The combination of information technology and life sciences will continue to solidify in 2004, predicts Rainer Engelhardt, chief executive officer of the Ottawa Biotechnology Incubation Centre, which expects to fill its second-phase building for 2004, as well as graduate its first set of startups.
While these are positive signs, Engelhardt also points to some anticipated bumps in the road. Such obstacles can only be overcome if investors and consumers look upon this relatively new sector with a healthy dose of realism, he says. OBJ reporter Scott Foster asked Engelhardt to discuss his vision for 2004.
THE BACKGROUND: "One thing that has really changed in the last year with respect to Ottawa and biotechnology is its recognition outside of the country. Relationships are being built with other research parks, research centres in the United States.
"Tucson is a great case in point. (This means) linking business in that circuit with what's being done here. The same thing is true for increased attention being paid to Ottawa by Germany, England and France. And we're talking about a formalized basis, not just general talk and gab that unfortunately happens much too often. There are some real concrete things being done. OBIC finally went over the hill to get financing for its second phase.
"The banks came in on that after a lot of convincing. I think there's a lot of comfort on their part ... that, yes, a fairly high-risk biotechnology commercialization ... was worth taking a gamble on. And it's a gamble from a debt-financing perspective, but we were able to get the $4.5 million from the two banks, matching our funds that we received to build a second phase. I think that's an example of greater confidence about what the future will hold for biotechnology in Ottawa."
THE GOOD NEWS: "We seem to be coming out of the slump of investment. The interest on the part of investors throughout North America in biotech seems to be picking up again. I think it will always take time to close deals, but there are certainly more deals being put on the table now, based on what I hear from my investor colleagues.
"That's a good sign because, after the recent downturn, not only were not many deals being made, but the young biotech companies that needed to go forward were scared off over the threat of low valuations. In reality, this was more than a threat. I don't want to be overly positive and fly a flag that says, 'We're out of it now'. But the appearance is that things are picking up. Recent news, with Adherex's ($21-million private placement announcement) with VenGrowth taking the lead, that's a big event. They've been working hard on that and that's a landmark event for Ottawa."
THE BAD NEWS: "I'm a very optimistic person, so I tend not to focus on the bad news. But I think there are some bumps in the road. We all do it and I'm guilty of it as well: we tend to over-forecast the benefits to the user, the consumer, about the health advances, for instance.
"In stem cell research, for example, I think people have been very enthusiastic about the potential. There is still real potential, but it's going to be a long time before all the problems with it are really resolved. That's a bump and I think people are realizing that we're not going to have a stem cell therapy available for an Alzheimer's patient next year. It just won't happen.
"There are lots of uncertainties associated with this very young biotechnology. Those are realizations that have to happen. Does that mean investors are going to get scared off again? I don't think so. I think the realism is something that everyone ultimately recognizes; it's better to be real about what the potential is than not."
THE BIG PICTURE: "Big breakthroughs are being made in the bio-convergence sector. Life sciences is coming closer and closer together with the information and communications technology side. And that's best exemplified with bioinformatics and nanotechnology. The (latter) in many ways is driven equally by the hard IT side – the soft chip technology – as well as the biochemical science. And that is something that's happened more intensively in the Ottawa area than ever before. I truly expect (bio-convergence and nanotechnology) will play an even larger role in 2004.
"We have young companies coming to OBIC, saying, 'We've come out of the IT sector. We have this technology and capacity and we are interested in applying it to the life sciences sector'. And my prediction is that this will solidify more and more. I think there is a noticeable increase in IT companies that have a life sciences focus. The second-phase OBIC building will be up (in 2004) and we intend to have it full.
"And there's a strong interest in having it full. There are lots of clients who want to come in. At the same time, we will probably graduate one, maybe two, companies out of our existing fold next year. So, toward the end of 2004, we'll be seeing the first successes of the OBIC approach to commercialization."
Scott Foster can be reached at scott.foster@transcontinental.ca
