Canadian biotech losing ground — and capital — fast: Ernst & Young report
(Toronto, 14 June 2011) With Canadian biotech companies capturing just two percent of all global capital raised in 2010, it’s clear the industry is losing ground on the global stage, Ernst & Young says. This finding marks a five percent drop since 2006.
Beyond borders, Ernst & Young’s annual global biotech industry report, shows public financing is going to only a select few, and private financing in Canada is at its lowest in 10 years. Research and development in the sector is still decreasing and the industry hasn’t seen an initial public offering here since 2007.
“Band-aid solutions are not going to push this industry forward,” explains Paul Karamanoukian, Ernst & Young’s Canadian life sciences industry leader. “The Canadian biotech industry must look inward, get their businesses into fighting form, and reinvent themselves to capitalize on the opportunities born of the changing healthcare ecosystem.”
Karamanoukian says that means stretching dollars further to become as efficient and effective as possible.
“Healthcare is evolving into an outcomes-driven system, and there is huge potential for Canadian biotech,” he notes. “If you’re going to fail in this new business environment, you’ve got to fail fast, cut your losses, move on and start again. That’s the only way to compete.”
In actual dollars, the report found Canadian biotech raised more than US$482 million in 2010, a decrease of US$251 million compared to 2009. After removing the financing of US$325 million from one company, the sector actually raised 18% more in 2010. But this is still the second lowest level in a decade.
Karamanoukian worries about what that means to Canadian companies fighting for a piece of the global pie. “We’re at our lowest point in 10 years. But by focusing on business fundamentals and emerging opportunities, that could change.”
The report identifies four complementary approaches for biotech companies to sustain innovation in this increasingly challenging environment:
1. Prove it or lose it. In an outcomes-driven ecosystem, companies are under more pressure to prove that their products are differentiated.
2. Do more with less. Companies will need to find new ways to conduct capital raising/deployment and R&D more efficiently. That means being creative in raising, optimizing, preserving and investing scarce capital. For research and development, this could mean targeting products to smaller populations to increase efficiency at all stages of the process.
3. Build new competencies. To support the first two imperatives, managers will need different competencies like awareness of changing market dynamics, management discipline, performance measurements, the ability to measure value, and more.
4. Collaborate for co-ordinated action. Sustaining innovation will also take changes that biotech companies cannot make alone, requiring co-ordinated action with other stakeholders.
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