Punit Dhillon has had a successful career in Vancouver's biotech sector and has been involved in several successful startups, including Protox Therapeutics Inc. and Vigil Health Solutions Inc. (TSX-V:VGL)
But in 2011, when he was founding his own company – OncoSec Medical, which is developing a skin-cancer treatment – he made the difficult decision to set up in San Diego, not Vancouver, where he and his family still live part-time.
And he's not alone. Protox Therapeutics, which changed its name last year to Sophiris Bio Inc. (TSX:SHS), has also moved to California, and the company recently filed for listing on the Nasdaq.
"There are also instances where we have B.C. companies that are being courted by venture capital groups out of Eastern Canada, primarily Quebec," LifeSciencesBC president Don Enns said.
"If they close – and there are two that are pending – they'll have to relocate to Quebec."
Even biotechs that remain in Vancouver often find that they need at least some presence in California, because that's where most of the senior executive talent is and because the U.S. is a much larger pharmaceutical market.
But lack of access to venture capital in Canada is the biggest reason to seek greener pastures. It's not just Canadian biotechs that face that problem, but it can be more pronounced for biotechnology because of the huge amounts of capital needed to get new drugs approved.
Dhillon's company, for example, will have to spend $300 million to move its skin cancer treatment through clinical trials.
He added that a number of notable flameouts in the B.C. biotech space have not helped bolster investor confidence in B.C.
"Unfortunately, biotech has had the stigma where we have had some failures that have led to nobody wanting to reinvest in the sector."
Allon Therapeutics Inc. (TSX: NPC) spent $100 million taking Davunetide, a drug for treating a rare neurological disorder, through clinical trials, only to conclude it didn't work.
Allon's stock dropped 95% in a single day – from $0.43 to $0.02 per share. The company was forced to cut staff by 40% in December, and it now faces delisting from the TSX.
In 2011, Angiotech Pharmaceuticals was forced to seek creditor protection and restructure. Two other Vancouver biotechs – QLT Inc. (TSX:QLT) and Cardiome Pharma Corp. (TSX:–COM) – have also been reduced to mere shells of what they once were.
Dhillon said it's disheartening to see Vancouver's once vibrant biotech sector now in jeopardy of losing talent to the U.S. simply because it lacks access to capital.
"When you have an industry that is not having any reinvestment of capital, it's going to stagnate. In order to get investment back into the biotech industry, investors need some confidence, and that's going to be through more funding from the public sector going back into biotech."
Dhillon believes Canadian governments could play a role in helping bolster B.C.'s biotech sector. He would like to see grant programs similar to those offered in the U.S. for proof-of-concept research and would also like to see a biotech incubation program developed here.
It's all about the talent
Not every B.C. company that headquarters in California is necessarily going there to get access to venture capital. In Boreal Genomics' case, it was all about talent.
The company is developing technology for non-invasive detection of cancer mutations. It has had no problem attracting American venture capitalists and has raised about $10 million so far. The company employs 30 researchers in its Vancouver lab and half dozen administrative staff in its California headquarters.
The only reason the company is headquartered in California is that it needed a new CEO, and California has the biggest biotechnology talent pool.
"Finding a CEO, and finding a VP of sales, that have experience in biotech tools was nearly impossible in Vancouver," said Boreal Genomics founder and chief science officer for Andre Marziali.
Marziali added that many American VCs don't realize how competitive B.C.'s biotech ecosystem is, or they might invest here more.
"Incredibly, many of them are still unaware of the benefits of operating here," he said.
In addition to the medical research coming out of Vancouver's universities, hospitals and BC Cancer Agency, the Canadian biotech sector benefits from the Scientific Research and Experimental Development and Industrial Research Assistance Program incentive programs, as well as rents and salaries that are much lower than in Silicon Valley.
LifeSciencesBC estimates there are 14,000 people employed in the B.C. biotech sector, with average salaries of $70,000.
Enns said it is hard to gauge whether that's up or down compared with 10 years ago. However, based on market caps, the B.C. biotech sector is significantly smaller than it was just a few years ago.
"By virtue of QLT and Angiotech alone, that was about $2.5 billion, $3 billion," Enns said. "They're a fraction of what they were."
