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Firm characteristics and fund-raising activities of biotech firms in Canada
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by Charlene Lonmo, SIEID, Statistics Canada
Innovative biotechnology firms are science-based firms which attempt to bring an application of biotechnology to the market. However, it is clear that a significant proportion of these firms derive no revenue from product sales while their products proceed through the various phases of testing and regulatory approval. In order to support their operations they must look to other sources of funding.
About this article
Context
Findings
About the author
About this article
This profile of innovative biotechnology firms in Canada uses data from the Biotechnology Use and Development Survey (BUDS) 2005.
More information about the Biotechnology Use and Development Survey is available here.
For more detailed information on Canada's innovative biotechnology firms, see the forthcoming SIEID Working Paper.
Context
Compared with many other areas of science, biotechnologies based on DNA, protein sequencing and synthesis, cell and tissue engineering, etc., are fairly recent, moving from the university lab to the firm only over the last 30 years. As a result, many innovative biotechnology firms are quite young, but others are older, previously established firms with a history of operating in other areas of business. These older firms have found a biotechnology application which either fits in with their other business activities or presents opportunities to build on their established business activities.
In addition, most biotechnology firms are small, with less than 50 employees and most are in the human health biotechnology sector.
As can be observed from Table 1, some very different profiles of biotech firms emerge based on their size and the sector to which they belong.
Table 1
Key variables for innovative biotechnology firms, by sector and size, 2005
Findings
Firms in the human health sector are younger than those in the other sectors and only three-quarters of these firms have any revenue. However, revenue reported by firms in the human health sector is more likely to come from biotechnology activities compared with revenue reported by innovative biotechnology firms in the agriculture and food processing or in the environment sectors. Almost half of firms in the human health sector are spin-offs from some other entity, typically from universities or hospitals.
Firms belonging to the other sectors are relatively older, with the oldest in the environmental biotechnology sector. These non-human health biotech firms are consistently more likely to report having some revenue, but their revenue is typically from sources other than biotechnology. There are some spin-offs, but not nearly the proportion reported by firms in the human health sector.
Small firms averaged less than 10 years of operation while the largest firms, with 150 or more employees, averaged over 40 years of operation. Given the recent nature of developments in biotechnology, these larger firms may have adopted new technologies to either adapt their previous practices or to expand into newer fields. For example, some established firms in various natural resource sectors (mining and oil and gas) appear to be developing biotechnology-based means of environmental remediation.
By contrast, the smaller, younger firms are more likely to be start-ups which have been established to exploit a particular biotechnology discovery. Consistent with this view, a much greater proportion of smaller firms reported they were spin-offs of some other entity, be it a university, government lab or other firm. Smaller and medium-size firms also reported a much higher concentration of revenue from biotechnology, about half their income, while for the larger firms the figure is less than ten percent.
Almost one-half of innovative biotechnology firms reported attempting to seek funds from sources outside of their revenue stream from products (Table 2). Of those firms, 173, or 73% were successful in raising some money. A total of 118 firms—about one-half of all firms that attempted to raise funds—were able to achieve their targets.
Table 2
Fund-raising by innovative biotechnology firms, by sector and size, 2005
Altogether, innovative biotechnology firms raised $1.35 billion, with a large majority being raised by firms in the human health sector. Funds were raised primarily by small and medium-size firms.
About the author
Charlene Lonmo is with the Science, Innovation and Electronic Information Division (SIEID) at Statistics Canada. For more information about this article, please contact sieidinfo@statcan.gc.ca.
