Canadian biotech companies may run out of cash

The Financial Post has an article this week outlining the difficulties faced by the Canadian biotech industry, whose members may find themselves in dire financial difficulties shortly. According to the article, at the start of 2009 50% of Canadian biotech companies did not have enough cash to cover costs for the year, and 25% would run out of cash within six months.

According to BioteCanada, an umbrella group that represents Canada’s biotech sector, closed capital markets have dried up venture capital for smaller biotech firms, and many of Canada’s bitoech companies risk being sold to multinationals with a resultant loss of highly skilled jobs and workers.

Peter Brenders, president and chief executive at BioteCanada, suggests the government needs to do three things to help the industry:

• Institute a restricted loan program for biotech companies to tap into when the market is down, which will be paid back when venture capital picks up. The money will be reserved solely for biotech firms to keep Canadian jobs, and the government will make a little profit on the loan and keep skilled workers, who will offer a higher tax base.
• Exempt all direct investment into biotech industries for a specified period of time from capital gains tax.
• Strengthen the incentive to keep jobs in the country by gutting the Canadian Controlled Private Company rules that restrict tax breaks for foreign companies investing in the industry.