Bio-entrepreneurialism. It’s quite a mouthful. By definition, it means the art or the endeavor of organizing,managing, and assuming the risks of a science- or biotechnology-based business or enterprise.

“Commercializing R&D is not for the faint of heart, the impatient or the poor,” Dr. Jacques Simoneau, Executive Vice President, Investments, Business Development Bank of Canada (BDC) said in a May 2008 speech to the House of Commons Standing Committee on Industry, Science and Technology. “Turning an idea into a successful company is very risky, complex and expensive. It takes patience, specialized knowledge, superior management skills and lots of money.”

And by most accounts, it doesn’t happen often enough in Canada. Indeed, pundits say an entrepreneurial environment is sorely lacking north of the border... for the very reasons listed by Simoneau. “In Canada, there isn’t the same kind of entrepreneurial culture that there is in the States,” says Lisa Crossley, PhD, P.Eng., President and CEO of Burlington-based Natrix Separations Inc. (formerly Nysa Membrane Technologies), a supplier of high performance, single use and multi-cycle disposable chromatography products. Prior to launching Natrix in 2005,Crossley spent five years cutting her teeth in the American biotech industry taking two lead therapeutic candidates through clinical trials in four indications—leads that ultimately powered the company’s IPO. “Down there, we had a lot of startup exposure. Everyone I knew was at a startup company. That experience had a tremendous impact on me and definitely accelerated my professional development.”

The mindset of U.S. entrepreneurs is to look toward the exit more so than toward the job itself, says RockyGanske,President& CEO,Axela Inc.,Toronto,which provides protein detection, characterization and monitoring products used in life science, health and clinical research (read more on Axela in Entrepreneurial Beginnings, page 26). And he would know.Ganske, an American, came north specifically to launch Axela. “I make no bones about it. I’m clearly here to create wealth—both for myself, my management team,my employees and my investors.”

Thomas Wellner spent the last 10 years working in the UK and Germany in top positions for Eli Lilly, following 10 years with the company in Canada.He recently returned to take on the role of President and CEO of Mississauga’s Therapure Biopharma Inc., a new, first-of-its-kind Canadian biopharmaceutical company specializing in developing, manufacturing, purifying, and packaging biological protein therapeutics—at a very large scale and small scale.

“The biotechnology scene has changed a lot since I was here 10 years ago. There was quite a robust industry then. It seem to have been somewhat decimated,” he says. “There are some tremendous brains and discoveries kicking around the labs here. But we need more investment and more focus around the commercialization of biotechnology.”

“I make no bones about it. I’m here to create wealth—both for myself, my [team] . . . and my investors.”

Crossley, Ganske and Wellner are among several forward-thinking Canuck executives trying to stymie some of the negative trends that are occurring. By their very success, they hope to boost, among other things, the bio-entrepreneurial culture in Canada.

“We have a really great opportunity here in Canada to build the next layer of business leaders in this space by showing them what it’s like to create this wealth and to create energy,” says Ganske. “They’ll go forward with that same hunger. It’s a function of getting enough successes.”

Even distributor VWR is hoping tomake itsmark. Axela and Natrix are the first pieces of its North American business development initiative that aims to help young biotech companies get their products in front of customers, and ultimately drive the adoption of new technologies, says Doug Ward, VP Marketing, Canada, at VWR International. In partnering with and distributing the products of new companies, it hopes to grow its life sciences program and fill gaps in its product portfolio. Depending on the nature of the partnership, the company can also provide market guidance and support given its knowledge of the end user and of the industry.

“I’ve been around a long time, and I’ve seen so many people develop a product and sell it off. It’s the Canadian reality. There are very few folks taking it to the market on the global stage like these two [Axela and Natrix]. That really attracted me... taking risks in Canada is not something that happens very often,” saysWard.

“I’ve come back to Canada wanting to start and lead a Canadian-based, but globally focused, company that through its success will hopefully contribute positively to the Canadian space,” addsWellner.

For its part,Therapure Biopharma Inc. provides protein manufacturing services on a contract basis, but also forms joint development partnerships with biotechnology firms—sharing the cost and risk of manufacturing complex biologicals at commercial levels. The company is also seeking to acquire pre-approval products and to forge potential equity participation in some cases.

“The intention is that we are all about helping biotech and innovative companies bring their products to life,” he says. “We’ll partner with them early on or midstream and stay with them through commercialization. There are not many biotech companies that happen to have $250 million kicking around to build a large-scale biomanufacturing facility like we have.”

It’s a unique business model, Wellner adds, made possible through the company’s relationship with backer Catalyst Capital Group Fund II.Therapure’s unique and flexible 130,000-squarefoot cGMP manufacturing facility will be completed this fall, generating at least 100 high-quality, value-added jobs for Ontarians, says Wellner. (Therapure Biopharma acquired its Canadian built and conceived facility from Hemosol Corporation, a specialist in therapies derived from hemoglobin, a blood protein.)

Wellner cites famous University ofToronto scientists Fredrick Banting and Charles Best as early examples of what happens to most Canadian scientists and discoveries... and indeed one of the main challengesTherapure is hoping to address. “Their discovery of insulin in 1921 changed the course of a disease. But they could not make the product at a global, commercial scale on their own. They were compelled to partner with a U.S. company that could provide them with the technical competency and capability.”

The current market conditions in Canada, he continues, encourage scientists to sell their products and ideas before they have to start spending money on phase two and three clinicals, and commercialization. “We need some Canadian success stories. I want to see them stick through it... but to do that you need access to a significant amount of capital, and the amounts that float around to support biotech in Canada are minuscule compared to what they are in the U.S.”

The fact that Canadians are quick to sell out is one of Crossley’s biggest pet peeves. “Up here, when we get that initial early offer of acquisition from a U.S.-based company for a couple million dollars, we sell out.”

She agrees this trend is fueled by a lack of venture capital, which then drives Canadian firms south for funding, which in turn usually invites the pressures of moving operations to the U.S. “We’re never actually able to achieve a critical mass of startup companies that have gone beyond seed stage.We create tons of value up here, but we’re never the ones who capture it. If we’re going to change our culture in Canada, we need larger funds, but maybe fewer of them. It’s a tough problem to overcome.”

“I’ve come back to Canada to start and lead a Canadian-based, but globally focused, company that through its success will contribute positively to the Canadian space.”

Axela’s Ganske agrees new programs and approaches are needed. He admits progress has been made to increase the SR&ED levels, but argues the only way to get cash back, is to spend it in the first place. He points to the labour-sponsored funds of years gone by, which were allowing capital to start building companies up, only to be cut in less than a five-year period. “I was left questioning the logic of the individuals [running the show] and their knowledge of this space, as investments in this space take much longer to build value” Ganske says. “Now, we’ve unfortunately created a shopping mall for U.S. venture capital guys. They can come in here and buy stuff on the cheap because there’s no money to support it.”

The funding gap, Ganske says, exists particularly beyond the seed stage. “Unless we find a way, quickly, to infuse some capital to bring those companies from that point, they will simply get rained out…they will run out of capital. It’s unfortunate because we need to get this momentum moving.”

Crossley cites her own journey with Natrix as an example of strategically avoiding some of the potential pitfalls. Three years ago, the technology behind Natrix was still in a university lab at McMaster in Hamilton.Natrix develops a membrane-based platform technology to improve the safety and economics of the biotechnology separation processes required to purify proteins and other life sciences compounds.With the technology, the company hopes to create novel, high value products for specific applications, including large-scale bioprocessing, blood processing, and food and beverage processing.According to Crossley, the technology is the first new thing to happen in separations in decades, and has a total addressable/accessible market of $9 billion.

“I think this company will be worth half a billion dollars within five years at the outside. It is a very attractive candidate to exit either via IPO or M&A. It’s a good story if you’re an investor.”

The proof is in the pudding. The company initially raised $2Min seed financing throughMDS Capital and BDC Venture Capital. “They gave us $2 million instead of the usual $500,000 investment. This really accelerated our progress by just allowing us to concentrate on developing our products,” she says.

“This company will be worth half a billion dollarswithin five years...It’s a good story if you’re an investor.”

This spring, Natrix leveraged the progress it had made on the initial seed investment to attract $19 million of financing from BDC, JovInvestment Management, and a new lead U.S. investor —D.E. Shaw Ventures.

In the last two years, Natrix assumed ownership of the technology they initially licensed from McMaster, leased 25,000 square feet of space in Burlington, Ontario, built a state-of-theart lab and manufacturing facility, and grew its staff from six to 37 people, including sales and product managers in the U.S. In addition to selling directly to high-volume markets, the company recently launched its first group of products into the research market through distributor VWR Canada. Incidentally, the company has subcontracted some work to Therapure’s new facility.

Crossley says they looked south for some funding because of the size of the investment needed: “We needed some deep pockets. But we were very clear with our investors that we would not move to the States. Collectively we said: ‘We are going to be a major global player and we will do it from Canada, not the U.S.’ It did weed out some investors—those who assumed we would move to Boston.”

While money is one of the largest hurdles,Crossley believes if you have a truly compelling value proposition, and it looks like the time to exit is reasonable, there is money out there. “In my experience there is a lot of money out there. If you have a real fundable value proposition, you’ll find the funding.”

But success, she says, also comes down to ensuring you have the right management team in place to turn your company into a success story—essentially the right mix of technical knowledge, business acumen and entrepreneurial drive. “With technology companies, leaders have to have some technical depth to position the company and products externally. But investors rely on the business skills to carry the company to revenue, growth and ultimately exit,” says Crossley. “There is a tremendous depth of VP talent in Canada, she continues. You don’t have to bring in a U.S. team, but you do have to be discriminating about what you’re looking for.”

Ganske says he initially brought in two U.S. individuals to lead various parts of Axela’s business. Today, however, the company boasts more Canadian management than U.S. “I’m cognizant of what Axela is doing to build that next group of biotech leaders in the Toronto space, based on the shared experience of the current management team,” he says.

Ganske disagrees with those who say Canada doesn’t have the right skills or the right people. “We have found very good Canadian management that we’ve been able to put into place. At the same time, when you have the capital support, if there is domain expertise you need to reach down into the States to get, you can do that,” he says “People will come north—but they won’t come north without the capital and they won’t come north without understanding the support is there to drive the company to the finish line.”

“In my experience there is a lot of money out there. If you have a real fundable value proposition, you’ll find the funding.”

Money, after all,makes the world go around.And it’s ultimately what lures many Canadian entrepreneurs south, or overseas for that matter,Wellner adds. “As an executive, I’ve taken a significant pay cut to come back to Canada, but that’s a personal choice I’ve made for my children and my wife, but it’s a cost,” he says. “I could go to the States and make many times what I’m making. That is what drives many people’s decisions on where the talent goes.”

The U.S., for instance, he says, also boasts robustness and vibrance of activity and deal-making, which he says also stimulates the structure of the industry and a lot of the entrepreneurial thinking. Crossley argues another big challenge in Canada is that people don’t know how to approach venture capitalists and investors (see sidebars to this story for tips and tricks on starting up and pitching investors). Programs likeMARS’s entrepreneurial office and the efforts of university tech transfer offices, however, will go a long way she expects.These networks can arm the uninitiated with the necessary skills, offer access to like-minded, experienced, business people, and even provide warm introductions, she says. “When you’re starting up, you really need someone with business savvy on your side.”

Academia does indeed have a role to play, according to Lorna Shaw-Lennox, Start-Up Company Specialist, Industry Liaison Office (ILO), University of Saskatchewan (U of S) (see Q&A, page 22). U of S is involved in the 2nd annual BioVenture Business Plan Challenge, which is similar to the sanofi pasteur Healthcare and Biotechnology Venture Challenge. Both programs assist scientists and students with launching their biobased business ideas.

“Our universities do an incredible job of developing technologies that are commercializable. It’s an entrepreneur’s dream,” says Ganske. “The foundation is there, but you need the cash to enable it.”