PricewaterhouseCoopers

PricewaterhouseCoopers

April 05, 2006 09:00 ET

Canadian Life Sciences and Biotech Companies See M&A as Key to Global Competitiveness

TORONTO, ONTARIO--(CCNMatthews - April 5, 2006) - Canadian biotech companies are building for a heightened level of merger and acquisition (M&A) activity, according to a new industry forecast released today from PricewaterhouseCoopers (PwC) done in collaboration with BIOTECanada. Ninety-four percent of forecast respondents rate M&A among their top three exit strategies and believe implementing M&A is a key action industry can take to improve Canada's ability to compete globally.

The Canadian Life Sciences Industry Forecast 2006 is the first of its kind for Canada, designed to have industry leaders outline the focus of their upcoming business development strategies and where their business opportunities lie. The majority of forecast respondents are at least three years away from profitability and more than half of respondents feel having stronger sources of capital for seed and early stage companies is the most critical factor to attaining success.

"Most respondents say they are seeking more than $10 million in their next round of financing and most expect to receive it from Canadian and U.S. venture capitalists as well as strategic partners," says John DeLucchi, National Leader, Life Sciences Group of PwC. "However, the ability to attract U.S. or foreign capital is identified as a top three challenge to becoming a stronger global competitor."

The forecast also found the industry is focused on achieving their revenue and profit objectives. Sixty percent of respondents said the most important actions the Canadian industry can take to better compete globally are to keep focusing on success in their current business. Second highest is recruiting experienced management (49% in top three) followed by implementing M&A (36% in top three). Effective federal government lobbying follows along with concentrating businesses in regional clusters and supporting industry associations.

Thirty-eight percent of commercial business respondents think the federal government can have a positive influence on their success. Respondents identify a number of areas where government can take positive steps. More than 80% ranked the creation of more favourable tax incentives for companies in their top three choices. Facilitation of increased funding from government sources and calls to improve the speed of the regulatory process follow as second and third choices (44% and 41% respectively).

Forty-eight percent of survey respondents are planning to move all or part of their businesses outside of Canada. "Canada stands to lose almost half of its life science and biotech companies if a more sustainable business environment is not established. We need to do better for Canadians," said Peter Brenders, President and CEO of BIOTECanada.

Access to funding is also identified as the forecast respondents' largest barrier to the successful commercialization of intellectual property (IP). More than 70% of respondents cite this lack of access as a top five barrier and 60% as one of the top three. Furthermore, respondents also rate the availability of experienced management as the second most important barrier to the successful commercialization of IP.

"Most respondents are not currently able to invest to make this a reality for their business," DeLucchi noted. "Only 28% of respondents involved in a life sciences and biotech business rank hiring key management expertise in their top three uses of funds from their next round of financing and only 2% rank this as their first choice. This is well behind investing more in R&D and investing more in working capital and operations."

"This is a warning sign that Canada needs to renew its interest in becoming competitive in the global marketplace of ideas and emerging technologies," said Brenders.

For more information about the Canadian Life Sciences Industry Forecast 2006, please contact Carolyn Forest, carolyn.forest@ca.pwc.com, (416) 814-5730 or Rhowan Sivel (613) 230-5585 ext 226. A copy of the survey can be downloaded at www.pwc.com/ca/lsforecast or at www.biotech.ca.

Forecast Methodology

This survey of life sciences and biotech industry stakeholders in was conducted in the fall of 2005. Questions asked were intended to delve into the perceptions of industry stakeholders as they look at the future challenges and issues faced by the Canadian industry.

Respondents included a national cross-section of public and private emerging life science companies, senior management of providers of capital to the industry as well as senior public officials involved with research institutes and government.

About PricewaterhouseCoopers

PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 130,000 people in 148 countries work collaboratively using Connected Thinking to develop fresh perspectives and practical advice. In Canada, PricewaterhouseCoopers LLP (www.pwc.com/ca) and its related entities have more than 4,300 partners and staff in offices across the country.

(Unless otherwise indicated, "PricewaterhouseCoopers" refers to PricewaterhouseCoopers LLP, Canada, an Ontario limited liability partnership. PricewaterhouseCoopers LLP, Canada, is a member firm of PricewaterhouseCoopers International Limited.)

About BIOTECanada

BIOTECanada (www.biotech.ca) is the national association representing a broad spectrum of biotech constituents including emerging and established companies in the health, agricultural, and industrial sectors, as well as academic and research institutions and other organizations dedicated to the long term and sustainable development of biotechnology, its practices and products.

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