Company Landscape

The biotech sector in Canada can already look back on almost twenty years of history, which has now settled into constant growth. The country is home to approximately 500 biotechnology companies – according to the definition from the Organization for Economic Cooperation and Development (OECD). Also included in this figure, alongside the dedicated biotechnology companies, were companies not directly involved in biotechnology, such as pharma companies and seeds manufacturers. The majority of the 500 companies are categorised as small and medium-sized (approx. 430) and is active in the field of medicine. Agriculture and food production are the other dominant business fields.

More information about the sector can be found in the study"Canadian Trends in Biotechnology" (2005)  PDF-Download

From 1997 to 2003, turnover rose constantly, from approximately 800 million Canadian dollars to 3.8 billion, although nearly seventy percent of this figure was achieved by large companies with over 100 employees. In 2006, Peter Brenders, President of the Canadian trade association BIOTECanada, stated that turnover was only around 1.7 billion dollars, suggesting a decrease in income – most likely as a result of the global consolidation of the industry. According to Brenders, current market capitalisation is about 22 billion dollars.Altogether, Canada employs around 12,000 people (statistics from 2003) in biotechnology-relevant fields of work, and mostly in the health sector. Geographically, the industry is largely situated in the four provinces of Quebec, Ontario, British Columbia and Alberta, both in the number of companies and in number of employees. Approximately 80 enterprises are listed on the stock exchange, most of which are headquartered in Quebec and Ontario.

Regional distribution of the companies

Pharma companies concentrated in Quebec

Canada has clearly succeeded in not only driving forwards the creation of biotechnology start-ups, but has also attracted major pharma companies and their research establishments to the country. For example, in 2003, Merck Frosst, a division of the New Jersey-based company Merck & Co, invested 116 million dollars in research and development in Canada. The Merck Frosst Center for Therapeutic Research in Montreal - the largest private biomedical research establishment in the country – has a research mandate for new therapies for illnesses of the respiratory tract, inflammatory diseases, diabetes and Osteoporoses. Altogether, Merck Frosst employs 1,900 people in Canada, including 300 scientists.British Pharma concern GlaxoSmithKline has had a similar history in Canada. In 2006, GSK invested a total of 176 million dollars in R&D in Canada - above all in vaccine research, as well as establishing production centres. Altogether, GSK employs 3300 people in Canada. In addition, the company Boehringer Ingelheim has a research centre of 130 scientists in Laval. There, researcher teams are concentrating on therapies for illnesses that are caused by the hepatitis C and the AIDS viruses. The opening of another new building is planned for the beginning of 2008.

Problem – Financing for SMEs

As with many other countries, the biggest hurdle for Canadian biotechnology firms is financing, especially for SMEs. The situation from 2003 is well documented: that year, 240 small and medium-sized companies attempted to bring in money from the private capital market. Ultimately, only 140 managed to successfully pull of a financing round, and only 90 of these fulfilled expectations. 

Not including dedicated venture capital outfits, since 1985, research-intensive enterprises can receive tax exemptions totalling 2 million dollars in the framework of the Scientific Research & Experimental Development (SR&ED) program, if their taxable income is below 200,000 dollars. This scheme is welcomed in principle by entrepreneurs, but in practice it applies rarely to biotech companies - many cannot make use of the tax exemptions, as they are not yet making a profit. Besides this, Credits are also lost as a result of mergers or takeovers by foreign companies. What is more, many fall outside of the scheme as a result of revenue limits, as support funding must also be counted as income. BIOTECanada has repeatedly called for a change to this system, so far unsuccessfully.
Between 1996 and the end of 2006, biotechnology companies could also receive financial support from the Technology Partnerships Canada (TPC) program. Thereby, approximately 25 million dollars were invested in research projects by biotech companies. However, at the end 2006, the program with the earlier conditions expired. Since then, the new government has brought in a new structure. Current plans will see more than 200 million euros invested in the program up to 2011. Beyond this, extra funds for demonstration projects have been available since the beginning of 2007, for example for the advancement of a bioethanol demonstration unit from Iogen Energy Corporation in Ottawa (more information here). Thereby, research into second-generation bioethanol, which can be used to extract biomass (cellulose), will be advanced and developed for the market.
Venture capital is also made available through the Business Development Bank of Canada (BDC). In 2002, a commitment of approximately 200 million dollars for the biotechnology industry was made available by the government, although actually far fewer funds eventually flowed into biotech companies. Thus, the trade association BIOTECanada reports that, in 2003, only around 93 million dollars was available for high-tech companies, and not exclusively for biotechnology. Nevertheless, up to 2002, the BDC had already invested 100 million dollars in biotech companies, of which 15 million went to start-ups in particular.