The Canadian biotech industry has a growing number of products in late-stage clinical trials and products awaiting regulatory approval -- and that could boost investor interest in the sector this year, a report by Ernst & Young LLP suggests.
Market values of the companies involved could rise if the results are positive and "if there is a string of successes, the entire industry could benefit significantly," the Beyond Borders: Global Biotechnology Report 2007 said.
"However, the danger is that if a number of clinical failures occur in 2007, it could have a devastating impact on the access to capital of early-stage private and public companies," the report cautioned.
The report outlined how conditions for the Canadian biotech industry have improved in numerous ways. For example, the industry had a banner financing year in 2006, raising a record $1.8-billion (U.S.), up 79 per cent from a year earlier. That surpassed the previous record of $1.3-billion set in 2003. Public companies raised $1.6-billion of that total, of which $925-million was in secondary offerings and the remainder in secured debt.
Also, 2006 was the first year that the Canadian sector recorded two $100-million plus financings in a single year -- one from Labopharm Inc. and the other from ConjuChem Biotechnologies Inc.
Revenue of the public biotech companies jumped 22 per cent to $3.2-billion, and losses declined by 43 per cent as Canadian companies moved closer to profitability. The number of companies in imminent financial danger also fell, with a quarter of the public firms reporting less than one year of cash in 2006, down from 45 per cent in the same situation in 2005. Moreover, half of the 82 Canadian public biotech companies are now sustainable and won't need to raise capital in the near term, unless they want to expand rapidly or make acquisitions, the report said.
But it was not all good news. Last year was not a great year in terms of the sector's market capitalization. In a year that saw the S&P/TSX composite index increase almost 19 per cent, market cap of the Canadian biotech segment actually dropped to $12.9-billion from $13.2-billion, the report noted.
It also noted that while the well-established mature companies were able to attract significant funds, private and public early-stage companies had problems. There were only two initial public offerings in the sector last year, and they raised less than $10-million in total, a far cry from the four that raised $160-million in 2005.
