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.

$700 Million Close Opens the Doors at Teralys Capital

Teralys Capital, the fund-of-funds announced in Quebec’s budget in March, actually closed on its $700 million today and “is now ready to move ahead with its mandate to finance private venture capital funds that invest in technology companies in the life sciences, information technology and clean technology sectors.”  (I guess the extra $125 million they were planning to raise from the private sector went to Excel’s new fund instead!)

I’m still not sure Teralys has a website, and today’s press release ends with “For further information: The telephone number provided below is for the exclusive use of journalists and other media representatives: Josée Lagacé, (514) 850-4835.”  But not if you’re a journalist running a VC fund.  Or a VC.  In other words, don’t call them, they’ll call you.

What is the State of Canada’s Biotechnology Industry?

There have been a lot of opinions over the last couple of weeks, with little consensus.

On the pessimistic side:

1. E&Y’s annual biotechnology report was released a week ago, and the reported taglines ranged from “time of reckoning” to “biotech business model crumbles“. 
2. The first report from Canada’s Science, Technology and Innovation Research Council said that Canadian businesses are stingy in funding research and development.

On the other hand:

1. The BIO SmartBrief story on E&Y’s report noted the E&Y data showing that mergers and acquisitions had a near-record year in 2008, amounting to $28.5 billion in the U.S. alone.
2. And, Rx&D’s response to the STIC report notes that pharma R&D investment, MaRS and Montreal’s biotech/pharmaceutical cluster are all highlights of the report.
3. Finally, BIO President and CEO James C. Greenwood said that most biotech firms likely will survive the financial crisis despite a shortage in cash assets and the lack of investments brought about by the deep freeze in initial public offerings.

My take?

E&Y’s 2008 data is consistent with the PwC-BIOTECanada report and likely reflects extra pessimism because it cuts off before the latest stimulus investments, including over $1 billion in Ontario and Québec.  As that money, plus the Ontario Venture Capital Fund, gets deployed, I think Greenwood is likely to be right and things will start to look up. 

Although Q1’s venture capital and private equity numbers still look grim, the Monday Deal Review is showing increasing activity the last few weeks and even a few offerings by public companies.

What You Missed While You Were at BioFinance

A lot to catch up on over the last few days…

• A professor in Hong Kong says don’t relax just because flu cases outside of Mexico have been mild — more spread equals more chances for further mutation.
• You think Biden had a bad public speaking week?  Check this one out from the Environment Minister in Prince Edward Island.
• Obama’s health care reform may be coming just in time.  The WSJ Health Blog reports on employers shifting more health care costs to employees.
• Unexpectedly, the biggest impact on science and health issues coming out of Senator Arlen Specter’s switch to the Democrats may be indirect — Sen. Grassley (R-IA) may move to take the top Republican spot on the Judiciary Committee, which is being vacated by Sen. Specter.  If he does, Sen. Grassley will be giving up the post on the Finance Committee that he has been using to aggressively pursue issues he sees with pharma companies and the FDA.
• Michael Sabia wasted no time putting his mark on the Caisse, implementing structural changes and accelerating planned developments.
• Good news:  adding Telapivir to Hep C treatments produces 69% cure rates.
• Stockwell Day, Canada’s Minister for International Trade, announced that Canada will be seeking new WTO “consultations” around the Country of Origin Labeling laws passed in the U.S. earlier this year, as we noted in March.
• Healthreform.gov has started weekly updates on … health reform.

And last but not least:

• The $825 million fund announced in Québec’s budget in March launched this week as Teralys Capital, closing on $700 million from FTQ, the Caisse and the Québec government.  $125 million from private sources pending.  Jacques Bernier will manage the fund, with a mandate to invest in Cleantech, Biotech and Infotech.

New Data in Canada: BIOTECanada-PwC 2009 Life Sciences Forecast

The BIOTECanada-PricewaterhouseCoopers 2009 Canadian Life Sciences Forecast was released today.

The Forecast was produced from data gathered in October and November 2008, so is (unsurprisingly) a bit bleak, but there are a few bright spots to be found:

• Canadian companies are increasingly flexible about exit scenarios.  In the 2009 Forecast, 66% of firms looked to mergers (down from 80% in 2007), while 48% looked to co-development partnerships and 46% saw licensing or selling IP as their success strategy.
• Some problems were reduced from levels reported in 2007:
  • Only 26% of respondents identified “attracting and retaining key employees” as one of the three most challenging issues, down from 39% in 2007;
  • In 2007, 33% of respondents identified “attracting a licensing or strategic partner” as most challenging, which was down to 22%  in 2009; and
  • 21% instead of 29% of respondents cited “managing the regulatory process.”
• Finally, there was a 66% increase in the number of respondents who believed “protecting intellectual property” would be a top-three challenge, which is excellent news … at least for lawyers.

The predominant issue weighing on the minds of respondents was clearly access to capital:

• Sixty-one percent of respondents ranked “increased Canadian venture capital” as critical to the industry; and
• While the overall percentage of companies expecting to raise between $10 million and $100 million in their next round remained the same as it was in 2007, the percentage expecting between $10 and $25 million tripled while the percentage expecting betwen $25 and $100 million was cut nearly in half.

The really good news about this, though, is that since the survey was taken last Fall, over $1 billion in venture investment funding has been budgeted in Ontario and Québec, and the Ontario Venture Capital Fund has already made several commitments … some of which are bound to end up with biotech VCs, right? Right?? Stay tuned.

$250 million Ontario Emerging Technologies Fund Seen, Raised by $825 million Quebec Venture Capital Fund

Ontario announced the $250 million Emerging Technologies Fund yesterday … pretty much exactly what Monday’s letter to McGuinty from the CVCA requested. That has got to be, by the way, either:

1. the world’s first psychic government relations campaign, or
2. the world’s fastest government stimulus.

Not to be out-done, the Québec budget today included an $825 million venture capital fund.  The government is teaming up with the Fonds de solidarité FTQ (english), the investing arm of the province’s labour federation, and the Caisse de dépôt et placement du Québec (english).

It will be interesting to see whether VC funds who receive OVCF money will also be eligible for the ETF matching.  The Ministry says that full guidelines will be posted on the MRI web site before the end of June 2009.