Canadian biotech faces time of reckoning: Ernst & Young

    Global financial crisis makes business model unsustainable

    TORONTO, May 5 /CNW/ - Without new approaches and funding sources, the
next few years could cripple the biotech industry in Canada, Ernst & Young
revealed today in Beyond borders: Global biotechnology report 2009.
    "More than half of the Canadian public companies still standing have less
than a year's worth of cash left," says Rod Budd, Ernst & Young's Canadian
biotech industry leader. "The industry must tackle the challenges head-on and
evolve the biotech business model to survive in any meaningful way."
    Today's report chalks up the industry's struggles to the economic crisis.
In the past, the model has operated like a relay race: companies work with a
series of investors and partners to raise capital and share risk. But the
constraints of today's credit-strapped market are making that a harder race to
run. Biotech needs both a steady supply of funding and innovation to keep the
model moving forward.
    "Market capitalization declined 61%, from US$10.8 billion in 2007 to
US$4.2 billion in 2008," Budd says. "That's at least partially driven by the
four significant public-company acquisitions. But the 72 public companies in
existence at the end of 2008 still saw their total market value shrink by
    The lack of initial public offerings (IPOs) in the last two years was a
bitter pill to swallow - made worse by a striking decline in follow-on public
offerings of common shares, which declined from US$398 million in 2007 to
$US80 million in 2008. Total funding for the Canadian industry decreased from
US$1.060 billion to US$478 million.
    "Capital has dried up, and that's threatening the very existence of
two-thirds of the Canadian public companies. About one third of public
companies with approved products are generating revenue. That provides a basis
for the future of the industry. Unless funding is found, Canada will be a much
smaller player in the global economy," Budd says.

    Other Canadian highlights from Beyond borders: Global biotechnology
    report 2009

    -  The number of Canadian companies dropped 11%, from 404 in 2007 to 358
       in 2008.
    -  Quebec-based companies attracted more total investment than any other
       province, with US$199 million raised.
    -  Ontario raised US$138 million; British Columbia raised US$90 million.
    -  The two largest deals were among the largest ever seen in the Canadian
       biotech industry. Both were announced in 2007 and completed in early
    -  Canadian firms had only limited success bringing new therapeutic
       products to market.

    About Ernst & Young

    Ernst & Young is a global leader in assurance, tax, transaction and
advisory services. Worldwide, our 135,000 people are united by our shared
values and an unwavering commitment to quality. We make a difference by
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For further information:

For further information: To receive a copy of this year's report or
reach a spokesperson, please contact: Amanda Olliver,, (416) 943-7121; Brooke McLachlan,, (604) 899-3597; Marie-Eve Graniero,, (514) 874-4313

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