More OETF Investments Announced, Including NeurAxon

The Ontario Emerging Technologies Fund got off to a bit of a slow start on the life sciences front, but last month it added Lumira and CTI Life Sciences as qualified investors.

Now, CTI has taken advantage of that status with OETF participating in a $14 million round of convertible debentures issued by NeurAxon, along with Delphi Ventures, OrbiMed, Ventures West, H.I.G. Ventures, BDC, NeuroVentures Fund and Lawrence Bloch (NeurAxon’s CEO).

Other investments announced today were in Covarity (software for commercial loan portfolio management) and Shoplogix (real-time performance management solutions for manufacturers), meaning a full 1/3 was allocated to life sciences in this batch. Good news for CTI and for Ontario life sciences companies.

Hat tip to MRI on Twitter (@OntInnovation) for this announcement. Note CTI is an Ogilvy client.

$50 million to BDC for Ontario Tech Investments, Will “Collaborate” With Ontario Venture Capital Fund

The Federal Economic Development Agency for Southern Ontario (FedDev Ontario) is providing $50 million to BDC: $35 million for direct investments in “early-stage firms in Southern Ontario” and $15 million for LP investments in VC funds “focused on Ontario-based opportunities.”

Rather than relying [entirely?] on internal BDC resources, “as part of its decision-making process, the BDC will collaborate with the Ontario Venture Capital Fund.” 

Interesting, the $35 million of new BDC direct investment money will be almost double the OVCF direct investment money, since the OVCF is down to under $19 million for direct investments.

H/T to TechFinance.ca via @startupnorth, @markmcqueen.

New Data Shows 70% of Canada’s Biotech Companies Have Under 12 Months’ Cash. BIOTECanada’s New Ask: Government Loans.

A Canwest story today highlights new BIOTECanada data showing 70% of survey respondents have under 1 year of cash, up from 50% in January.  FierceBiotech picked it up as well, guaranteeing a full dose of international attention.  

Even though the remaining 30% of respondents likely include some with big recent successes — Bioniche, Allostera and Zymeworks — and some with creative approaches — ConjuChem, Neuromed, etc. — the top-line number is grim indeed.  Plus, as Kasia Majewski points out:

“Most firms have found away to extend their cash, but they’ve done that by massive layoffs, by shutting done operations to the bare bones. So essentially the lights are on but there’s one guy home.”

Given that there has been no systemic cash infusion, it’s not surprising that the number of firms in trouble has gone up since January. 

On the other hand:

There is a bolus of fund-of-funds and direct capital waiting to be deployed, including:

• The Ontario Emerging Technologies Fund, which is getting ramped up,
• The Ontario Venture Capital Fund, which has plenty of dry powder,
• Teralys Capital, which opened its doors with $700 million this week, and 
• Some NRC-IRAP money that is starting to trickle out.

Plus, Lumira Capital’s Q2 newsletter (pdf) points to the new BDC money, Alberta Investment Management Corp’s PE plans and the new Alberta Enterprise Corporation as potential additional sources of funding in the medium term.

BIOTECanada bottom line:

In the winter, the organization was focused on tax initiatives.  Yesterday, though, the focus was entirely on

“negotiations with Industry Canada to obtain a loan program for Canada’s biotech sector that can hold the industry over until capital markets rebound. … [Specifically,] government loans to be repaid after a two- year period at six per cent interest.”

Maybe it’s the new money looming on the horizon, or the seeming lack of traction for the tax policy asks, but the focus has definitely shifted.

My bottom line:

Even the new loan program advocated by BIOTECanada will not help if the other government funding doesn’t make it to biotech companies and VCs. We’ve been keeping an OVCF scoreboard that still shows a goose-egg for biotech investments.  It may be early days for these new capital sources, but the hour is late for Canadian biotech companies.

Post-Vacation Brain Dump: Canadian Developments

Here’s a bit of Canadiana to start off the catching up:

• MRI Minister Wilkinson gave a speech teeing up the Ontario government’s plan to revamp the Ontario Commercialization Network into a more integrated “Ontario Network of Excellence,” reorganizing twelve core programs into four.  This is presumably the first stage of follow-up from the Steering Committee report in March.
• A new newsletter and survey from BDC point to some continued optimism.
• A new management team from MSBiV, a University tech commercialization/valorization seed fund.

New Funding for BDC Says Venture Capital in Canada “Tastes Great!”; Kedorsky Says “Less Filling!”

Yesterday Tony Clement announced an additional $450 million in funding to BDC:* $100 million in credit guarantees, $260 million for follow-on investments in companies where BDC is already a direct investor, and $90 million to invest in venture funds.  The follow-on money and the LP money will be spent over 3 years. (On purpose. (Ha.))

All the more topical, then, that in a recent WSJ VC Blog post on Canada’s venture capital industry Paul Kedorsky is quoted as saying that Canada’s industry won’t be helped by “government want[ing] to goose things.”  Paul, who used to be at Ventures West, authored a Kauffman foundation report saying the U.S. VC industry needs to shrink (check!), and thinks the industry on both sides of the border needs “a kind of restart.”

Personally, I vote “don’t look a gift horse in the mouth.”

*H/T Mark Macleod and @chrisarsenault.  Pic from thelivingdead531.

More New Canadian Tech VC Funding

The Business Development Bank of Canada (BDC) is putting $75 million, allocated in the Federal 2008 budget, into the new Tandem Expansion Fund. The Fund expects a first close of $300 million this summer, and will invest in “Canadian technology growth companies.” At the helm are Charles Sirois and Brent Belzberg. 

More details about the team and the fund

Allocating Spending to Support R&D: UK, U.S. and Canadian Approaches

The U.S., Canada and the UK have all acknowledged the central importance of R&D even in these recessionary times.  However, the three national governments have decided to focus their spending on different steps of the R&D equation:

1. Education: UK Takes the Long View
   British PM Gordon Brown, in a speech this week, identified three priorities: research, education and training, and public discourse.  However, only one of the three, education, was the subject of specific increased targets and spending:  retraining to increase the number of science teachers, a goal to double the number of pupils in state schools taking ‘triple science’, and a new Diploma program.  The U.S. and Canada have increased funding for graduate studies, but the UK effort is focused at an earlier stage, to rebuild the interest and capabilities of domestic graduates. 
2. Publicly-Funded Research: U.S. Takes the Lead
   The focus of the U.S. R&D spending increases has absolutely been on research.  The increases for the NIH and NSF in the stimulus and the budget will go largely to increasing the volume of publicly-funded research.  PM Brown’s speech also vowed to protect funding for science from competing demands for Government support during the downturn, but did not propose increases over the existing 10-year plan.  Canada’s budget actually cut research funding across the three main granting agencies.
3. Commercialization: Canada Takes Off 
   Canada’s focus was on commercialization.  The 2009 budget included $200 million allocated to the National Research Council’s IRAP program — $170 million to double the program’s contributions to companies, and $30 million to help companies hire over 1,000 new post-secondary graduates.  It also provided significant additional funding to BDC.  The only comparable spending in the U.S. was the $400 million for ARPA-E, which is allocated to energy programs, and supports research as well as commercialization.  PM Brown’s speech recognized the importance of maintaining the country’s struggling start-ups, and he has reached out to big pharma, but promised no specific action.

What’s still missing:  Stimulating Output

• Despite calls in the UK, the U.S. and Canada, there have been no major tax policy changes enacted in this round of budgets and bailouts that ease the burden on, or return money to, early-stage technology companies.  Ontario has actually taken some steps in this direction with the Ontario Venture Capital Fund and the Ontario Tax Exemption for Commercialization.
• Nor have there been many changes that increase the value of outputs: in the bio/pharma area, the UK has probably moved farthest in this direction, with upcoming reforms of the National Institute on Comparative Effectiveness (NICE), while the U.S. has seen decreasing FDA approvals and is allocating new comparative effectiveness funds.  On the other hand, approvals of GE animals, support for personalized medicine and big spending on electronic medical records will provide support to specific industry initiatives.

Stay tuned to our Bailout Page for updates.