November 22, 2015

Guest Editorial


Canada continues to be one of the world’s leaders in developing and fostering scientific breakthroughs. While talent is in great abundance in Canada, there’s been an evolution in the ways Canadian science is being commercialized and financed globally.

2014 was a year for the record books. According to EY’s 29th annual biotechnology industry report, Beyond borders: reaching new heights, on almost every measure we track—revenues, profitability, capital raised and more—the life sciences industry reached new heights in 2014. But Canada continues to experience some challenges in the face of this lucrative environment.

Understanding the Canadian life sciences environment involves looking at the industry in a new light and reimagining how Canadian companies can be encouraged to flourish.

The global nature of life sciences9-Month 2015 Performance

On both a national and a global scale, the world of life sciences is enjoying tremendous growth. Across the four established biotech clusters we track—the US, Europe, Australia and Canada—revenues grew 24% in 2014.*

Canada has worked hard to evolve its position as a global hub for innovators in the life sciences industry and has become a prominent player. It’s shown tremendous strength and innovation in the past decade to support the industry and is moving towards showcasing its technological advances around the world.

Heading south for capital

When life sciences companies in Canada embark on a capital-raising journey, it’s clear the US remains its dominant source. This is due largely to the US market’s combining an ability to raise capital quickly and high tolerance for risky scientific ventures. The US biotech industry also enjoyed a record year in 2014, setting a new all-time high in total capital raised (US$45.1 billion) as well as funds raised through IPOs (US $4.9 billion).*

The industry has transitioned into a borderless environment. Securing investors and capital from the US and other regions is considered a given process rather than an exit. While raising capital outside Canada has become commonplace, this doesn’t mean companies should move away from Canada as a place for growing the business. Bringing back the business after securing capital from the US can offer many advantages.

The war for talent and pipeline assets

The life sciences sector’s robust presence creates a deep talent pool in Canada, which has increased Canada’s competitiveness in the global market and helped attract life sciences companies to locate here.

Life sciences present a strategic opportunity for Canada’s future prosperity. Many companies globally are able to develop great science and breakthroughs—but to be successful they need the right talent and people in place to support the ideas through the lifecycle. With the right support, such as public policies that support strong intellectual property protection, market access, talent development and access to capital, the sector has the potential to significantly grow its contributions in Canada.

What’s Canada doing well in life sciences?

Canada’s greatest asset in the life sciences industry is its people. Canada boasts highly educated talent, globally competitive academic institutions across all life sciences disciplines and an efficient single-payer health care delivery system. With less red tape and a relatively lightly bureaucratic tax system in place, Canada is a great country in which to run a business. Canada’s average income tax rate of 26% and relatively progressive indirect tax system are much more competitive than the US combined corporate income tax rate of close to 40% and a complex network of state and local sales taxes.

Canada holds a unique position in the world as one of the safest countries for conducting life sciences work from both an economic and financial standpoint. According to the Government of Canada, there were 260,404 permanent residents who immigrated to Canada in 2014. Canada’s deemed as a desirable country in which to live in and conduct business.

Canada’s political and economic stability have strengthened its reputation in the industry. We’re seeing more analysts encouraging life sciences companies to conduct their business in Canada, as it enjoys less volatility than the US. Because of this stable environment, more US companies are turning to Canada for acquisitions and divestitures.

What is striking is that Canada offers businesses the lowest corporate tax rate of the G8. Canada’s current tax laws have attractive tax regimes that positively impact all businesses. With income tax rates being 14% less than the US, investment in Canada produces higher multiples and can help raise additional sources of capital. For those companies that have successfully raised capital, having a Canadian footprint can yield greater opportunities for global acquisitions.

The life sciences industry continues to be booming and profitable. Its strong performance in 2014 across so many metrics gives us a real reason to celebrate. The view from the top is good, and with ongoing support and investment Canada will continue to excel as a leader in the development of new scientific breakthroughs and rising talent.

*Beyond borders: reaching new heights, EY’s biotechnology industry report 2015.

Mario Piccinin and Karen Atkinson are partners with EY. Follow EY’s Private Mid-Market practice on Twitter @EY_CAPrivateCo. And visit us at

 [The author and his immediate family members may have long or short positions in the shares of some companies mentioned in or assessed during the preparation of this blog. Past share price performance may not be an indicator of future share price performance. This blog does not consider the investment objectives, financial situation or particular needs of any particular person. Investors should obtain professional advice based on their own individual circumstances before making an investment decision.]

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