / life science study. While increasing in number, the questions surrounding the RTO route is whether it is a sound investment strategy in the long term? Certainly the firm gets earlier exposure to the market, albeit for a lower level of new funds, initially.

In the long term the short term benefits do not translate into sizeable follow-on investments in most cases. For instance, 146 of the 166 RTOs that have happened in Canada have raised just $330 million (average $2.3 million) and only $3.4 billion in 140 firms with follow-on private placement (average $24 million per a firm). This compares with146 of 202 IPOs which raised $4.2 billion initially (which on average was more than 10 times the amount at $29 million) and a further $14.4 billion in VC and follow-on private placements (an average of $99 million per a firm).

Even if the IPO launch period was adjusted to a similar time frame, say from 1990, the IPO funds raised were $30 million per firm on average and follow-on financing was at $100 million per firm, figures which were still higher than for the RTO cases. (Note: funds raised by stock options or warrants have not been factored in.)

Profits: The net profits after tax were also looked at in this study.

The most recent data taken into account for this study (2008 to 2011)

Innovation today for the medicine of tomorrow

By Katherine Bonter

30

The Last Word

Biotech...It’s personal

By Rob Henderson

RTOs

TABLE 1: 368 PUBLIC FIRMS BY SECTOR

Do changes to the SR&ED program threaten Canada’s competitive advantage?

368 biotech and life science firms have gone public in Canada by an IPO or RTO, but in the long term, which route is best?

16 BIOTECHNOLOGY FOCUS MARCH 2013

over the past 100 years up to 2011, over 368 current and past biotechnology / life science firms have gone public in Canada. In that time, another 60 firms have tried to obtain a Canadian stock exchange listing – some failed whilst others were successful but never operated in Canada. In spite of detailed searches on SEDAR, Google, company reports and even reviewing old copies of the Globe and Mail via their online listings, the total public firms found may well be short especially if listed before the Second World War.

IS A RTO THE BEST WAY TO GO?

real miracle

MARCH 2013 BIOTECHNOLOGY FOCUS 21

20 BIOTECHNOLOGY FOCUS MARCH 2013

departments

TH:

INNOVATION TODAY FOR THE MEDICINE OF TOMORROW

By: Katherine Bonter

HOT BUTTON ISSUES

CEPMED, A CENTRE OF EXCELLENCE FUNDED

BY THE NETWORK OF CENTRES OF EXCELLENCE (NCE) PROGRAM, WAS CREATED BY THE MONTRÉAL HEART INSTITUTE TO PROMOTE INNOVATION IN PERSONALIZED MEDICINE (PM) THROUGH INVESTMENT, RESEARCH AND KNOWLEDGE TRANSLATION.

24

WILL CHANGE YOUR BUSINESS

Just a small handful of biotech / life science firms have gone public since 2010 – one of which was excluded (Pacific Therapeutics) because it did not have a prospectus to get listed on the CNSX exchange in 2012.

By: Denys G.T. Cooper

20

HOW IMMINENT CHANGES IN R&D TAX CREDITS

Canada’s SR&ED program has historically been considered one of best R&D incentive programs in the world. Historically the program has delivered about $3 billion of federal money to fund private sector R&D in Canada and triggers an additional $1 billion or so in provincial tax credits that are tied to SR&ED eligibility. This system of tax credits has been effective both in retaining high quality jobs in Canada and incenting foreign companies to set-up in Canada thereby creating new jobs.

However, at a time when many countries – and many U.S. states – are expanding their R&D tax credits, Canada is cutting back. And as those cutbacks are about to start; most companies will feel their effect for the first time in 2013. The effect will be progressively more severe as the different types of cuts come into effect in subsequent years.

Since for many Canadian companies the tax credits provide a cash benefit beyond whatever tax is payable, these cuts will go straight to the bottom line.

Count David Hearn managing director of Scitax Advisory Partners among those who feel the SR&ED changes are a tough pill to swallow for the biotech sector. He foresees the changes having a lasting impact on R&D in Canada.

In a recent interview with Biotechnology Focus, Hearn noted “On

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Source: The Conference Board of Canada.

14 BIOTECHNOLOGY FOCUS MARCH 2013

CANADIAN LIFE SCIENCE

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CANADIAN LIFE SCIENCE

By Shawn Lawrence

CHART 1: PERCEPTIONS OF IMPORTANCE OF INNOVATION

Major Cause of Death All Causes

Source: Kevin Murphy and Robert Topel, The Value of Health Advances (Chicago: University of Chicago Press, 2006).

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CANADIAN LIFE SCIENCE

By Gabriela Prada

HOT BUTTON ISSUES

HOT BUTTON ISSUES

A

Unfortunately, this is an area where Canada has faced challenges. In 2012, Canada’s level of labour productivity (that is, the dollar value of output per hour worked) was US$42, much lower than that of the United States, at US$52.

More worrisome is that despite a broad and growing consensus that Canadian productivity needs to be improved, the gap with the U.S. is widening, not narrowing. Canada’s productivity level has fallen to 80 per cent of the U.S. level from a high of 90 per cent in the mid1980s. Efforts to improve labour productivity are needed to sustain or improve Canada’s standard of living.

How does this relate to Canada’s health care systems? According to Statistics Canada, Canadian workers lost an average of 7.7 days from work in 2011 due to illness or disability .

Direct and indirect costs of disease and injury in 2000 were estimated at around $188 billion , a figure that is likely to be higher now.

Disease outbreaks are very costly too. The Severe Acute Respiratory Syndrome (SARS) drained billions of dollars from Canada’s economy in 2003. Because health care services touch the life of every Canadian, the sector plays a key role in decreasing employee absence due to illness, stress, and disability, which bring significant economic burden to Canada. Put simply, healthier workers are more productive workers.

Third, the health care sector is a major pillar of science and technology research. It also is a leader in putting the results of research to work. Advancements in life sciences have resulted in additional economic output of trillions of dollars that exceeds health research

s one of the biggest recipients of public revenues, health care plays an integral role in Canada’s economic performance. While most people are generally aware of the sector’s high costs (over $200 billion or about 11.7 per cent of gross domestic product in 2011), there is less understanding of its economic benefits. The health care sector delivers economic benefits on three levels: jobs, productivity and innovation.

First, the health care sector is a major employer. The sector directly employs about 1.4 million physicians, nurses, and other health care providers and clerical and administrative staff, which represents about nine per cent of total jobs in Canada. Indirectly, the sector also supports thousands of additional jobs through its supply chain: the purchase of medical supplies, clinical equipment, and professional services. About 45,000 Canadians are employed in pharmaceutical, medicine, medical equipment, and medical supplies manufacturing in Canada.

Therefore, directly or indirectly, the sector has a major influence on the careers of thousands of Canadians, many of whom are highly qualified professionals, that pay taxes and purchase goods and services from all sectors of the economy.

Second, the health care sector contributes to a more productive and engaged workforce.

Productivity, how efficiently goods and services are produced, is the single most important determinant of a country’s per capita income over the long term. Countries with high productivity have a superior standard of living.

CANADIAN LIFE SCIENCE

By: Shawn Lawrence

HOW HEALTH CARE DRIVES THE ECONOMY

In doing so, we have engaged a broad range of stakeholders nationally and internationally including: biopharmaceutical, IT and pharmacy companies, public sector researchers, physicians, hospitals, patients and regulatory agencies.

CEPMed’s key objectives are to accelerate clinical development through innovative clinical trials

and to enable clinical adoption through realworld implementation research. The following article, based on a presentation given in November at the MaRs annual Future of Medicine Conference, aims to inform the development of a broad vision for accelerating innovation in PM based on progress in two areas: business models and intellectual property.

CANADIAN LIFE SCIENCE

Although we have observed unprecedented advances in understanding the molecular biology of disease, the current capacity of organizations to translate these advances to the clinic is a barrier to progress. Drug development strategies and business models tailored to a ‘blockbuster’ approach are gradually being replaced by strategies and models for approaches that target smaller patient populations typically identified using molecular diagnostics (MDx), i.e. personalized or stratified medicine. This shift is a disruptive force in the biopharmaceutical and related industries as well as in the health care sector more broadly. Opportunities created by this disruption can drive industrial growth in Canada and deliver a broad range of socioeconomic benefits. However, evolving business models, technologies, clinical research paradigms and regulatory pathways make success in this area particularly challenging.

While innovative companies, organizations and countries stand to benefit, innovation - the ability to turn knowledge into new and improved goods and services - is not a Canadian strength. Canada was ranked 14th out of 16 peer countries in its innovation capacity and consistently underperforms compared to other OECD countries. Canada does, however, have strengths that can provide a ‘competitive edge’ for innovation in PM – including high public investment in genomics research, numerous high performing and well funded incubators and facilitator organizations with objectives in clinical research or drug development, strong clinical research capacity and expertise, and publically funded and integrated health care systems. Combining these strengths with effective business models for Canadian companies and strong, well informed, intellectual property strategies could serve to improve our innovation capacity in PM.

A BUSINESS MODEL broadly represents the role each type of firm or organization plays in creating, capturing or delivering value within a particular value chain. A value chain spans all activities for bringing a product or service from conception to use (innovation) and can encompass several business models. With respect to PM, a business model can refer to the role played by research institutes, pharmaceutical companies, diagnostic companies, hospitals, pharmacists or physicians in bringing a 24 BIOTECHNOLOGY FOCUS MARCH 2013

CANADIAN LIFE SCIENCE

THE LAST WORD

By Rob Henderson

BIOTECH...

It’s Personal

Rob Henderson, President, BioTalent Canada

30

In December of last year, one of my colleagues related an encounter he had one evening on his way home from work.

He had ventured into one of the local Shawarma take-out spots downtown and had engaged one of the restaurant’s staff in a casual discussion. He discovered the man was in fact a physician from Iraq. He had come to Canada in the hopes of practicing medicine and starting a new life for his family here. Unfortunately for him, his dream had to wait, as his application for licensure as a physician would take several years to complete and was by no means a guarantee.

As a result, this Iraqi physician was working as a cook in the establishment, and while still a noble undertaking, it was not the one for which he had trained.

My colleague then expanded on the potential of examining an alternative career path, the bio-economy, which could utilize his scientific skills, and might even make a better, more fulfilling living for him and his family.

His response was one of gratitude, relief, joy, and surprise. It was as if no one had ever taken the time to demonstrate career alternatives to this man.

Fast forward to January of 2013, where the parents of a ten-year old boy named Cameron wait as he is rushed to the ICU of a local children’s hospital, suffering from acute keto-acidosis, a result of undiagnosed Type 1 Diabetes.

They slowly realize their lives are about to be unalterably changed to a regimen of numerous blood tests, strictly monitored diets and daily insulin injections.

How are the two stories related?

When Canadian Frederick Banting discovered insulin in 1921 he had no idea that by 2011 Type 1 and Type 2 diabetes would affect over 285 million people globally (according to the Canadian Diabetes Association).

People throughout Canada have personal experience with cab drivers, pizza deliverers and countless other service industries where internationally educated doctors, nurses, veterinarians and pharmacists earn a living, having failed or waiting to get licensed in their chosen profession in Canada. Wouldn’t their scientific skills be better utilized and contribute more to the Canadian economy if they were presented with alternative careers in the bio-

30 BIOTECHNOLOGY FOCUS MARCH 2013

economy, contributing to Canada’s world-standing in Diabetes and other fields of research?

Preliminary findings of the 2013 BioTalent Canada Labour Market Intelligence Study indicate: • 35 per cent of biotech companies responded stated their greatest recruitment challenge was attracting candidates with the skills they require; • 42 per cent of those stated that the lack of required skills presented a major impact to the organization’s ability to achieve its goals.

As a country in which immigration is a national priority and where industry will depend more upon it as the driving force to fuel the many Canadian economic verticals, we simply MUST get better at steering educated immigrants toward bio-industries and regions where they can make a substantive contribution and utilize the education and skills they already possess.

If we fail to do so, not only will the bio-economy stall, we will fall behind in the competitive international battle that will determine future success for all countries – the battle for skilled labour.

Biotechnology is personal to so many, yet it is easy to lose sight of the faces of the industry. Canadian science benefits the lives of so many, but many of us entrenched in the industry often forget the tangible human impact.

The stories of the physician cook and the diabetic child need to resonate, like the human faces that form part of Rx&D’s recent “Living Proof” marketing campaign. These stories bring home the importance of the human resources we need in order to benefit the Canadians we serve.

I have recently realized I am indeed fortunate, because now I am reminded every day of the need for proper expertise in the bio-economy and in disease research.

My son’s name is Cameron and he’s diabetic.

@

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Research News

8

Business Corner

27

New Products

29

Calendar of Events

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Please send your comments/letters to biotechnology_focus@promotive.net

MARCH 2013 BIOTECHNOLOGY FOCUS 3

PUBLISHER’S NOTE

PUBLISHER/ EDITOR-IN-CHIEF STAFF WRITERS

Resuscitating venture capital in Canada There’s been a lot of talk recently about the long-promised return of venture capital to Canada. The question is whether the buzz about the VC renewal is signaling a turnaround in biotech financing – or if it’s much ado about nothing.

Financing in biotech is the Hot Button Issue. Every year in our Hot Button Survey, you, our readers, are not shy about sharing your fears and frustrations over the lack of available cash. In particular the lack of venture capital in Canada has been a much commented on subject.

A recent report from Canada’s Venture-Capital & Private Equity Association (CVCA) and its research partner Thomson Reuters takes a look at Canada’s VC market in 2012. The report indicated that new investment activity in Canada’s VC market reached $1.5 billion, with fund raising at its highest since 2002. Last year also saw $1.8 billion raised for domestic venture capital funds.

Of the $1.5 billion invested (via 395 rounds), Canadian VC funds contributed $1.1 billion, an amount that increased by seven per cent from 2011. This growth in domestic activity was welcome, as it helped offset the 22 per cent drop in investments by foreign VC funds, which nonetheless brought $380 million of investment to Canada. Moreover, investments in the biotechnology, life sciences and medtech sectors reached $368 million invested via 76 rounds, while the clean tech sector saw $144 million invested in 33 rounds.

Ontario led in VC activity, with $603 million invested capital. Québec was second with a 28 per cent market share and $409 million invested. The top five regions were rounded out by British Columbia which was steady year over year while activity in both Alberta and Atlantic Canada dropped.

One of the more disappointing data trends quoted in the report was the continued gap in VC deal capitalization levels between Canada and the U.S.. The report found that Canadian innovative firms captured only 44 per cent of the amount of venture capital invested in American innovative firms in 2012.

An encouraging sign on the fund formation side was that 2012 saw 33 domestic VC funds receiving $1.8 billion in new commitments. This was the highest level of capital raised in a decade (in 2002 the industry raised $2.5 billion), and was up 73 per cent from 2011.

“The investment results for 2012 are really encouraging and one of the things that isn’t immediately obvious from the data is that six Canadian deals; Desire2Learn, Engineered Power, Thrasos Innovation, D-Wave Systems, Lightspeed Retail Inc. and Securekey Technologies Inc. where among the top 30 largest venture capital deals done in North America,” said Peter van der Velden, president of the CVCA and Managing General Partner of Lumira Capital Corp., who commented on the report in a release.

“These companies highlight this country’s phenomenal potential as an innovation leader in the global economy and these investments illustrate the both the importance and rationale for a strong domestic Canadian venture capital ecosystem.”

Terri Pavelic Shawn Lawrence

Daniela Fisher

Editorial Interns

Steven Loung

Laura Knox-Wallar

CONTRIBUTING WRITERS

Denys G.T. Cooper

Gabriela Prada

Katherine Bonter

National Account Manager GRAPHIC DESIGNER CONTROLLER MARKETING MANAGER

Rob Henderson Marcello Sukhdeo Elena Pankova John R. Jones Mary Malofy

CIRCULATION DIRECTOR James Watson circulation@promotive.net Tel: 705-812-0611

EDITORIAL ADVISORY BOARD Celine Bak, Analytica Advisors; Rob Henderson, BioTalent Canada; Najla Guthrie, KGK Synergize; Pierre Bourassa, IRAP, Montréal; Murray McLaughlin, Sustainable Chemistry Alliance; Carol Reynolds, Wordmark Consulting Group Inc.; Ulli Krull, UTM; John Kelly, Erie Innovation and Commercialization; Peter Pekos, Dalton Pharma Services; Brad Thompson, Oncolytics; Darrell Ethell, CanReg; John Hylton, John H. Hylton & Associates; Robert Foldes, Cognovie Inc.; Randal R.Goodfellow, P.Ag., Senior Vice President, Corporate Relations, Ensyn; Bob H. Sotiriadis, Robic LLP; Dale Patterson, Genome Canada; Darcy Pawlik, Syngenta Seeds Canada Inc; Gail Garland, OBIO; Barry Gee, CDRD; Bonnie Kuehl, Scientific Insights Consulting Group Inc.; Raphael Hofstein, MaRS Innovation Biotechnology Focus is published 10 times per year by Promotive Communications Inc. 24-4 Vata Court, Aurora, Ontario L4G 4B6 Phone 905-727-3875 Fax 905-727-4428 www.biotechnologyfocus.ca E-mail: biotechnology_focus@promotive.net Subscription rate in Canada $35/year; USA $60/year; other countries $100/year. All rights reserved. No part of this publication may be reproduced without written consent. Publications Mail Registration Number: 40052410 Return undeliverable Canadian addresses to: circulation dept – 24-4 Vata Court, Aurora, Ontario L4G 4B6 National Library of Canada ISSN 1486-3138 \ All opinions expressed herein are those of the contributors and do not necessarily reflect the views of the publisher or any person or organization associated with the magazine.

If you would like to order hard copy or electronic reprints of articles, contact Sandra Service 905-727-3875 x221 reprints@promotive.net

4 BIOTECHNOLOGY FOCUS MARCH 2013

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R & D NEWS Public-private partnership in personalized medicine launched in Québec

Clinical Trials & Patents n OncoGenex Pharmaceuticals, Inc. (Bothell, WA and Vancouver, BC) has announced plans for the initiation of its Borealis-2 clinical trial. Borealis-2 is an investigator-sponsored, randomized, controlled Phase 2 study evaluating OGX-427 in patients with advanced or metastatic bladder cancer who have disease progression after initial platinum-based chemotherapy treatment. The trial is the fourth Phase 2 study of OGX-427 in a genitourinary (GU) cancer. It will investigate if combining OGX-427 with docetaxel, the standard option in salvage treatment for metastatic bladder cancer, improves survival compared to docetaxel alone.

Clinical stage vaccine company Immunovaccine Inc. (Halifax, NS) announces the signing of an investigator-initiated study agreement for the ongoing evaluation of its DPX-0907 cancer vaccine at the Busto Arsizio Hospital in Italy. Marco Bregni, M.D., head of the Oncology Unit of the Hospital of Busto Arsizio, will serve as the principal investigator for the Phase 1/2 DPX-0907 clinical trial in patients with breast and ovarian cancer. Immunovaccine expects the Phase 1/2 study to be initiated during the fourth quarter of 2013. A completed Phase 1 trial of the vaccine therapy in breast, ovarian and prostate cancer patients showed DPX-0907 to be safe and well-tolerated while generating specific polyfunctional T cell responses and triggering increases in antigen targeted CD8 T cells. These positive results were published in the peer-reviewed Journal of Translational Medicine in August 2012.

n

From left to right: Dr. Gerald Batist, professor of oncology at McGill University and co-director of the Quebec Clinical Research Organization in Cancer (Q-CROC); Élaine Zakaïb, Minister for Industrial Policy and the Quebec Economic Development Bank; Nicolas Marceau, Minister of Finance and the Economy; Martin Leblanc, president and CEO of Caprion Proteome.

The Government of Québec is making a $10 million investment in the Personalized Medicine Partnership for Cancer (PMPC), a new public-private partnership that will focus on developing and implementing clinical biomarkers and other personalized healthcare solutions and services for cancer patients in the province of Québec and abroad.

The investment, to be disbursed over a four year period, will be supplemented with $11.1 million of funding from the private sector partners, for a total project value of $21.1 million.

The PMPC will be under the leadership of Caprion Proteome Inc., a Montréalbased biotech company specializing in the discovery and development of protein-based diagnostic biomarkers. The other partners will include the Québec Clinical Research Organization in Cancer (Q-CROC), a multidisciplinary network of clinicians, academic scientists and other members of the medical community involved in clinical and translational cancer research, as well as private partners Oncozyme Pharma Inc., Pfizer Canada Inc., Sanofi Canada Inc. and TELUS Health.

As part of the projects supported through this partnership, state-of-the-art genomic, proteomic, bioinformatic and information technology platforms will be implemented to develop and deploy novel biomarkers and targeted therapeutic strategies in the healthcare system for 6 BIOTECHNOLOGY FOCUS MARCH 2013

the treatment of lung, colon and breast cancers.

“The sequence of our genome or the profile of the proteins in our blood can be used to accurately predict disease progression or treatment outcome. Our partnership will integrate advanced technology platforms with clinical research to accelerate the development and clinical deployment of novel personalized healthcare solutions. Caprion has pioneered such strategies for years, and with our partners, we are committed to delivering tangible results to provide more targeted diagnosis and treatments for cancer,” said Martin LeBlanc, president and CEO of Caprion Proteome.

The PMPC project stemmed from the Stratégie québécoise de la recherche et de l’innovation (SQRI) that was created by the Government of Québec to advance knowledge and accelerate the deployment of innovative personalized medicine solutions to the bedside. The partnership, in collaboration with the Ministère de la santé et des services sociaux (MSSS), was also built to strengthen the cooperation between the private and the public research sectors including academic healthcare institutions and universities.

To see this story online visit http://biotechnologyfocus.ca/newpersonalized-medicine-public-privatepartnership-for-cancer-research/

Oncolytics Biotech Inc. (Calgary, AB) has released results examining per cent overall tumour shrinkage data from its U.S. Phase 2 clinical trial in patients with squamous cell carcinoma of the lung (SCCLC) using intravenous administration of REOLYSIN® in combination with carboplatin and paclitaxel (REO 021). The analysis examined overall per cent tumour changes between pre-treatment and up to six treatment cycles. Of 20 evaluable patients, 19 (95 per cent) exhibited overall tumour shrinkage, (mean (20 patients): 33.7 per cent shrinkage). The study enrolled patients with metastatic or recurrent squamous cell carcinoma of the lung. The primary endpoint of the study is objective tumour response rates, and the secondary objectives include progression free survival and overall survival. To date, the company has observed nine partial responses (PR), nine stable disease (SD) and three progressive disease (PD) by RECIST criteria for a disease control rate (complete response (CR) + PR + SD)) of 86 per cent. The study continues to enroll patients.

n

For more R&D news visit http://biotechnologyfocus.ca/ category/bio-pharma/

R & D NEWS Fighting fat with fat: stem cell discovery identifies potential obesity treatment Researchers at the Ottawa Hospital Research Institute (OHRI) have discovered a trigger that turns muscle stem cells into brown fat, a type of good fat that could help reduce obesity. The findings from Dr. Michael Rudnicki’s lab at the OHRI were published recently in the journal Cell Metabolism.

In 2007, Dr. Rudnicki led a team that first proved the existence of adult skeletal muscle stem cells. In his recently published study, Dr. Rudnicki shows these adult muscle stem cells have the ability to produce muscle fibres as well as to become brown fat.

Brown fat is an energy-burning tissue that is important to the body’s ability to keep warm and regulate temperature. In addition, more brown fat is associated with less obesity.

“This discovery significantly advances our ability to harness this good fat in the battle against bad fat and all the associated health risks that come with being

overweight and obese,” says Dr. Rudnicki, a senior scientist and director for the Regenerative Medicine Program and Sprott Centre for Stem Cell Research at the OHRI. Rudnicki is also a Canada Research Chair in Molecular Genetics and professor in the Faculty of Medicine at the University of Ottawa.

In the study, Dr. Rudnicki identifies how adult muscle stem cells become brown fat. The key is a small gene regulator called microRNA-133, or miR-133. When miR-133 is present, the stem cells turn into muscle fibre. When reduced, the stem cells become brown fat.

Dr. Rudnicki’s lab showed that adult mice injected with an agent to reduce miR-133, called an antisense oligonucleotide or ASO, produced more brown fat.

They were also protected from obesity and had an improved ability to process glucose. As well, the local injection into the hind leg muscle led to increased energy production throughout the body—

an effect observed after four months.

Using an ASO to treat disease by reducing the levels of specific microRNAs is a method that is already in human clinical trials. However, a potential treatment using miR-133 to combat obesity is still years away.

“While we are very excited by this breakthrough, we acknowledge that it’s a first step,” says Dr. Rudnicki, who is also scientific director of the Stem Cell Network. “There are still many questions to be answered, such as: will it help adults who are already obese to lose weight? How should it be administered? How long do the effects last?

Are there adverse effects we have not observed yet?”

To see this story online visit http://biotechnologyfocus.ca/fightingfat-with-fat-stem-cell-discoveryidentifies-potential-obesity-treatment/

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OBIO™ members lead innovation in the life sciences. Every facet of health care with a stake in innovation is represented on OBIO Advisory Boards.

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MARCH 2013 BIOTECHNOLOGY FOCUS 7

BUSINESS CORNER

iCo Therapeutics ranked number one in life sciences and technology on 2013 TSX Venture 50 iCo Therapeutics Inc. has been named the top ranked company in its class in the TSX Venture Top 50.

The Venture 50 is the Exchange’s annual list of the strongest performers from five industry sectors. iCo ranked number one among technology and life science companies. Companies are selected based on four equally weighted criteria - return on investment, trading activity, market capitalization growth, and analyst coverage.

The results were obtained from data up to December 31, 2012.

Andrew Rae, president and CEO of iCo

Therapeutics credited positive clinical data from the company’s Phase 2 iDEAL study for the treatment of diabetic macular edema for the company’s strong performance in 2012 on the exchange. He adds the company expects to announce primary endpoint data from the iDEAL study before the end of the year.

To see this story online visit http://biotechnologyfocus.ca/icotherapeutics-ranked-number-one-in-lifesciences-and-technology-on-2013-tsxventure-50

Isotechnika merger with Aurinia to create new nephrology company Isotechnika Pharma Inc. and Aurinia Pharmaceuticals Inc. have signed a Binding Term Sheet for the merger of the two companies, creating a clinical stage pharmaceutical company focused in nephrology.

Aurinia is originally a spin-out from Vifor Pharma, a company of the Switzerlandbased Galenica Group. In January 2012, Isotechnika announced that it had granted Vifor an exclusive license for the company’s lead drug, voclosporin, for the treatment of lupus and proteinuric nephrology indications. Aurinia’s current leadership team

is comprised primarily of former senior managers, directors and officers of Aspreva Pharmaceuticals, which Galenica acquired for $915 million in 2008. Aurinia now holds certain rights to this large ALMS database and holds the license for voclosporin in lupus nephritis. Aurinia’s lupus rights and database will be combined in the newly merged company with the transplantation and autoimmune rights, and the database held by Isotechnika.

Leading the combined company as CEO will be Dr. Robert Foster, who is the current

president and CEO of Isotechnika. Michael Martin, Aurinia’s current CEO, will serve as the new company’s president and chief business officer. The Board of Directors of the new company will be comprised primarily of members from both Isotechnika’s and Aurinia’s current Boards of Directors.

To see this story online visit http://biotechnologyfocus.ca/isotechnika-merger-with-aurinia-to-create-newnephrology-company

Dealmakers n Microbix Biosystems Inc. (Mississauga, ON) announces it has sold its Water-for-Injection business to the California-based Irvine Scientific. The sale of Microbix’ non-core asset is part of its strategy to focus on higher value-added Antigen products as well as key pipeline projects such as Kinlytic, which Microbix is currently developing under license for Zydus Cadila. The sale was constructed on an earn-out basis, though specific deal terms were not disclosed. n CO2 Solutions Inc. (Québec City, QC) has been awarded a contract by the CO2 Capture Project (CCP) for providing certain project data and reports to CCP, relative to the pre-pilot phase of CO2 Solutions’ Alberta oil sands project. The CCP is a partnership of several major energy companies working together to advance the technologies that will underpin the

8 BIOTECHNOLOGY FOCUS MARCH 2013

deployment of industrial-scale CO2 capture and storage. The value for this contract was not disclosed and will be included in CO2 Solutions’ calendar 2013 revenue. n Cangene Corporation (Winnipeg, MB) has entered into an agreement to acquire investigational hemophilia compound IB1001 and certain other assets from Ipsen and Inspiration Biopharmaceuticals, Inc. in connection with Inspiration’s bankruptcy proceedings. The deal is subject to bankruptcy court approval and customary closing conditions. Under the agreement terms, Cangene will pay approximately US$5.9 million upfront for IB1001 and other acquired assets, as well as tiered royalties on net sales and additional payments if certain sales milestones are achieved. IB1001 is an intravenous recombinant Factor IX (rFIX) that is being

developed for the treatment and prevention of bleeding episodes in people with hemophilia B. Oppenheimer & Co. acted as exclusive financial advisor, and Reed Smith acted as legal advisor, to Cangene on the transaction.

Biolux Research Ltd. (Vancouver, BC) announces a partnership with MAC International Medical Solutions LLC of Dubai, UAE, for the distribution of the OsseoPulse™ bone regeneration system for use in implantology and dental surgery. The distribution agreement includes the regional territory of the Middle East and North Africa (MENA), and is for a three year term.

n

For more Business Corner news visit http://biotechnologyfocus.ca/category/ industryintel/

BUSINESS CORNER BIO International Convention to highlight hot topics in the biotech industry The 2013 BIO International Convention will feature a program of more than 800 speakers in over 125 sessions across 15 topic areas addressing the latest business opportunities and challenges as well as the newest innovations for executives, investors, scientists and policy leaders. The Convention, celebrating its 20th anniversary, will take place April 22 to 25, 2013 at McCormick Place in Chicago, Ill. “Chicago is recognized for its cutting edge architecture and world-class design which will serve as an appropriate backdrop for this year’s 2013 BIO International Convention where a constructive blueprint for the future of the industry will be further advanced. On the cusp of new frontiers in biotech research and development, visionaries ranging from industry and academic veterans to those just starting to chart their path will find the program, exhibition and partnering meetings will provide an unparalleled set of tools to forge their ideas into products for the future benefit of patients and consumers,” said John Flavin, BIO program committee co-chair, managing director, Flavin Ventures, LLC and executive di-

rector of Chicago Innovation Mentors.

The 2013 BIO International Convention program will feature three days of cutting-edge educational sessions, 60 and 75 minutes in length, as well as an increased number of advanced sessions. The 2013 program will hear from top thought leaders offering their insight on issues essential to the industry. These topic areas include: Achieving Regulatory Approval & Compliance; Biofuels & Biobased Chemicals; Biotech Patenting & Tech Transfer; Business Development; Drug Discovery & Development; Finance; Food & Agriculture; Innovations & Opportunities in Vaccines; International Spotlights & Policy Track; International Market Briefings Track; Manufacturing of Biologics & Drugs; and Market Access and Commercialization.

New this year, the first day’s program will feature the International Spotlights & Policies Track, a full day dedicated to highlighting and exploring the development strategies of the four BRIC (Brazil, Russia, India and China) nations. The panels in this program are designed to identify and discuss specific initiatives within each country that are driv-

ing the pace of biotechnology innovation.

Additional Monday programming includes: BioTech Primer; Translational Research Forum; Biotechnology Entrepreneurship Boot Camp; Personalized Medicine & Diagnostics Forum; Breakout Sessions; and International Market Briefings.

Yet another new addition to this year’s program includes the Alzheimer’s Forum, to be held April 24. The Forum will confront the issues and roadblocks to finding treatments and cures for this disease. Panel discussions during the Forum will focus on biosciences and future hope, regulatory considerations and challenges and the societal and economic impact of Alzheimer’s.

To see this story online visit http://biotechnologyfocus.ca/bio-international-convention-to-highlight-hot-topicsin-the-biotech-industry/

Important Notice:

Avis important :

Human Pathogens and Toxins Act

Loi sur les agents pathogènes humains et les toxines

Attention: Persons handling human pathogens and toxins

Destinataires : Personnes manipulant des agents pathogènes humains et des toxines

The Human Pathogens and Toxins Act is designed to protect the health and safety of the public against risks posed by the accidental or deliberate release of human pathogens and toxins from research or other facilities.

La Loi sur les agents pathogènes humains et les toxines vise à protéger la santé et la sécurité de la population contre les risques associés au rejet accidentel ou délibéré d’agents pathogènes humains et de toxines par un centre de recherche ou un autre établissement.

Under the Human Pathogens and Toxins Act, if you are handling human pathogens and toxins, you may be subject to certain obligations. The best way to know if the Act affects you is to register with the Public Health Agency of Canada on our website.

Selon la Loi sur les agents pathogènes humains et les toxines, si vous manipulez des agents pathogènes humains ou des toxines, vous pourriez avoir à remplir certaines obligations. La meilleure façon de savoir si la Loi s’applique à vous consiste à vous inscrire auprès de l’Agence de la santé publique du Canada en consultant notre site Web.

To register or to obtain more information about laboratory biosafety in Canada, please visit

Pour vous inscrire ou pour en savoir plus sur la biosécurité en laboratoire au Canada, veuillez consulter le site

www.publichealth.gc.ca/pathogens

www.santepublique.gc.ca/pathogenes

MARCH 2013 BIOTECHNOLOGY FOCUS 9

Hot button Issues

By: Daniela Fisher

CANADIAN LIFE SCIENCE

Industry trends:

readers report hot button issues for 2013 You know the drill.

Welcome to our ninth ‘Hot Button Issue’ where we take the pulse of Canada’s biotechnology and life science industries, and explore the issues that you, our readers, have identified as key concerns.

10 BIOTECHNOLOGY FOCUS MARCH 2013

Through these surveys, we aim to find out what gets your blood pumping and neurons firing in terms of what needs to change in the industry, as well as taking these concerns before government. In this Hot Button Issue, we’re doing just that.

Generally speaking, your message was clear: the storm is not yet over. While 2012 saw the beginnings of a revitalized venture capital system and a rebound in financing, with a reported 53 per cent increase in financing highlighted by Ernst & Young’s Beyond Borders Report, the industry is still strapped for cash.

Based on the results of our survey, capital is as fleeting as ever for Canadian biotechs, and the disconnect between government and industry is seemingly growing larger, despite more collaborative ventures. The words “cash-starved” and “frustrated” appeared numerous times in survey answers.

What you had to say: C-Level Executives, Entrepreneurs, Investors, Service Providers, Venture Capitalists and Other Stakeholders Results: Overall, industry respondents saw the VC infusion as all sizzle but no steak. While respondents recognized that government and the private sector are providing opportunities for funding, more is needed to get companies from start-up to standalone status.

In terms of what’s getting the most industry buzz, answers pointed to regenerative medicine, stem cell therapeutics, nanotechnology, nutraceuticals and food safety. As we move into the era of personalized medicine and prepare for the oncoming wave of retirees, there is little surprise that the need for health-related products, treatments and technologies is on the rise. Additionally, with the world’s population expected to hit nine billion by 2050, it is

lowest possible grade (poor), while this year, only 14.3 per cent offered this response.

Ultimately, there is still great concern that companies will run out of funding before they’re able to get their innovation or technology to market. Moreover, Canadian biotechs still struggle to escape the “valley of death” funding gap, when companies need large amounts of capital but are not producing revenue. Complicating matters, the VC community can be leery to invest in startup biotechs, which typically require more funding over a longer period of time as compared to other industries. In a report released recently by Canada’s Venture Capital & Private Equity Association (CVCA) and research partner Thomson Reuters, 2012 saw $1.5 billion in new venture capital investment, a number that is almost identical to the amount raised in 2011. Of this amount, investment in the biotechnology, life science and medtech sectors bottomed out at $368 million and $144 million for the clean tech sector. The fact is that it can be difficult to get investors to understand the validity of technologies that are years away from market. The options left are that the company will either end up closing down, leave Canada for better opportunities, or if lucky be acquired by a foreign company.

However, as mentioned above, we are beginning to see some positives in regards to funding and financing, with pharma companies like Pfizer, Merck, Eli Lilly and GSK launching new funds along with VC titans Lumira Capital and Teralys Capital. On the public side, there was the federal government’s $400 million Venture Capital Action Plan, as well as the Business Development Bank of Canada (BDC) putting $20 million of the $150 raised by TVM Capital towards a

no wonder that respondents highlighted food safety as a growing trend in biotech.

On the research and innovation front, respondents from the business community graded Canada surprisingly low this year. Normally in our surveys, research is graded excellent or above average. This year, 42.9 per cent described it as average, 32.1 per cent called it below average and only 14.3 per cent chose the above average option.

While the general consensus was negative, individual comments were mostly positive when it came to research in Canada. Academic research got rave reviews; the only issue most readers had was the lack of support for taking that research through to commercialization.

As one individual explained: “Research in academia, institutions and hospitals combined is probably at the top of the world; the failure however is at the industry stage due to lack of proper support (ex. academia believes that industry should be there to help it instead of the other way around due to the way Big Pharma used to conduct business in Canada with academia).”

Almost all the respondents were critical about the lack of funding for research in Canada. Advancing basic research to development has always been a thorny issue in biotech, one that readers say government and industry need to address, with long-term financing for start-ups to commercialize their innovations considered a must.

In response to the question of how the business of biotech is faring, as usual answers showed clear concern for the industry. Altogether, 42.9 per cent called it below average, with 35.7 per cent calling it mediocre. However, a possible silver lining can be found. Last year, 25.9 per cent of you gave this answer the

new Canadian life science venture fund. The challenge now is taking these funds and putting them to work closing the funding gap, and helping more startup biotechs.

In terms of real-time use for the funding, respondents are not seeing a marked increase in financing. One respondent commented: “The focus still seems to be on development of traditional resources rather than value added innovation.”

While another explained: “The government is focusing on its resource sectors as well as the automotive and aerospace industries. Part of the challenge of biotech is that it has yet to generate any significant economic win for Canada in the past 30 years. The Canadian biotech industry has consumed billions of dollars but has not generated that billion dollar product. It has not realized the promise for Canada. We have yet to recoup some 30 years of investment in biotechnology. We are still showing red! It is hard to get government to listen to you and take you seriously.”

To fix this problem, readers suggested new ways to revitalize venture capital investment, and for government to introduce more incentives for innovation.

“One of the few successful programs I am aware of is SR&ED – yet proposed changes appear to limit funds available through this program, not making things easier. Training of graduate students is also too academic and fails to encourage entrepreneurship.”

Other common suggestions were flowthrough shares, creating more favourable tax incentives including those for foreign investors, and to develop a culture of risk-taking to allow for entrepreneurs to take chances on early stage technologies.

As one respondent put it, “we need a more

Business Survey Questions State of the Industry, how the business of biotech is faring:

State of Research and Innovation in Canada:

Is Government listening to what the life sciences field is telling it?

Current Industry job outlook:

Do you find financing opportunities:

Excellent: 0% Above Average: 7.1% Average: 35.7% Below Average: 42.9% Poor: 14.3%

Excellent: 7.1% Above Average: 14.3% Average: 42.9% Below Average: 32.1% Poor: 3.6%

Yes: 17.9% No: 82.1%

Excellent: 3.7% Above Average: 0% Average: 33.3% Below Average: 40.7% Poor: 22.2%

Harder to come by: 74.1% Easier to come by: 3.7% The same: 22.2%

3.6%

7.1% 14.3% 32.1% 42.9%

35.7% 42.9%

3.7%

7.1% 17.9%

14.3%

3.7%

22.2%

22.2%

33.3% 82.1%

40.7%

74.1%

MARCH 2013 BIOTECHNOLOGY FOCUS 11

Hot button Issues

CANADIAN LIFE SCIENCE

searchers’ concerns were lack of sufficient funding and too few funding agencies for new discoveries requiring risk (innovation) to get off the ground.

In answer to the question is Canada a leader on the world stage in your field, just 41.2 per ing to be awarded based on quality instead of cent said ‘yes,’ while 64.7 per cent said ‘no.’ commercial potential. Respondents also said This answer was much more positive than funding the latter is short-term thinking.

Government needs to “Make a stronger the industry-side results (17.9 per cent ‘yes’ and 82.1 per cent ‘no’), which again indicates commitment to basic research. Industry benthe strength of Canada’s research community. efits and grows on a knowledge base but that Respondents did indicate however that base grows from grass roots innovation in Canada life sciences sector’s strongest at- research labs. Not always is every conceivable tributes are the intelligence and creativity of application envisioned when basic research is its researchers, great infrastructure that exist, undertaken and research grants should not be and the work of our academic institutions. used to subsidize,” said one respondent.

“The most important discoveries of the On the other end of the spectrum, Canada’s weakest attributes were not enough VC, too last 50 years have resulted from investigatormuch indirect funding, slow translation of initiated fundamental research rather than ideas to practical innovations and a lack of from funding targeted to particular diseases or long-term and early stage funding. Interest- groups of researchers. Continued funding of ingly, researchers were divided on whether fundamental research will ensure a constant public-private collaborations were a strength flow of new ideas, techniques and discoveries or weakness in terms of encouraging innova- that can then be applied to therapeutic drug tion. As one individual explained, “Emphasis discovery, clinical diagnostics, and personalis placed on industry partnerships and com- ized medicine.”

Another fear expressed in our survey mercialization, which creates artificial innovations to meet consumer fetish and only profit answers was that as research money is bethe goals of the private industry.” As such, ing siphoned to industry, risky (innovative) there is fear that research driven by industry research is becoming less valued and a small group of individuals are getting increasingly is a threat to true innovation.

In terms of the issues researchers want larger grants, while less funding is available raised before government, the underlying for the majority of researchers and students. frustration was clear: fund more discovery- Likewise, a large number of the respondents based research. This is a constant concern in mentioned they would rather see money beour Hot Button Issue. Researchers’ concerns ing distributed amongst more researchers, usually are not about how much money is instead of going towards “big stars.” In terms Researchers, Innovators, Lead Investiga- being put towards R&D, more so how that of other government programs, respondents money is being distributed. After years of highlighted concerns that NSERC and CIHR’s tors, Scientists, Research Organizations funding basic research, there has been a success and Academia Results: 3.7% rates were falling and called for in3.6% 7.1% reversal to funding industry partnerships and creased funding for both agencies.

For the most part, the feedback from Canada’s 7.1% 14.3% 22.2% mentioned the research community was similar to that of collaborations and cutting grants for basic 3.7%respondents 22.2% Finally, many 17.9% their business counterparts. Top among re32.1% 14.3% research. As in years past, readers want fund- plight of students and recent graduates in their 33.3% As research funds and post-graduate answers.

35.7% 42.9% 82.1% 40.7% 74.1% respondents scholarships continue to decline, Research survey Questions 42.9% are concerned that we could enter another brain-drain period if our academic graduates What is the state of reDo you feel that Do you find granting and cannot find employment in Canada. There search and innovation government is listening financing opportunities: were also calls for a national strategy to fund in Canada: to what the life sciences graduate student training rather than leaving it field is telling it?

Harder to come by: 83.3% to every individual researcher and the whims Excellent: 0% Easier to come by: 0% of project grant funding.

Above Average: 44.4% Yes: 14.3% The same: 16.7% On the subject of our students, industry Average: 44.4% No: 85.7% professionals and researchers were united.

Below Average: 11.1% Both credited Canada’s well-trained graduates Poor: 0% as the future lifeblood of Canada’s biotech 11.1% industry. favourable environment that encourages early stage companies to remain in Canada rather than being acquired by US companies. This can be done by encouraging larger Canadian companies to take risks and acquire smaller firms. Allow for long term high risk investment in small Canadian firms. Don’t starve them by offering one year grants. Focus on teaching entrepreneurship and innovation early in schools.

This is a culture change that needs to happen.”

Also in light of the financial challenges facing the industry, many highlighted the uptake of collaborations, and suggest this is a good trend developing in the industry provided government, academia and industry can stay in sync concerning end goals. Respondents also suggested opening up funding for health innovation and rewiring our culture to be more innovative, starting in schools and training new grads.

We asked readers how we could improve public awareness and support of the sector.

Many responded with the idea of reaching out to media outlets to emphasize the potential benefits to Canada of investing in the life sciences, especially healthcare. There was also much mention of educating both government and public on why healthcare innovation matters.

Lastly, we asked readers whether or not they felt government was listening to what they were saying, where 82.1 per cent answered with a decisive ‘no.’ In our other survey, researchers responded even more emphatically, with 85.7 per cent saying ‘no.’

14.3% 44.4%

44.4%

12 BIOTECHNOLOGY FOCUS MARCH 2013

85.7%

16.7%

83.3%

To see this story online visit http://biotechnologyfocus.ca/ industry-trends-readers-reporthot-buton-issues-for-2013

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Jobs, productivity and innovation:

CANADIAN LIFE SCIENCE

How health care drives the economy

Hot button Issues

A

s one of the biggest recipients of public revenues, health care plays an integral role in Canada’s economic performance. While most people are generally aware of the sector’s high costs (over $200 billion or about 11.7 per cent of gross domestic product in 2011), there is less understanding of its economic benefits. The health care sector delivers economic benefits on three levels: jobs, productivity and innovation.

First, the health care sector is a major employer. The sector directly employs about 1.4 million physicians, nurses, and other health care providers and clerical and administrative staff, which represents about nine per cent of total jobs in Canada. Indirectly, the sector also supports thousands of additional jobs through its supply chain: the purchase of medical supplies, clinical equipment, and professional services. About 45,000 Canadians are employed in pharmaceutical, medicine, medical equipment, and medical supplies manufacturing in Canada.

Therefore, directly or indirectly, the sector has a major influence on the careers of thousands of Canadians, many of whom are highly qualified professionals, that pay taxes and purchase goods and services from all sectors of the economy.

Second, the health care sector contributes to a more productive and engaged workforce.

Productivity, how efficiently goods and services are produced, is the single most important determinant of a country’s per capita income over the long term. Countries with high productivity have a superior standard of living.

Unfortunately, this is an area where Canada has faced challenges. In 2012, Canada’s level of labour productivity (that is, the dollar value of output per hour worked) was US$42, much lower than that of the United States, at US$52.

More worrisome is that despite a broad and growing consensus that Canadian productivity needs to be improved, the gap with the U.S. is widening, not narrowing. Canada’s productivity level has fallen to 80 per cent of the U.S. level from a high of 90 per cent in the mid1980s. Efforts to improve labour productivity are needed to sustain or improve Canada’s standard of living.

How does this relate to Canada’s health care systems? According to Statistics Canada, Canadian workers lost an average of 7.7 days from work in 2011 due to illness or disability .

Direct and indirect costs of disease and injury in 2000 were estimated at around $188 billion , a figure that is likely to be higher now.

Disease outbreaks are very costly too. The Severe Acute Respiratory Syndrome (SARS) drained billions of dollars from Canada’s economy in 2003. Because health care services touch the life of every Canadian, the sector plays a key role in decreasing employee absence due to illness, stress, and disability, which bring significant economic burden to Canada. Put simply, healthier workers are more productive workers.

Third, the health care sector is a major pillar of science and technology research. It also is a leader in putting the results of research to work. Advancements in life sciences have resulted in additional economic output of trillions of dollars that exceeds health research

Table 1: Current Value of a 10 Per Cent Reduction in Mortality from Major Diseases (US$2004 billions) Major Cause of Death

Males

Females

Total

All Causes

$10,651

$7,885

$18,536

Cardiovascular Diseases

$3,254

$2,471

$5,725

Cancer

$2,415

$2,261

$4,675

Diabetes

$237

$249

$486

Infectious Diseases

$500

$148

$649

Accidents & Adverse Effects

$977

$421

$1,398

Source: Kevin Murphy and Robert Topel, The Value of Health Advances (Chicago: University of Chicago Press, 2006).

14 BIOTECHNOLOGY FOCUS MARCH 2013

By Gabriela Prada

and health care costs over the same period by orders of magnitude. For example, at the turn of the 20th century, an individual had a life expectancy of 50 years. In 1961, the average Canadian could expect to live to age 71, and in 2006, the estimated average life expectancy in Canada was 80 years. This represents an impressive gain of 30 years of life over one century. These health gains represent the benefits of improvements in determinants of health (e.g., education, income) but also health advancements which were the product of research and innovation that was properly translated into health-care services. In the U.S., 1970 to 2000 life expectancy gains have been estimated to be worth US$95 trillion (US$3.2 trillion per year). Further improvements in the treatment of cancer and cardiovascular diseases are estimated to bring additional value in the magnitude of billions of dollars to the U.S. (See Table 1).

A 2008 report from the United Kingdom also highlighted the value of advancements resulting from medical research. It found that public investments in cardiovascular research in the U.K. – conducted from 1975 to 1992 – yielded returns of about 39 per cent. In other words, for each £1 invested in public cardiovascular research, the U.K. earned £0.39 per year in perpetuity. This demonstrates that when health research and development leads to health innovations that are appropriately and timely integrated into health and health care systems, it results in healthier and longer lives, which creates more value than the investments they require. Combined with the shift over the past century from physical labour to

Chart 1: Perceptions of Importance of Innovation

Source: The Conference Board of Canada.

Chart 2: Frequency with which Health Care Organizations Involve Suppliers, Partners, Patients and Clients in the Creation, Development, or Testing of Ideas

The design and implementation of these policies, strategies and plans will require broader participation and consultation; long-term commitments that go beyond election cycles; higher tolerance for risk; and deeper understanding of science, technology, and innovation and their contribution to health care and society. Let us seize the opportunity created by current fiscal pressures to generate national and provincial health innovation policies for Canada. The potential returns are so important that Canada can’t afford to lose them.

References:

Source: The Conference Board of Canada. knowledge work, this means that Canadians have the ability to remain in the labour force for longer and hence make a greater contribution to wealth creation as well as consumption. The returns on research, therefore, also contribute to productivity growth. Despite its escalating costs, the health care sector may be creating more value than it consumes. It is no exaggeration to say that the Canadian health care system lies at the heart of Canada’s national economy and innovation system, both as a contributor of inputs and as an attractor or demander of its outputs.

This makes it difficult to understand why Canada has no specific health innovation goals, strategies and plans — at the federal or provincial levels — to coordinate and support innovation efforts. Although innovation is key to health care sustainability and the national economy, it has been up to health regions and health care organizations to experiment, with little guidance on targets, how to reach these targets, and how to assess results and determine value. Recent research suggests that health care organizations would benefit from innovation strategies, plans and toolkits that could help them to set up processes and structures more conducive to innovation.

In a 2012 survey conducted by The Conference Board across Canada, senior executives of health care organizations from acute, long term and home care recognized innovation as a priority for the sustainability of the Canadian health care system. However, fewer executives strongly agree that innovation is essential for improving their organizational performance, and fewer still have planned and implemented innovation targets.

Innovators often look outside of their organizations for ideas as well as involve others in their creative processes. A survey conducted

by McKinsey, for example, found that the top managers surveyed indicated that the largest sources of new ideas were peers, partners, suppliers or customers. In another example,

a PwC survey found that 45 per cent of respondents identified customers, suppliers and market intelligence as their top sources for new products or ideas. They also noted that among the most innovative 20 per cent of companies, it was common practice to “… seek and gather ideas and knowledge widely, from customers, suppliers, employees, other industries and competitors.” In contrast, the Conference Board survey found that less than one-third of health care organizations in Canada always or often involve patients, clients, suppliers or partners in the creation, development or testing of ideas.

When asked if innovation has helped health care organizations to improve their performance in terms of innovation awards, patents, license fees, and royalties earned, the large majority of organizations responded not at all or slightly. These results bring questions about the effectiveness of innovation efforts or even more concerning, the lack of focus on protecting the outputs of intellectual assets generated by the Canadian health care sector.

Comprehensive federal and provincial policies to encourage, enhance, and support systemic innovation within the health care sector could help to overcome these organizational innovation challenges within the health care sector. Innovation requires collaboration and partnerships across the health enterprise, which comprises health care, health industries, universities, governments and patients.

Federal and provincial health innovation policies, strategies and plans would provide two key aspects that are currently missing: 1) Blueprints for action to guide the collaborative participation of these stakeholders and ensure that their innovation efforts work in synchrony to optimize resources and outcomes; and 2) A pathway for determining the innovations the system needs to be more effective and for getting them developed, tested, and introduced provincially and nationally.

1. The Conference Board of Canada, The Economic Footprint of Health Care Delivery in Canada, 2013.

2. Conference Board of Canada, How Canada Performs, Labour Productivity Growth. http://www.conferenceboard.ca/hcp/details/economy/measuring-productivitycanada.aspx 3. Statistics Canada, Days lost per worker due to illness or disability, by sex, by province. http://www.statcan.gc.ca/tablestableaux/sum-som/l01/cst01/health47aeng.htm 4. Public Health Agency of Canada. Investing in prevention. The economic perspective.

Key findings from a survey of the recent evidence. 2009. Retrieved from http:// www.phacaspc. gc.ca/ph-sp/pdf/preveco-eng.pdf 5. Kevin Murphy and Robert Topel, Measuring the Gains from Medical Research—An Economic Approach (Chicago: University of Chicago Press, 2003).

6. Brunel University Health Economics Research Group et al., Medical Research: What’s It Worth? Estimating the Economic Benefits From Medical Research in the U.K. [online]. (November 2008), [cited November 2009]. ww.wellcome.ac.uk/ stellent/groups/ corporatesite/@sitestudioobjects/documents/web_document/ wtx052110.pdf.

7. McKinsey & Company. How Companies Approach innovation: A McKinsey Global Survey. 2007. http://bus6900.alliant.wikispaces.net/file/view/How+Companies+A pproach+Innovation.pdf 8. PriceWaterhouseCoopers. Innovation Survey. 2010. http://ebookbrowse.com/ pwc-innovation-survey-pdf-d44705114 Gabriela Prada is Director, Health Innovation, Policy and Evaluation with The Conference Board of Canada.

To see this story online visit http://biotechnologyfocus.ca/jobsproductivity-and-innovation-howhealthcare-drives-the-economy MARCH 2013 BIOTECHNOLOGY FOCUS 15

CANADIAN LIFE SCIENCE

CANADIAN LIFE SCIENCE

Hot button Issues

By: Shawn Lawrence

How imminent changes in R&D tax credits

will change your business

In 2013, changes to Canada’s Scientific Research and Experimental Development (SR&ED) tax program announced in last year’s federal budget will start to hit your bottom line. Bio-tech companies will likely feel more pain than most. Historically the program has delivered about $3 billion of federal money to fund private sector R&D in Canada. An additional $1 billion per year or so of provincial tax credits are tied to SR&ED eligibility. This system of tax credits has been effective both in retaining high quality jobs in Canada and incenting foreign companies to set-up in Canada thereby creating new jobs.

However, at a time when many countries – and many U.S. states – are expanding their R&D tax credits, Canada is cutting back. And as those cutbacks are about to start; most companies will feel their effect for the first time in 2013. The effect will be progressively more severe as the different types of cuts come into effect in subsequent years.

Since for many Canadian companies the tax credits provide a cash benefit beyond whatever tax is payable, these cuts will go straight to the bottom line.

Count David Hearn managing director of Scitax Advisory Partners among those who feel the SR&ED changes are going to be an es16 BIOTECHNOLOGY FOCUS MARCH 2013

pecially tough pill to swallow for the biotech sector. He foresees the changes having a lasting impact on R&D in Canada.

In a recent interview with Biotechnology Focus, Hearn noted “On the surface it might seem that the cuts apply primarily to large corporations that are foreign- or public-owned. However, the majority of the changes are cuts in expenditure eligibility that apply to anyone making a SR&ED claim. The biotechnology and pharmaceutical industries are going to be particularly hard-hit by these changes for a couple of reasons. Firstly, an unusual portion of start-up companies in this sector are publically funded which means they’ll see a five per cent cut in their SR&ED benefit rate in tax years ended after December 31, 2013. Secondly, because of the immediate 20 per cent cut in eligibility of contract research which is so prevalent in this sector. And thirdly – perhaps worst of all for biotech – is the total elimination of SR&ED on any capital equipment whether purchased or leased. Biotech can be a very capital intensive sector of industry.”

According to Hearn, any changes to SR&ED implemented by Canada’s Federal Government will end up altering science and technology policies of the various provincial governments, some of whom could

“If I’m a biotech company and I hire you as a subcontractor, and you charge me $100 for the research, previously 100 per cent of what you paid me attracted SR&ED. As a result of budget 2012, as of January 1st 2013, only $80 of the $100 is going attract SR&ED. That’s bad news for any company that buys R&D services, buts its really bad news for contract research companies selling those services. . .” — David Hearn have priorities somewhat different than those of Ottawa.

“For example Ontario offers the OITC which provides s a 10 per cent cash refund to all corporations and the ORDTC, that provides a 4.5 per cent non-refundable ITC. Other provinces offer similar and in some cases much greater benefits than above. Both of these credits are calculated on whatever expenditures Ottawa allows at the federal level. As such, when the federal government reduces the expenditures that attract SR&ED, for example Ottawa reducing contractors by 20 per cent, this is also reflected in the Ontario benefit. So in effect the federal government has reduced the amount of tax credit benefit that Ontario has to pay. So far, only one province has moved to address this; in November 2012 Québec introduced a boosted tax credit aimed specifically at the bio-pharma sector.”

As for the bigger picture, the feeling in the industry is that most Canadian-controlled private corporations (CCPCs) escaped the five percentage point cut in the investment tax credit (ITC) benefit rate and remain eligible to receive ITCs of 35 per cent of SR&ED expenditures, paid as a cash refund if there are no taxes payable at year end. Yet according to Hearn, that’s not entirely true.

“It’s generally well known that for non-CCPCs that Budget 2012 changed the benefit rate from 20 per cent to 15 per cent. What’s less well communicated is that high spending CCPCs will also suffer that same cut on expenditures above $3 million.”

Hearn went on to say that Biotechnology Focus readers in particular need to pay attention to this wrinkle for two reasons: “First because bio-tech is one the sector likely to have CCPCs spending more than $3 million per year, second because this $3 million limit is changed by factors of taxable income and taxable capital. For example, a company with taxable income of $600,000 in the prior year would see the reduction in benefits from 20 per cent to 15 per cent at only $2 million instead of $3 million.”

Another significant change arising from Budget 2012 is the reduction in the “proxy” overhead which is a notional amount calculated as a percentage of the claimed SR&ED wages that is allowed for overhead and “supplies.” Regardless of tax year end, effective Jan. 2013 the percentage changes from 65 per cent to 60 per cent, and then in Jan. 2014 changes again down to 55 per cent. Hearn noted that companies still have the option to elect the “traditional’ overhead method wherein

MARCH 2013 BIOTECHNOLOGY FOCUS 17

Hot button Issues

CANADIAN LIFE SCIENCE

CANADIAN LIFE SCIENCE

the actual overheads are claimed instead the proxy percentage. However, Hearn went on to say that unfortunately claims made using the traditional method seem more likely to be audited than those made using proxy.

“The cuts made to the SR&ED credit tax program through Budget 2012 could be further amplified by a whole series of new policy documents released by CRA in December 2012. While these documents don’t have the force of law, they paint an accurate picture of how CRA will assess the claim you file and what their auditors expect to see in terms of compliance record keeping. Many industry observers have pointed out that some of the positions set out in these new policy documents are somewhat more restrictive in terms of the types of R&D work that qualify to attract SR&ED as compared to earlier versions of similar documents produced by the Agency. Dr. Russ Roberts of the Canadian Advanced Technology Association recently wrote on that organization’s website that: ‘The result of the new, consolidated policies when used in audits has been supported for a much narrower scope of SR&ED, both in terms of what are SR&ED projects and what work can be associated with them.’” 1 It all adds up to putting Canadian technology firms – especially biotechnology businesses – in a pinch, Hearn concludes.

“Essentially, you get less benefit, less eligible expenditures and less R&D activity that qualifies for the credit. So, as a result of Budget 2012 there is a reduction in expenditures and benefit rate on the quantitative side, and as a result of CRA administrative policy we’re seeing a reduction on the qualitative side.”

Hearn also has questions regarding the timing of and the purpose behind the cuts. The federal government maintains that the cuts to the SR&ED program will be offset by bolstered direct grants and loan programs. While such initiatives as increasing funding for NRC’s IRAP grant program and delivering $400 million in venture capital through its technology investment program are positive measures, Hearn believes they won’t offset the crunch CCPCs are facing with the cuts.

“In a time when just about all of the world’s knowledge economy countries are increasing, not decreasing the use of tax credits, the Canadian Government’s move to curtail them is puzzling. Our system of SR&ED tax credits has given Canada a significant competitive advantage on the global stage; so if the goal is to attract investment, jobs and businesses to Canada , I think any move away from tax credits is a step in the wrong direction,” he said.

The renewed federal emphasis on direct funding through grants and loans instead of tax credits also creates some unique concerns he believes.

“For starters, businesses understand the tax credit system much more than they understand the direct funding models based on grants and loans. When company CEOs or CFOs choose a location, they think about availability of labour, they think about cost of real estate, the quality of life, the political stability, and most importantly, from a government policy standpoint, companies look at the tax picture first. They really don’t like grants and loans, for the reason that such funding mechanisms are so highly subjective. In most cases the government is picking the winners and losers.”

He explains that transparency is the big advantage that funding R&D through the tax system has over any of these “direct funding,” grant and loan schemes.

“The tax system operates according to the rule of law. It operates with the support of the same professional chartered accountants and lawyers to whom we entrust all other aspects of commercial oversight.

18 BIOTECHNOLOGY FOCUS MARCH 2013

“In a time when just about all of the world’s knowledge economy countries are increasing, not decreasing the use of tax credits, the Canadian Government’s move to curtail them is puzzling. Our system of SR&ED tax credits has given Canada a significant competitive advantage on the global stage.”

There are well defined redress procedures through the courts by which anyone denied R&D funding can appeal that denial and by which government can recover R&D funding given to anyone not entitled to receive it. But in these grant/loan schemes, there’s no process for redress. There are rules but there isn’t really legislation per se. There’s no professional body that acts as a translating layer between government and business.”

Another thing to know about these grants and loans, explains Hearn, is that they often work against the tax system.

“A company that receives government assistance gets less R&D tax credits.”

Essentially, direct funding has the potential to affect the SR&ED benefit the company may have been otherwise eligible for.

Hearn also has a suggestion for government to consider as an alternative to direct funding for non-CCPCs, again with transparency being the goal. It’s an argument that has been put forth many times before in past Hot Button Issues of Biotechnology Focus.

“I don’t want to say I’m against direct funding, and I do think the Canadian Government is showing itself to be genuinely interested in supporting the biotech sector. However, I think government needs to re-visit the flow-through share idea. Flow-through shares have worked perfectly to incent development of Canada’s petroleum industry.

There’s a high demand amongst investors for these types of shares, the legislation already exists and our professional communities know how to use them.”

References 1. see “Comment” at http://www.cata.ca/Media_and_Events/ Press_Releases/cata_pr02011302.html

To see this story online visit www.biotechnologyfocus.ca/how-imminent-changesin-rd-tax-credits-will-change-your-business/

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By: Denys G.T. Cooper

Going public:

Is a RTO the best way to go?

368 biotech & life science firms have gone public in Canada by an IPO or RTO, but in the long term, what route should life science firms take?

Hot button Issues

Executive Summary This study looked at the presence and growth of a broad group of biotech and life science firms which have gone public in Canada – in all 368 cases. There is a significant drop in lag times from date of incorporation to the date of going onto a stock exchange, but also for the times to take overs and even closures. The drop in market cap values over five years and low profitability for most of these firms have hurt at the time when there is a large need for financing to cover R&D, clinical trials and commercialization before they can move ahead. However, the number of high growth firms - gazelles - is significant.

Sector

# Firms

% Firms

Pharma

121

33%

#IPOs: RTOs 66 : 55

Biotech and Diagnostics

73

20%

39 : 34

Medical Devices & Ear. Eye, Dental

59

16%

27 : 32

Agric / Food / Beverages / Aquaculture 65

18%

50 : 15

Bio Environment / Energy

6

-1%

0:6

Other: Hospitals, Software, Services

44**

12%

21 : 23

Total

368

100%

202 : 166

** Includes 3 firms with no confirmed date or even decade of IPO

20 BIOTECHNOLOGY FOCUS MARCH 2013

# Firms

Figure 1: Growth in Accumulated Numbers

by Year of IPOs and RTOs

Table 1: 368 Public Firms by Sector

Year

Just a small handful of biotech / life science firms have gone public since 2010 – one of which was excluded (Pacific Therapeutics) because it did not have a prospectus to get listed on the CNSX exchange in 2012.

This paper is the first to have identified that over the past 100 years up to 2011, over 368 current and past biotechnology / life science firms have gone public in Canada. In that time, another 60 firms have tried to obtain a Canadian stock exchange listing – some failed whilst others were successful but never operated in Canada. In spite of detailed searches on SEDAR, Google, company reports and even reviewing old copies of the Globe and Mail via their online listings, the total public firms found may well be short especially if listed before the Second World War.

IPOs and RTOs The data has been broken down into two main pools – those firms with Initial Public Offerings (IPOs) in one pool, and Reverse Take Overs (RTOs), Cap Stocks & Québec’s SPEQ (herein abbreviated to just RTOs). In the literature, there are many definitions of life science firms and biotechnology firms, so awareness is needed of the data sources for this analysis.

The public firms identified are covered in Table 1.

The vast majority of firms came from Ontario (148), BC (92), and Québec (75), with the balance from the Prairies and Maritimes. The number of IPOs and RTOs per year both peaked in 2000. The accumulated numbers of life science and biotech issues are seen in Figure 1.

Just a small handful of biotech and life science firms have gone public since 2010 – one of which was excluded (Pacific Therapeutics) because it did not have a prospectus to get listed on the CNSX exchange in 2012.

RTOs RTOs are a relatively new financing tool – present since the late 1980s, but in eight of the past 10 years there have been more RTOs than IPOs found in this biotech / life science study. While increasing in number, the questions surrounding the RTO route is whether it is a sound investment strategy in the long term? Certainly the firm gets earlier exposure to the market, albeit for a lower level of new funds, initially. In the long term the short term benefits do not translate into sizeable follow-on investments in most cases. For instance, 146 of the 166 RTOs that have happened in Canada have raised just $330 million (average $2.3 million) and only $3.4 billion in 140 firms with follow-on private placement (average $24 million per a firm). This compares with146 of 202 IPOs which raised $4.2 billion initially (which on average was more than 10 times the amount at $29 million) and a further $14.4 billion in VC and follow-on private placements (an average of $99 million per a firm).

Even if the IPO launch period was adjusted to a similar time frame, say from 1990, the IPO funds raised were $30 million per firm on average and follow-on financing was at $100 million per firm, figures which were still higher than for the RTO cases. (Note: funds raised by stock options or warrants have not been factored in.)

Profits: The net profits after tax were also looked at in this study.

The most recent data taken into account for this study (2008 to 2011) showed that profits of $1.2 billion in 27 IPO and 11 RTO firms (average of $32 million) were offset by losses of $1.4 billion in 164 firms for a net loss of $280 million. The main contributor to profits was Shopper’s Drug Mart at $614 million. The three sectors of biotech, pharma and medical consisting of 145 firms, had similar performance per firm for an average net loss of $6.6 million per firm. The three highest profits for the pharma sector were from Cardiome, Interimune and Paladin for an average net profit of $69 million each. With the high costs of bringing a new drug to market (revised up to over $1.2 billion), there is insufficient net cash flow for pharma firms so they must seek outside financing and/or set up strategic alliances. Both lead to stock dilution. The 18 agro sector firms showed net profits of $159 million for a $9 million average per a firm.

In comparing the change in profitability of 65 firms from 2000 to 2010, only 34 firms had reduced losses or turned to profitability compared with 32 firms with increased losses. The net losses of $85 million in 2000 turned to a net profit $687 million in 2010. However, $614 million of this profit was credited to one firm, meaning the rest combined showed only a net profit of $73 million. The five agro firms were profitable in both periods. For 31 pharma firms the $49 million in losses rose from 2000 to $286 million a decade later.

Takeovers: There is a high churn rate of the firms via take overs found in this study. These involved 188 of the 368 public firms (51 per cent), with 43 of those being taken over multiple times (some up to four times) which meant that there was a total of 243 takeovers recorded.

Of the 188 firms taken over, 106 were first taken over by Canadian firms followed by 57 cases from the U.S.. Some of these cases involved the Canadian firm moving its head office to the U.S.. Only 18 firms were taken over by European countries, with the rest from Asia, Israel and Australia. Of the initial foreign takeovers only four more ended up in Canadian control.

Over time, the initial takeovers were predominantly by new Canadian parents in the period until the 1970s (over 85 per cent), which then dropped off to 50 per cent from 1990 onwards. By sector the probability of takeovers was highest in the medical sector at 54 per cent and agro sector at 67 per cent. Biotech and pharma sectors were lower at 49 per cent. In the agro sector most of the takeovers were part of the consolidations in the brewery, wine and distilled liquor sub-groups. The average takeover time from incorporation was shorter for foreign take overs (15 years), than for Canadian acquisitions, where the time frame was 21 years. Overall, this time period has been dropping over the past 20 years.

The probability of a takeover by sector for RTO cases was 25 per cent +/- 5 per cent, whereas it was higher at 50 per cent +/- 10 per cent, for IPO firms with agro, biotech and medical firms in each case being the most sought after.

Takeover Valuations: it was especially difficult to obtain the valuation when multi-national acquirers were involved. With data on only 108 firms with recorded takeover valuations (57 per cent), the total valuations found of $31.8 billion are understated. At an average of over $294 million, there is a wide variation from a few thousand dollars MARCH 2013 BIOTECHNOLOGY FOCUS 21

CANADIAN In a 2012 studyLIFE

by Statistics Canada, MacDonald showed that of SCIENCE

89,400 firms which started operating in 2002, 58 per cent had disappeared within five years (55 per cent for technology / scientific firms).

(typically in distress cases) to the top two firms at over $4 billion each for Biochem Pharma and Molson Breweries.

For those firms with valuation data for both an IPO and first takeover, the average takeover valuation exceeded the IPO value for the agro and pharma sectors by 21 and 12 times respectively. Even if these were adjusted by taking out one large takeover each, the multiplier was five times the amount. However, the takeover valuations barely covered the initial IPO placements in the other three sectors, yet alone the subsequent funding raised since going public.

Takeover valuations for RTO firms were generally much lower (50 per cent) of those firms with a previous IPO. There was one key RTO exception, namely I.D. Biomedical at $1.4 billion.

Gazelles: High growth firms are known to produce a disproportionately larger number of new jobs. For this study high growth firms, known as “gazelles”, are defined as having doubled in a five-year period their employment to a minimum of 20 employees and/or generated sales of $10 million per year or multiples thereafter. In a study by Statistics Canada and the National Research Council (NRC) of 1.1 million firms running from 1995 to 2000, only two to four per cent were considered gazelles over a 10 year period. From another study of 2,434 firms which had received VC funding of $18 billion over 10 years up till 1999, of the 1,586 technology based firms, 18 per cent were considered gazelles, with biotech/medical/pharma at 19 per cent (Industry Canada: 2008 – D. Cooper and Y. Errounda). These findings indicate that firms grow through organic internal growth and/or through acquisitions.

Further for public biotech and life science firms, the study found that there were 147 gazelles (40 per cent), with the three highest levels found in the medical (47 per cent), pharma (45 per cent), and biotech (16 per cent) sectors. These numbers were likely understated for the older firms – particularly in the agro sector (29 per cent) because of incomplete information on sales and employment growth for the pre-war periods.

From this data, the question can be asked as to whether gazelles are targeted for takeovers? The answer is yes, as there was a key difference in takeover rates for gazelles (51 per cent) vs. non-gazelles - just 33 per cent across all sectors. There was even stronger evidence with

pharma gazelles with a 69 per cent takeover rate compared to 14 per cent for non-gazelles.

If within five years of start-up the firm received NRC support from the Industrial Research Assistance Program, then the percentage of takeovers for gazelles in general rose to 63 per cent (sectors ranged from 40 per cent to 79 per cent).

With the downturn in the economy, some of the gazelles (45 in total or 31 per cent of those included in the study) have reduced their employment and/or sales from prior peak levels. As seen in another study of university spin offs (D. Cooper, 2002), such firms once again expanded when the economy recovered, the firms once again expanded. Indeed, another feature of gazelles is that they often make multiple jumps. Furthermore, gazelles are not as fragile as the animal name might suggest - they show a very low closure rate, as noted in this study.

Closures: Only 24 per cent or 88 of the 368 firms have been closed, a figure that is much lower than the national average for all start ups. There is no significance in closure rates for IPO or RTO firms. By sector, the biotech group had the lowest closure rate at 14 per cent whereas the medical group was highest at 45 per cent. Primarily because of the long survival times for the agro sector, the average closure time for all sectors was 18 years, whereas it was 12 years for the three main sectors of biotech, medical and pharma. (Note: a few firms were included which went into bankruptcy proceedings but emerged via a rescue takeover.)

In a 2012 study by Statistics Canada, MacDonald showed that of 89,400 firms which started operating in 2002, 58 per cent had disappeared within five years (55 per cent for science and technology firms).

(Caution: for the Statistics Canada figures, if a firm is taken over, it may be deemed to have disappeared even if it continues under a new name or as an operating division of a new parent company. My study retains the firm as active when it is known to continue to operate after a takeover. This in part explains my lower closure rates (i.e. higher survival rates).

For non-agro sector gazelle based firms, the average closure times were longer than for non-gazelles tracking at 17.6 years versus 11.6

Figure 3: Lag Times for 188 Public Firms to be Taken Over

# Lag Years

Figure 2: Lag Times for IPOs

# Lag Years

Hot button Issues

CANADIAN LIFE SCIENCE

Incorporation Year 22 BIOTECHNOLOGY FOCUS MARCH 2013

Incorporation Year

Figure 4: Number of Firms with Changes in Market Cap Valuations for 130 Biotech / Life Science Public Firms

# Up Firms # Down

years respectively. In a separate study (partially funded by Industry Canada in 2011 to 2012), those pharma firms with more strategic alliances had increased levels of gazelles and saw fewer closures.

Lag Times IPO: There has been a steady reduction in time from the date of incorporation to an IPO, - known as the lag time - from over 25 years from incorporation to currently less than five years. This drop is seen in all sectors with relatively high correlation R2 values of the linear trend line at 0.66 – as seen in Figure 2. For 63 of 66 pharma firms it was 0.72.

The average lag time to an IPO for firms incorporated since 2000 was only 3.8 years. Linear trend lines should more correctly be drawn as exponential curves, which all have somewhat lower R2 values. The following trend lines were first shown graphically in 2005, in a study on university spin off firms. This presentation of data is new because for most other analysts, the lag time data was obscured by the inclusion of RTOs, cap stocks and Quebec’s SPEQs, which seldom have a lag time of more than two to three years from incorporation. However, with the recent near absence of IPOs and even only a few RTOs in the past three years there will be an extension of lag times until the financial markets open up.

Takeovers: The reduction in lag time from date of incorporation is also seen for the time to takeovers and even for closures. There are reasonably high correlation R2 values at 0.71 for the first takeovers (188). The R2 value was higher for the pharma sector at 0.77 but lower for biotech firms at 0.49. For IPO cases the R2 value was 0.67, and 0.76 for 63 closures. These lag time changes, which now focus around the five year mark or less, have significant implications for company managers. The lag time to takeover for firms incorporated since 2000 has continued to drop – to an average of 5.6 years. For the 28 takeovers in the period 2005 to 2011, 75 per cent of the firms in Canada were closed within a year - in some cases this was because the firm’s management moved its operations to the U.S. The foreign takeovers, mostly from the U.S., are made for strategic growth opportunities of the technology or market position. In the agro-food sectors there was a considerable number of rationalizations in the wine, beer and distilled liquor businesses. A significant number of the takeovers by Canadians in the biotech and pharma sectors were because of weak financial positions of the firms, some of which have

since been turned around – notable are the five firms taken over by Paladin.

Closures: The correlation coefficient R2 values for lag times from incorporation were even higher at 0.89 for all closures, and 0.79 for pharma and medical but slightly lower for other sectors. There was no difference in lag times between IPO and RTO firms closed.

Financing: A study has been made of the changes in market cap valuations for 130 firms from 2006/07 to 2011. Up until December 2011, only 22 per cent of the firms had increased market caps; while 64 per cent of the firms were down in market cap size. This spread was similar for all sectors except for the agro sector wich had expansions in 47 per cent of the cases. (Note: this analysis does not include the closed cases so from an investor’s viewpoint the effective market cap valuations with drops are even greater.)

From an investors view point, at least for those with surviving firms, the good news is that the market cap valuation in 2010 for 147 firms at $96.1 billion is considerably higher than the combined IPO/ RTO launch values of $2.26 billion and $9.79 billion raised in VC and follow-on private placements. (Note: these figures have not been discounted to their present net worth.)

In summary, the overall success and growth of RTO firms are lower than for IPO firms. However, new firms wishing to go public in the past three years have had little or no other option than go via an RTO. To keep new products flowing, external financing has to be augmented via takeovers and strategic alliances.

The views and opinions expressed in this article are those of the author alone and do not represent, in any way, the views or opinions of the Department of Industry or of the Government of Canada.

Dr. Denys Cooper worked at NRC in its IRAP program for 35 years, where he specialized in the growth and financing of SMEs especially in life sciences and in university spin off firms. Since 2005, he has been consulting. Financial support is gratefully acknowledged from Industry Canada and NSERC towards some of the data analysis. Contact: Denys.cooper@sympatico.ca

To see this story online visit http://biotechnologyfocus.ca/going-public-is-a-rtothe-best-way-to-go MARCH 2013 BIOTECHNOLOGY FOCUS 23

Hot button Issues

Status of Market Cap Change

Innovation Today for the Medicine of Tomorrow

By: Katherine Bonter

Hot button Issues

CEPMed, a Centre of Excellence funded by the Network of Centres of Excellence (NCE) Program, was created by the Montréal Heart Institute to promote innovation in personalized medicine (PM) through investment, research and knowledge translation.

In doing so, we have engaged a broad range of stakeholders nationally and internationally including: biopharmaceutical, IT and pharmacy companies, public sector researchers, physicians, hospitals, patients and regulatory agencies.

CEPMed’s key objectives are to accelerate clinical development through innovative clinical trials

and to enable clinical adoption through realworld implementation research. The following article, based on a presentation given in November at the MaRs annual Future of Medicine Conference, aims to inform the development of a broad vision for accelerating innovation in PM based on progress in two areas: business models and intellectual property.

CANADIAN LIFE SCIENCE

Although we have observed unprecedented advances in understanding the molecular biology of disease, the current capacity of organizations to translate these advances to the clinic is a barrier to progress. Drug development strategies and business models tailored to a ‘blockbuster’ approach are gradually being replaced by strategies and models for approaches that target smaller patient populations typically identified using molecular diagnostics (MDx), i.e. personalized or stratified medicine. This shift is a disruptive force in the biopharmaceutical and related industries as well as in the health care sector more broadly. Opportunities created by this disruption can drive industrial growth in Canada and deliver a broad range of socioeconomic benefits. However, evolving business models, technologies, clinical research paradigms and regulatory pathways make success in this area particularly challenging.

While innovative companies, organizations and countries stand to benefit, innovation - the ability to turn knowledge into new and improved goods and services - is not a Canadian strength. Canada was ranked 14th out of 16 peer countries in its innovation capacity and consistently underperforms compared to other OECD countries. Canada does, however, have strengths that can provide a ‘competitive edge’ for innovation in PM – including high public investment in genomics research, numerous high performing and well funded incubators and facilitator organizations with objectives in clinical research or drug development, strong clinical research capacity and expertise, and publically funded and integrated health care systems. Combining these strengths with effective business models for Canadian companies and strong, well informed, intellectual property strategies could serve to improve our innovation capacity in PM.

A business model broadly represents the role each type of firm or organization plays in creating, capturing or delivering value within a particular value chain. A value chain spans all activities for bringing a product or service from conception to use (innovation) and can encompass several business models. With respect to PM, a business model can refer to the role played by research institutes, pharmaceutical companies, diagnostic companies, hospitals, pharmacists or physicians in bringing a 24 BIOTECHNOLOGY FOCUS MARCH 2013

therapeutic, diagnostic device, clinical testing service, software or combination thereof, through a value chain and into use. In contrast to traditional drug or diagnostic device development, value chains in PM are non-linear and require integration of activities across different organizations in new ways. Defining these evolving value chains and their dynamics may facilitate innovation by informing decision-making, strategy development and stakeholder roles and interactions in ways that can reduce risks or maximize socioeconomic benefits.

Successful commercialization in PM requires effective integration of an innovation into the clinical management of a particular disease as well as compatibility between the innovators business model and the clinical setting. Optimizing value creation requires a deep understanding of the relevant clinical setting(s) and adoption drivers. This is often mentioned as one of the reasons for the success of Genomic Health’s OncotypeDxTM – that the clinical need and integration of the test into clinical management was well defined and considered early in development. Some have suggested that a lack of understanding in this area is slowing the development of personalized medicine. For example, there have been significant differences in the success of implementation of the same innovation and value creation in Canada vs. the U.S., in a publicly vs. privately funded health care system. As of 2010, OncotypeDx® was fully adopted in the U.S. and reimbursed by virtually all insurance providers. In contrast the adoption of OncotypeDx® in Canada has been much slower. We estimate that only 10 per cent of patients who could benefit (according to OHTAC or ASCO guidelines) were tested in 2010. Commercialization of BRCAAnalysis®, a gene test assessing breast cancer predisposition, by Myriad Genetics provides another example. In spite of the legal battles over Myriad’s intellectual property, Myriad has successfully commercialized in the U.S. using an exclusive service provider business model.

However, Myriads efforts failed completely in Canada where such testing is currently provided by and through the publically funded healthcare system. This outcome is notable considering similarity of the U.S. and Canadian IP regimes and grant of patents to Myriad in both countries; suggesting that the exclusive service provider business model is not com-

patible with the Canadian health care system environment.

How might this affect the ability of Canadian companies to grow, attract investment and operate in Canada? Over time, could this lead to a dependence of Canadian organizations on exclusive U.S. test providers? These questions need to be considered and explored carefully to find an optimal path forward for Canadian companies in PM. Innovative MDx are needed for PM. Case studies have highlighted the need for better commercialization planning in MDx and the risks associated MDx development and commercialization. MDx regulatory approval, time to payor coverage, data requirements and time to physician adoption are highly variable and unpredictable. As a result, estimating the net present value (NPV) of a test, to justify an investment, can be difficult even for a test that is near to market. For example, an approved and reimbursed test can take up to eight years for physician adoption. As a result, an investment of $40 to 50 million in a MDx test that sells for $2,500 to 3,500 corresponds to a 10 year NPV range of $0 to 15 million. Adding to this challenge diagnostics are undervalued and typically not paid for based on clinical value like drugs. Diagnostic tests account for only five per cent of hospital costs, yet they influence 60 to 70 per cent of clinical decisions. Rewarding the true value add provided by innovative MDx, and clarifying paths to and requirements for success, will help to assure that incentives are in place for investors and innovators.

Intellectual property (IP) rights are a key enabler of innovation and economic growth in many domains. In 2010, IPintensive industries were responsible for 27.7 per cent of all jobs in the U.S. economy and 34.8 per cent of the U.S. GDP. The exclusive rights conferred by IP are necessary to support investment in high risk, high cost ventures like those that ultimately provide us with innovative drugs, biologics, diagnostic devices and research tools. In the absence of IP rights, investment would be reduced and the full public disclosure of many inventions delayed or even prevented. Patent protection has been granted to isolated products of nature, such as proteins, peptides, antibodies, genes and their uses for decades. This

protection has provided a foundation for the growth of the biotech industry; however this same practice, when applied to genetic material, is strongly contested even when the genetic material is a non-natural product like a cDNA. The outcomes of recent U.S. patent litigation, specifically Mayo v. Prometheus Labs and Association for Molecular Pathology v.

Myriad Genetics, have affected the enforceability of granted patents, best practices for claiming biomarker inventions and have significant implications for innovation in MDx. The patentability of methods that relate to correlations between natural phenomenon, such as a gene variant or metabolite (a biomarker) and clinical phenotypes was considered in both Prometheus and Myriad. In March 2012, Supreme Court decision found that the Prometheus claims, directed to methods of optimizing the dose of a drug based on measures of the level of a specific metabolite, were directed to a non-patentable law of nature. Interestingly, the patents disputed in Prometheus (U.S. 6,355,623 and 6,680,302) are owned by Hopital-Sainte-Justine in Montréal and relate to an out-licensed Canadian innovation. In the Myriad case, the courts considered the patentability of therapeutic screening methods, diagnostic methods as well as isolated DNA and cDNA molecules, related to BRCA genes associated with breast cancer.

U.S. Federal Court decisions in 2011 and 2012 both found Myriad’s DNA, cDNA and therapeutic screening claims valid and their diagnostic method claims invalid. However a final verdict is still pending. In November 2012, the U.S. Supreme Court agreed to hear an appeal and will consider Myriad’s claims to DNA and cDNA molecules “gene patents” but not to methods. Regardless, the bar for protecting biomarker inventions has been raised and uncertainties faced by the MDx industry increased.

Both the Prometheus and Myriad decisions MARCH 2013 BIOTECHNOLOGY FOCUS 25

Hot button Issues

A 2005 Science article concluded that as much as 20 per cent of human genes are patented.

Hot button Issues

CANADIAN LIFE SCIENCE

have influenced biomarker invention claiming practices. The Prometheus patent claimed a method of detecting a drug metabolite and using a correlation between the metabolite and an effective dose to optimize the dose administered. This optimizing step was articulated as a wherein clause, in brief, wherein the level of metabolite indicates a need to increase or decrease the dose. Claiming the practical consequence of the biomarker correlation/natural phenomenon in this way, rather than reciting a specific action, has been common practice for some time. Post Prometheus, we know that claims that include a natural correlation will likely need to include a specific pre-solution activity, a specific post-solution activity or both to be considered patentable. For example, a specific way of analyzing the biomarker (pre-solution) or a specific action taken after the correlation is determined (post solution). A study of 2,300 granted U.S. patents, directed to genotyping methods, found that: 79 per cent are likely patent ineligible, in view of Prometheus, because the claims do not recite either a specific pre- or postsolution activity; 20 per cent recite a specific pre-solution activity and are possibly patent eligible; 0.63 per cent recite a specific post solution activity and are possibly patent eligible; and only 0.72 per cent recite both a specific pre- and post-solution activity and are likely patentable. The results of this study are critical and actionable information for biomarker IP owners, investors and companies.

Important side issues have been raised in light of the ongoing Myriad BRCA gene patenting controversy such as: the potential impact of ‘gene patents’ on the use of whole genome sequencing and the potential impact of private databases created by exclusive providers of genetic tests on clinical interpretation and advances in genomic medicine. A 2005 Science article concluded that as much as 20 per cent of human genes are patented.

This finding has been frequently cited as support for the idea that gene patents block innovation and that licensing fees needed for comprehensive gene sequencing methods would slow progress. More recently an analysis of the patents considered ‘gene patents’ in the 2005 article found that 26 per cent of 26 BIOTECHNOLOGY FOCUS MARCH 2013

these patents do not claim a DNA molecule or genotyping method, 69 per cent claim a DNA molecule and five per cent claim a genotyping method. Of the 69 per cent that claim a DNA molecule these are largely directed to primers, cDNA and vectors that would not be infringed by whole genome sequencing methods. Of the five per cent that claimed genotyping methods these were primarily directed to sequencing methods that would not likely be infringed by next generation sequencing technologies. This data provides strong evidence that gene patents do not currently pose a threat to whole genome sequencing.

As for the issue of proprietary databases derived from genetic testing services, the balance between corporate property and ensuring broad access to clinically relevant information is not clear but the potential consequences for clinical interpretation and innovation are obvious. Finding solutions that are in the best interests of patients and protect corporate interests, while stimulating innovation both in the public and private sectors, may not be easy. As the data contained in such databases is foremost the property of the individual who provided a sample and consented to the capture and use the derived data, the interests and role of these individuals should be the primary consideration. One mitigating action could be electronic records, within public healthcare systems, that can receive genetic data produced by exclusive service providers and share these data for research within public sector, by non-profit organizations or international consortia.

References 1. Milne, C.-P. & Kaitin, K. Translational medicine: an engine of change for bringing new technology to community health. Science translational medicine 1, 5cm5 (2009).

2. Zuckerman, R. & Milne, C.-P. Market watch: industry perspectives on personalized medicine. Nature reviews. Drug discovery 11, 178 (2012).

3. Clayton Christensen, The Innovators Prescription, A Disruptive Solution for Health Care, 2009.

4. http://www.conferenceboard.ca/hcp/ details/innovation.aspx 5. Hansen, MT and Birkinshw, J Harvard Business Review, The Innovation Value Chain, Harvard Business Review, 2007, https:// blog.itu.dk/KMP-E2008/files/2008/08/ theinnovationvaluechain.pdf

6. Keeling, P., Roth, M. & Zietlow, T. The economics of personalized medicine: commercialization as a driver of return on investment. N Biotechnol 29, 720-31 (2012).

7. Estimates based on incidence of Canadian incidence, Ontario Heath Technology Advisory Committee Recommendations, and sales data provided by Genomic Health 8. Keeling, P., Roth, M. & Zietlow, T. The economics of personalized medicine: commercialization as a driver of return on investment. N Biotechnology 29, 720-31 (2012).

9. Davis, J. et al. The microeconomics of personalized medicine: today’s challenge and tomorrow’s promise. Nature reviews.

Drug discovery 8, 279–86 (2009).

10. Intellectual Property and the U.S. Economy: Industries in Focus. Economics and Statistics Administration United States Patent Office, March 2012.

11. Haanes E. et al. Stealing fire: a retrospective survey of biotech patent claims in the wake of Mayo v. Prometheus. N Biotechnology, 30, 758-60, (2012).

12. Haanes E. et al. Stealing fire: a retrospective survey of biotech patent claims in the wake of Mayo v. Prometheus. N Biotechnology, 30, 758-60, (2012).

13. Cook-Deegan, R., Conley, J., Evans, J. & Vorhaus, D. The next controversy in genetic testing: clinical data as trade secrets?

European journal of human genetics : EJHG (2012).doi:10.1038/ejhg.2012.217 14. 2005 Science article 15. Holman, C. Debunking the myth that whole-genome sequencing infringes thousands of gene patents. Nature biotechnology 30, 240–4 (2012) Katherine Bonter is the director of promotion and advocacy at Cepmed. Prior to joining Cepmed, she worked for 15 years in the pharmaceutical and biotechnology industry, focusing primarily in business development and intellectual property. She has also worked for four small- to medium-sized early stage companies in research, competitive intelligence, project management and intellectual property (IP) protection of pharmaceutical, diagnostic and research products.

To see this story online visit http://biotechnologyfocus.ca/ innovation-today-for-themedicine-of-tomorrow

NEW PRODUCTS Photoelectric sensors Baumer introduces qTeach, an easy-to-use, wear-free

zontal air movement is also key to operator protection from hazardous chemical and compounds being manipulated within the enclosure.

Web: www.aircleansystems.com new card:Layout 1 1/31/2013 9:09 AM PageCycler 1 Thermal Techne has intro-

teach procedure initiated by touching the housing of O500 series photoelectric sensors. O500 optical sensors with qTeach feature no mechanical buttons or moving parts that can wear out, and are available in three models: diffuse sensors with background suppression, SmartReflect reflector-free light barriers and retro-reflective sensors for reflective surfaces. The sensors require no mechanical adjustment during setup and offer convenient teach-in process with a light touch to the housing using any ferromagnetic tool such as a screwdriver. A blue LED on the sensor provides clear optical feedback during the teach procedure, blinking to indicate when the user has activated teach mode and when the teach function has been completed. To prevent inadvertent reprogramming in the field, qTeach automatically locks out after five minutes of operation.

Web: www.baumer.com Scales AirClean Systems PowderSafe Type B enclosures usher in a new era of

duced a new Combi-Block for its widely used Prime Thermal Cycler range, providing instrument users with even more flexibility.

The new Combi-Block has a total capacity of 66 tubes, either 33 x 0.2 ml or 33 x 0.5 ml volume. There is an optional 25°C temperature gradient spread over the 11 columns. Multi-user laboratories and core

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powder weighing and containment technology. Equipped with a controlled negative pressure HEPA-filtered environment, PowderSafe Type B is fabricated with polypropylene, which is a chemically resistant, high mass polymer. The innate chemical resistance of polypropylene allows users to easily clean the enclosure without the worry of degradation, while the high mass construction alleviates the threat of vibration and balance disturbance during weighing. Furthermore, FlowSmooth™ technology provides even, horizontal air distribution throughout the enclosure, preventing turbulence. This laminar hori-

facilities have a range of cycling requirements, and the use of different sized wells means a selection of consumables can be accommodated in the same instrument.

Techne Prime Thermal Cyclers are suitable for a range of PCR applications, with the new Combi-Block adding to the existing 96-well (0.2 ml), 60-well (0.5 ml) and 384-well block options. Prime Thermal Cyclers can be purchased with or without a temperature gradient, with the option to upgrade later using a simple unlock code.

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NEW PRODUCTS Sequencing kit The NEXTflex 16S V4 Amplicon-Seq Kit has been developed to simplify bacterial metagenomics studies using Illumina® HiSeq and MiSeq platforms. This kit allows users to go from sample to sequence in two hours. Using

specialized NEXTflex primers that target the V4 region of the 16S subunit, a single PCR amplification simultaneously ligates the necessary sequencing and barcoded region for multiplexing. The entire workflow requires only one clean-up step maximizing recovery. The kit is available with up to 48 barcodes, with higher degrees of multiplexing available on a custom basis.

Web: www.biooscientific.com Pipettes After nearly a year on the market, the flexible, accurate Mettler Toledo Rainin E4 XLS family of electronic pipettes are designed to be the most ergonomic electronic pipette available. Offering a comfortable grip, precise balance and a large full-colour screen, the pipette is made to enhance speed and prevent user fatigue. The E4’s joystick control and logical menus, available in single channel, multichannel and adjustable spacer formats, simplify switching between functions. The E4 XLS is also extremely versatile, allowing operators to gain its ergonomic benefits across a wide range of pipetting functions.

These include titration, dilution, reversemode pipetting and sequential volume

programming for complex protocols.

A multi-dispense feature automatically calculates how many aliquots can be dispensed from a single pickup so operators quickly ascertain how many samples can be prepared.

Web: www.mt.com/e4 Photometer The new, Omega lightweight HHWT-13 series of handheld dip strip photometers are a more “green” and cost effective alternative to testing water for cyanide, iron, ammonia, phosphate, pH (5 to 10) sulfide, fluoride, chloride, and quarternary ammonia.

Instead of using a 10 ml water sample, this CE compliant product uses a 4 ml water sample, which uses up to 60 percent less chemical per test. It features a simple three-button control, 140 test memory and an automatic countdown test time.

This product is ideal for wastewater treatment and in all industries which require the monitoring of their process pH. Web: www.omega.com HPLC columns Protea Biosciences Group Inc.introduces its Amplus wide-pore

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core shell HPLC columns, a new line of liquid chromatography columns specifically designed for intact protein analysis. This new family of HPLC silica-based columns employ core shell technology combined with a specific porosity designed to facilitate protein separation, including those with high molecular weight.

Web: www.proteabio.com Data logger The RTR-574-H highprecision wireless 4 channel light logger achieves a temperature measurement accuracy of ±0.3°C (between 10 to 40°C) 28 BIOTECHNOLOGY FOCUS MARCH 2013

with an overall range of -30 to 80°C while the humidity measurement accuracy is ±2.5% (at 25°C, 10 to 85% RH) with an overall range of 0 to 99% RH. Other features include a TR-574-H illuminance UV recorder that can simultaneously measure and record four parameters: illuminance, ultraviolet light (UV), temperature and humidity. In addition to these parameters, the TR-574-H is also capable of displaying cumulative illuminance and cumulative amount of ultraviolet light in the LCD display. The wide luminosity range covers 0 to 130k lx and low light resolution to 0.01 lx and the UV range covers 0 to 30 mw/cm2.

Internal accumulation of exposure is for both light and UV. This compact, lightweight unit is approximately 2” X 3” and operates on one AA battery. The TR-74Ui-H has a large data capacity which can store up to 8,000 readings times four channels for a total of 32,000 readings in one-time or endless recording mode. This unit is compatible with any RTR-500 series wireless data collector and can be used for automatic downloading of logged data, real time monitoring and warning notifications by email or text to cell phones.

PCR System Thermo Fisher Scientific Inc. introduces its new SureTect PCR System. The system is ideal for food safety laboratories that are testing for the most common bacterial pathogens. With the new system, results for all targets and matrix types can be obtained in less than 24 hours of the food sample being received, leading to faster food release. The SureTect System combines a real-time PCR instrument with bespoke software and convenient pre-filled reagent components that together with a single PCR protocol for a range of common targets and sample types, streamline the test workflow. Assays for Salmonella species and Listeria monocytogenes are available now. Assays for Listeria species and Escherichia coli O157:H7 will be released later this year with further tests already in development.

Web: www.thermofisher.com

CALENDAR MARCH 2013 March 17-22 PITTCON 2013: Pittsburgh Conference on Analytical Chemistry and Applied Spectroscopy Venue: Philadelphia, PA Tel: 412-825-3220 Fax: 412-825-3224 Email: info@pittcon.org Web: www.pittcon.org

March 28 International Conference on Virtual Worlds and Education Venue: Ottawa, ON Tel: 613-695-3040 Email: icvwe2013@International-ASET.com Web: http://icvwe2013.international-aset.com/

APRIL 2013 April 4 LifeSciences British Columbia Awards Venue: Vancouver, BC Tel: (604) 602-5228 Email: rhage@lifesciencesbc.ca Web: http://facesofinnovation2013. eventbrite.com

April 6-10 AACR Annual Meeting 2013 Venue: Washington, DC

Tel: 215-440-9300 Fax: 215-440-9313 Email: aacr@aacr.org Web: www.aacr.org

April 7-11 245th ACS National Meeting & Exposition Venue: New Orleans, LA Tel: 202-872-6061 Email: nationalmeetings@acs.org Web: portal.acs.org/portal/acs/corg/content

April 9-11 Design of Medical Devices Conference Venue: Minneapolis, MN Tel: 612-626-5642 Email: johnsont@me.umn.edu Web: www.dmd.umn.edu

April 9-11 World Orphan Drug Congress USA Venue: Washington, DC Tel: +1 212 379 6322 Fax: +1 212 379 6319 Email: enquiry.us@terrapinn.com Web: www.terrapinn.com/conference/ world-orphan-drug-congress-usa/index.stm

April 11 Minnesota Neuromodulation Symposium Venue: Minneapolis, MN Tel: 612-626-5493

Email: neuromod@umn.edu Web: neuromodulation.umn.edu

April 13-16 ACRP 2013 Venue: Orlando, FL Tel: 703-254-8100 Fax: 703-254-8101 Email: office@acrpnet.org Web: http://acrp2013.org/

April 20-24 Experimental Biology 2013 Venue: Boston, MA Tel: 301-634-7075 Fax: 301-634-7008 Email: eb@faseb.org

April 22-25 2013 Bio International Convention Venue: Chicago, IL Tel: +1-202-962-6655 Email: convention@bio.org Web: www.convention.bio.org/

April 22-26 12th International Symposium on Mutation in the Genome Venue: Lake Louise, AB Tel: +61 (0) 3 8344 1831 Fax: +61 (0) 3 9347 6842 Email: rania@variome.org Web: wired.ivvy.com/event/MPZ4L2/

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AirClean Systems......................................................................................... 27.......................................................................... www.aircleansystems.com AlbertatBay...............................................................................................................31...........................................................................................www.albertatbay.com Best Western Victoria Park Suites.........................................................................31..........................................................................................www.victoriapark.com Biolux Research Ltd...................................................................................... 8............................................................................. www.bioluxresearch.com BIOO Scientific.............................................................................................. 28.............................................................................. www.biooscientific.com Canadian Government Executive.........................................................................2........................................................................ http://cgeleadershipsummit.ca/ Cangene Corporation................................................................................... 8....................................................................................... www.cangene.com Caprion Proteome Inc................................................................................... 6.........................................................................................www.caprion.com Children’s Miracle Network...................................................................................17......................................................................www.childrensmiraclenetwork.ca CO2 Solutions............................................................................................... 8................................................................................ www.co2solutions.com Government of Canada...........................................................................................9........................................................................................ www.publichealth.gc.ca iCo Therapeutics........................................................................................... 8............................................................................www.icotherapeutics.com Inspiration Biopharmaceuticals ................................................................... 8.............................................................................. www.inspirationbio.com MAC International Medical Solutions LLC...................................................... 8.......................................................................................www.mac-ims.com Mettler Toledo ............................................................................................. 28............................................................................................... www.mt.com Microbix Systems.......................................................................................... 8.......................................................................................www.microbix.com OBIO............................................................................................................................7.............................................................................................................www.obio.ca Omega......................................................................................................... 28.........................................................................................www.omega.com OncoGenex Pharmaceuticals........................................................................ 6...................................................................................www.oncogenex.com Oncolytics Biotech........................................................................................ 6........................................................................ www.oncolyticsbiotech.com POI..............................................................................................................................13.............................................................................................................. www.poi.ca Protea Biosciences Group ........................................................................... 28.................................................................................... www.proteabio.com VWR.............................................................................................................................5.......................................................................................................... www.vwr.com MARCH 2013 BIOTECHNOLOGY FOCUS 29

THE LAST WORD

By Rob Henderson

Biotech...

It’s Personal

Rob Henderson, President, BioTalent Canada

In December of last year, one of my colleagues related an encounter he had one evening on his way home from work.

He had ventured into one of the local Shawarma take-out spots downtown and had engaged one of the restaurant’s staff in a casual discussion. He discovered the man was in fact a physician from Iraq. He had come to Canada in the hopes of practicing medicine and starting a new life for his family here. Unfortunately for him, his dream had to wait, as his application for licensure as a physician would take several years to complete and was by no means a guarantee.

As a result, this Iraqi physician was working as a cook in the establishment, and while still a noble undertaking, it was not the one for which he had trained.

My colleague then expanded on the potential of examining an alternative career path, the bio-economy, which could utilize his scientific skills, and might even make a better, more fulfilling living for him and his family.

His response was one of gratitude, relief, joy, and surprise. It was as if no one had ever taken the time to demonstrate career alternatives to this man.

Fast forward to January of 2013, where the parents of a ten-year old boy named Cameron wait as he is rushed to the ICU of a local children’s hospital, suffering from acute keto-acidosis, a result of undiagnosed Type 1 Diabetes.

They slowly realize their lives are about to be unalterably changed to a regimen of numerous blood tests, strictly monitored diets and daily insulin injections.

How are the two stories related?

When Canadian Frederick Banting discovered insulin in 1921 he had no idea that by 2011 Type 1 and Type 2 diabetes would affect over 285 million people globally (according to the Canadian Diabetes Association).

People throughout Canada have personal experience with cab drivers, pizza deliverers and countless other service industries where internationally educated doctors, nurses, veterinarians and pharmacists earn a living, having failed or waiting to get licensed in their chosen profession in Canada. Wouldn’t their scientific skills be better utilized and contribute more to the Canadian economy if they were presented with alternative careers in the bio-

30 BIOTECHNOLOGY FOCUS MARCH 2013

economy, contributing to Canada’s world-standing in Diabetes and other fields of research?

Preliminary findings of the 2013 BioTalent Canada Labour Market Intelligence Study indicate: • 35 per cent of biotech companies responded stated their greatest recruitment challenge was attracting candidates with the skills they require; • 42 per cent of those stated that the lack of required skills presented a major impact to the organization’s ability to achieve its goals.

As a country in which immigration is a national priority and where industry will depend more upon it as the driving force to fuel the many Canadian economic verticals, we simply MUST get better at steering educated immigrants toward bio-industries and regions where they can make a substantive contribution and utilize the education and skills they already possess.

If we fail to do so, not only will the bio-economy stall, we will fall behind in the competitive international battle that will determine future success for all countries – the battle for skilled labour.

Biotechnology is personal to so many, yet it is easy to lose sight of the faces of the industry. Canadian science benefits the lives of so many, but many of us entrenched in the industry often forget the tangible human impact.

The stories of the physician cook and the diabetic child need to resonate, like the human faces that form part of Rx&D’s recent “Living Proof” marketing campaign. These stories bring home the importance of the human resources we need in order to benefit the Canadians we serve.

I have recently realized I am indeed fortunate, because now I am reminded every day of the need for proper expertise in the bio-economy and in disease research.

My son’s name is Cameron and he’s diabetic.

@

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Ready, Set, Prep The new Eppendorf epMotion® 5073 family members Whether it’s PCR set-up or nucleic acids purification or general liquid handling tasks, experience how easy small scale benchtop automation can be. Free up your time with high precision pipetting on 6 positions, automatic tool exchange and many other new features.

> Software assistants for easy application programing > MagSep reagents for DNA/RNA preparation > Application specific tools and accessories included

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Full page journal ad Biotechnology Focus - BFO

2/28/13 10:52 AM