trends, issues and developments in canadian life science ... · bioms medical—and winner of the...

SUMMER 2006

T r e n d s , I s s u e s a n d D e v e l o p m e n t s i n C a n a d i a n L i f e S c i e n c e

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The future of nutraceuticalsis ripe—but not in CanadaForbes Medi-Tech president Charles Butt sought successoverseas and is now setting his sights closer to home

The future of nutraceuticalsis ripe—but not in CanadaForbes Medi-Tech president Charles Butt sought successoverseas and is now setting his sights closer to home

Canadian confidence highat BIO 2006 in Chicago

Successful investorand public relationsstrategies

U.K. biotechreachesnew heights

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Summer 2006 BIO BUSINESS 3

10 BIO 2006Canadian life science participation, and confidence,reaches new heights at the world’s largestbiotechnology event held in Chicago in April.

16 BUSINESS MANAGEMENTCommunications experts sound off on successfulinvestor and public management strategies.The lesson? Transparency is key to effectivestakeholder relations.

19 QUESTION & ANSWERKevin Giese, president and CEO of Edmonton’sBioMS Medical—and winner of the 2005 BioAlbertaAward for Entrepreneurship—on successfulmanagement practices for Canadian biotechs.

27 FINANCINGIs your company making the most of Canada’stax incentives for R&D? KPMG’s Ed Zacharukproffers his insight on doing exactly that.

30 REGIONAL PROFILEThe U.K.’s biotech sector—ranked by manyas second only to the U.S.—continues to flourishthanks to government support and investment.

38 IN PERSONUniversity of Guelph professor Jack Trevors namedas a fellow of prestigious international thinktank,the World Innovation Foundation.

BIO BUSINESSContents

20 The Future is RipeWith an aging population and increasingconcerns about obesity and its many associated healthissues, functional foods and nutraceuticalsare set to take off. But thanks to tough regulatory laws,development in Canada has stalled, and the majority ofbiotech firms have focused almostexclusively on exports to grow their business.

also inside

20Cover Story

“The future of biotech in this country depends ultimately on firmsinvesting wisely in research and development, getting products tomarket successfully, maximizing investment return and present-ing investors with an attractive risk/reward business model,” saysRod Budd, leader of Ernst & Young’s Life Sciences practice inCanada, and author of the Canadian chapter of Ernst & Young’s20th anniversary edition of Beyond Borders: GlobalBiotechnology Report 2006.

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Canada’sChallenge

t was great to see Canada’s strongpresence at BIO 2006 in Chicago. Itdid my heart proud. We’ve tried to

summarize some of the Canadian high-lights of the show on page 10.Canadian provinces and contingents

stood out, as did many other countriesand states. From a media delegate’spoint of view, I’m always being wooedin an attempt to get coverage. And thisyear’s courtship was intense. Accordingto BIO, roughly 50 countries turned outwith booths. Almost every U.S. statehad a booth. And all—including ourown 1,100 Canadian attendees—werebattling to attract the attention, rev-enue, and employment opportunitiesoffered by biotech. Indeed, competi-tion was fierce.Unfortunately, most presented simi-

lar, if not identical, value propositionsconsisting of the usual suspects: an edu-cated workforce; strong financial andresearch support; a favourable regulato-ry/government agenda. Each touteditself as the next big biotech centre.The most convincing pitches, however,were focused around specialized indus-try segments (unique to an area or coun-try); the availability of encouragingincentives; presence and/or proximityto existing strongholds; and globalprowess as evidenced by numerousexisting partnerships and alliances.I would say that the reputation of

Canadian biotech is on the rise, and wetoo can plug many of the latter charac-teristics. Witness Manitoba’s researchcollaboration and alliance-buildingefforts (see Q&A on page 11). Butthere is a lot more awareness and eco-nomic development work to be done.It doesn’t help to learn of the

McGuinty government’s plans for Bill102. The news served to disheartenand deflate the industry post-confer-ence. The bill will impose unprece-dented restrictions on the sale of brandname products in Ontario, thus makingit more difficult for Ontario biotech tobe successful, points out the Toronto

Biotechnology Initiative in its letter tothe editor on page 7, and by MarkGregory in his conference analysis col-umn on page 10.Amendments have since been

made after industry representativesand organizations admonished that thebill had to be fixed. The proposed revi-sions include the creation and clarifica-tion of certain definitions and theestablishment of new processes (toreview recommendations or drug list-ing decisions, for example). Punditssay these changes represent a move-ment in the right direction, but thatthe full financial impact remains to beseen over the coming months as theregulations are further fine-tuned.The point is that it’s precisely

actions like this that could potentiallydeter, and hinder the growth of biotechin Ontario, and in Canada. It certainlydoesn’t help in our efforts to grow glob-ally and attract serious economicdevelopment dollars. Canada is in agood position to move forward, andeven up the biotech ante, but not with-out the support of the powers that be.

Cheers,Bernadette

Editor’s NoteBIO BUSINESSTrends, Issues and Developments in

Canadian Life Science

Publisher Christopher J. Forbes& CEO [email protected]

Managing Bernadette JohnsonEditor [email protected]

Art Tammy WhiteDirector [email protected]

Contributors Lisa D’InnocenzoMark GregoryCatherine MuirKevin WilsonEd Zacharuk

Secretary/ Susan A. BrowneTreasurer [email protected]

Sales Beth KukkonenManager [email protected]

Account Kirsty TamakiManager [email protected]

Promotion Nancy SimManager [email protected]

Production Roberta DickManager [email protected]

Production Sara ForgetCo-ordinator [email protected]

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OpinionBill 102 and the Governmentof Ontario’s Innovation Agenda

Ontario benefits from a well-established drug manufac-turing industry, both brand name and generic, as well as

a biotech sector with the greatest promise of any in NorthAmerica. Next to the United States, Canada has morebiotech companies than any other country and Ontario ishome to many of them. The promise of biotech is just begin-ning to be reflected in a growing number of biotech medicaldiagnostic and therapeutic applications entering the market.Aspects of Bill 102 raise serious questions about the com-

mitment of the Government of Ontario to encouraging thebiotech sector as a centerpiece of its innovation strategy. Atthe same time as the Premier, also the Minister of Researchand Innovation, is singing the praises of Ontario as a greatplace to commercialize biotech, the Ontario Minister ofHealth and Long Term Care is announcing changes to therules and policies related to drugs that diminish the eco-nomic prospects of brand name drug manufacturers inOntario and in other parts of Canada as well. This is not thestated objective of the changes announced but it is one ofthe obvious consequences.Why should those of us who are concerned with the

future of biotech in Ontario and Canada be troubled withBill 102? The greatest promise for biotech in Ontario is inthe medical sector. It is where the greatest number ofOntario biotech companies are developing products. Thesewill be Canadian products that improve the diagnosis andtreatment of disease of our citizens and become importantsources of exports to other parts of the world.Aspects of Bill 102 will impose unprecedented restrictions

on the sale of brand name products in Ontario that will makeit more difficult for Ontario biotech to be successful. Biotechbenefits from a strong and growing drug manufacturing sector.That is not only true of Ontario. In virtually every countrywhere there is a thriving biotech sector one can point to a sig-nificant brand name drug presence close at hand. Drug com-panies are a source of investment capital to biotech, and essen-tial partners for research and development activities and prod-uct commercialization. To the extent that brand name drugcompanies will find Ontario a materially less attractive place inwhich to do business as a result of Bill 102, Ontario biotechwill be disadvantaged. Ontario biotech will find it more diffi-cult to do deals with brand name companies and the pool ofexperienced managerial talent from which biotech recruitsmany of its business leaders will be diminished.At the same time, it will bemore difficult to attract newbrand

name drug manufacturing and biotech activity to Ontario. Bill102 is widely perceived in the international biotech communityas anti-brand name drug manufacturers and by extension anti-biotech. The work of the leaders of the brand name companiesin attracting world product mandates to Ontario is being serious-ly undermined. The ability of the Government to promoteOntario as a place to do biotech will suffer the same fate.What should the Government do now? The Government

should rethink its decision to press ahead with Bill 102 and therelated policies on an artificial timetable designed to stifleinformed discussion. To this point there has been no mean-ingful consultation on Bill 102 and the related policies. TheGovernment’s claim that there were extensive consultationbefore the release of Bill 102 inmid-April is simply not correct.There was an earlier extensive fact finding process thatinvolved many stakeholders but at no time prior to the releaseof Bill 102 was there any consultation on what has been pro-posed in the Bill and in the related policies. Contrast thisprocess with the more inclusionary process of drug policyreview in Quebec that began in 2004 with a government poli-cy paper and public hearings, followed by legislation last year.The Government should complete the policy making

process in a sensible and respectful manner. It must releasedetails of the myriad of proposed policies that are related toBill 102 and which have been announced in brief summaryonly. How can the Legislature properly consider Bill 102 ifmore than 70% of the proposed reforms have yet to beexplained in any detail whatsoever? What opportunity forinput will there be on those policies once Bill 102 is rushedinto law? It may take several months for the policy work tobe completed. That would mean that the Committeeshould begin its consideration of Bill 102 and the relatedpolicies sometime this fall, instead of in a couple of weekstime in what promises to be a highly unsatisfactory process.We need to insist that Government makes policy in a

manner that it is open and transparent and in the best long-term interests of its citizens.

Authors: Grant Tipler is head of the Health Care and Life Sciencesmarket for Royal Bank of Canada, and president of the TorontoBiotechnology Initiative (TBI), a 400-member strong biotech organi-zation representing all facets of the biotech community in Toronto.Lorne Meikle is president of BCY Biosciences and the immediate pastpresident of TBI. Jeffrey Graham is a partner in the Toronto office ofBorden Ladner Gervais LLP, and is a former president of TBI.

The following was originally published in the May 27 edition of theNational Post. Subsequent comments concerning the editorial and Bill 102in general also appeared in the newspaper’s June 1 edition.

8 BIO BUSINESS Summer 2006

Steven J. BurtonMontreal’s ProMetic Life Sciences Inc.announced changes following a corpo-rate reorganization announced inNovember 2005. Dr. Steven J. Burtonhas been named the new presidentand CEO of ProMetic BioSciences.Genevieve Lavertu is being replacedby Mark Bandrauk at the generalcounsel and corporate secretary level.

Jean Bourgouin, Euan TaylorVancouver’s WEX Pharmaceuticalsreduced its workforce in North Americaby more than 50%. As part of therestructuring Dr. Euan Taylor steppeddown as VP, IP and assumes the roleof director, IP; and Dr. Jean Bourgouin,EVP/chief medical officer, leaves hisposition but remains as a member ofthe Scientific Advisory Board andfuture consultant.

Gilbert GodinBiovail Corp. hired Gilbert Godin as itsSVP, technical operations/drug delivery.He is formerly of MDS Pharma Services.

Mark KaufmannMontreal’s CelmedBioSciences Inc. promotedMark Kaufmann, formerlyCOO and VP corporate

development, to the position of presi-dent and CEO. He replaces recentlyretired André de Villers, MD.

Scott M. LangilleViRexx Medical Corp., Edmonton,named Scott M. Langille as CFO.Previously, he was CFO at 401Capital Partners Inc.

Brett GannonXillix Technologies Corp., Vancouver,recently announced executive manage-ment changes: Cynthia Roney steppeddown as president and CEO and willtake on the position of EVP; BrettGannon was appointed president andCEO; and Farran Grant, recently pro-moted to VP Finance, becomes CFOand corporate secretary.

News

Canadian business costs lowestamong G7 countries, reports KPMG

Canadian biotech companies are building for a heightened level of merger andacquisition activity, according to a new industry forecast released by

PricewaterhouseCoopers (PwC) in collaboration with BIOTECanada. Ninety-fourpercent of respondents ratedM&A among their top three exit strategies and believeimplementing M&A is a key action industry can take to improve Canada’s ability tocompete globally. The Canadian Life Sciences Industry Forecast 2006 is the first of itskind for Canada, designed to have industry leaders outline the focus of their upcom-ing business development strategies and where their business opportunities lie. Themajority of forecast respondents are at least three years away from profitability andmore than half of respondents feel having stronger sources of capital for seed andearly stage companies is the most critical factor to attaining success.“Most respondents say they are seeking more than $10 million in their next

round of financing and most expect to receive it from Canadian and U.S. venturecapitalists as well as strategic partners,” says John DeLucchi, National Leader, LifeSciences Group of PwC. “However, the ability to attract U.S. or foreign capital isidentified as a top three challenge to becoming a stronger global competitor.”

Source: www.pwc.com/lsforecast or www.biotech.ca

M&A is key to globalcompetitiveness

Canada leads the G7 countries as the most cost-effective location for business,according to a 2006 study that compares business costs in nine industrial

countries in North America, Europe and Asia Pacific (Canada, France,Germany, Italy, Japan, the Netherlands, Singapore, the U.K. and the U.S.).Canada ranked second out of the nine countries examined, with business costsapproximately 5.5% below those in the U.S.

Singapore is the overall leader among the countries studied, with business costsapproximately 22.3% below those in the U.S. According to KPMG’s study,Competitive Alternatives: KPMG’s Guide to International Business Costs, Japan andGermany rank as the most expensive countries in which to do business. The studyresults were determined using recent exchange rates, with the Canadian dollar val-ued at US85.2¢ (C$1.1735 per US$).

For larger cities in Canada, Edmonton and Montréal rank as those with thegreatest cost advantages relative to the U.S. While costs in Toronto andVancouver are the highest within Canada, and on par with such low-cost U.S.cities as Atlanta and Tampa, these cities do still offer significant cost advantagesover most of the large U.S. cities included in thestudy. Among the smaller cities examined,Canadian cities generally continue to offer lowercost structures than equivalent U.S. cities, evenafter allowing for the higher value of theCanadian dollar since 2004.

Study says Canada maintains cost advantage overU.S. despite rising dollar


Scott M. LangilleViRexx Medical Corp., Edmonton,named Scott M. Langille as CFO.Previously he held the position of CFOat 401 Capital Partners Inc.

Kelly B. McNeillCalgary’s ResVerlogix Corp. welcomedKelly B. McNeill as CFO. McNeill willhelp lead the company’s financial report-ing and regulatory filing requirements.

Jay Mohr, Martin StogniewZelos Therapeutics made twoexecutive appointments: Joseph S.Mohr joins as chief business officerand Martin Stogniew, Ph.D. joins asEVP of development.

Peter NicholsonThe Canadian Academies of Scienceappointed Dr. Peter Nicholsonas the first president of the CAS.Previously he was deputy chief of stafffor policy in the Prime Minister’s Office.

Murray WigmoreThermo Electron Corporationappointed Murray Wigmore asGM of the Scientific InstrumentsDivision in Canada. He will beresponsible for all commercialaspects of the business in Canada.

In April the Expert Panel on Commercialization, which wasestablished in May 2005 to advise the government on an actionplan for meeting its commercialization objectives, presented its final report. Thereport, entitled People and Excellence: The Heart of Successful Commercialization, coversa comprehensive package of 11 recommendations to provide a strong starting pointfor Canada to achieve its full potential. At the core of these recommendations is thedevelopment of a business-led Commercialization Partnership Board (CPB). TheCPB would create a new role for the private sector as a full partner in charting thecourse for, and developing policy related to, commercialization.

Source: www.strategis.ic.gc.ca/commercialization

Douglas LudwigPatheon Inc., Toronto, named Douglas L.Ludwig to the position of CFO and EVP.The company also announced the retire-ment of CEO Robert C. Tedford effectiveMarch 31, 2007. While identifying anew CEO, Patheon has established theOffice of the CEO to carry out the CEO’sresponsibilities on an interim basis. It willconsist of Peter Green, chairman, NickA. DiPietro, president and COO andLudwig, CFO and EVP.

George Markus, MargaretSposatoGenerex Biotechnology Corporation,Toronto, hired two new employees:George Markus as manager of regula-tory affairs; and Margaret Sposato asa senior research associate at the com-pany’s subsidiary, Antigen Express, Inc.

Expert Panel on Commercializationreleases final report

BIOTECanada recognizesbiotech’s cream of the cropBIOTECanada honoured Canada’sbiotech leaders at its National PresidentsAwards Dinner in June. The followingawards were celebrated:• Biotech Company of the Year:Aspreva Pharmaceuticals

• Contribution to Advancing theBenefits of Biotech for Canadians:Dr. Alex Mcpherson, Biomira

• Promising Early Stage Companies:Rimon Therapeutics Ltd., andMBEC Bioproducts

• Contribution to the Association: Dr.Luis Barreto, VP of public policy,SanofiPasteur, Toronto

SSoouurrccee:: www.biotech.ca

BC Biotech honours championsBC Biotech announced the recipients of the2006 BC Biotechnology Awards. Theseannual awards are presented annually byBC Biotech to recognize individuals andorganizations that have made outstandingcontributions to the development of BC’sbiotech industry. They are:• Dr. Ross McGillivray for the

Genome BC Award for ScientificExcellence—professor, biochemistry &molecular biology and director,Centre for Blood Research, UBC;

• Dr. Martin Gleave for Innovationand Achievement—founder and CSO,OncoGenex Technologies, and director, clinical research,Prostate Centre at Vancouver GeneralHospital;

• Mr. Richard Glickman forLeadership—co-Founder, chairman andCEO, Aspreva Pharmaceuticals; and

• Neuromed Pharmaceuticals forLife Sciences Company of the Year.

Quebec celebrates life sciences leaders Leaders in Quebec’s life sciences industry were honoured at the sixth edition of theGenesis awards gala, organized by BIOQuébec and presented by the Cité de laBiotech. The awards recognize organizations and individuals who make a contribu-tion to the development of biotech in Quebec. The Genesis awards were presentedin five categories, including Atrium Biotechnologies (Entrepreneurship,Biotechnology Biopharma ceutical), Laboratoire Orthopédique MÉDICUS (Entrepren -eurship award, health technologies), Innodia Inc. (Innovation award), ResonantMedical Inc. (Transfer-Emergence award), and to a pillar of the pharma industry,James R. Howard-Tripp (Brio).Source: www.biomedex.info

AWARDS


ON SITE ANALYSIS

Canadian life science participation,and confidence, reaches new heights

By Mark Gregory

BIO in Chicago was big. Reallybig. This year 20,000 delegatestook part from over 50 coun-tries. The event also involvedabout 1,100 Can adians making itthe largest Can adian contingentever. Over 80 companies andinstitutions showcased their science or services at the Can -adian Pavilion. The event was awho’s who of Canada’s nationallife science community. Industryinsider and key Bio Business con-tributor Mark Gregory spied thefollowing movers and shakersworking the BIO receptions,backrooms and exposition floor.

BIO

2006

FFaacceess iinn tthhee CCrroowwdd Quebec Premier Jean Charest worked BIO where it counted.Charest told Bio Business that, “Quebec’s confidence on theinternational stage is high. My job is to open doors for Quebeccompanies and to do our best to build our alliances and part-nerships with Canadian provinces and other jurisdictions.” Michel Leblanc, vice president of Montreal InVivo;

André Marcheterre, president of Merck Frosst CanadaLimited; Bertrand Bolduc, president of BIOQuebec andpresident and CEO of Mistral Pharma; and many othersplayed a large role in making sure that Montreal, Canada’slargest life science cluster, made a big impression. Clearlythey succeeded with a recent decision by BIO to holdBIOFinance East in Montreal in 2007. This will mark thefirst time ever that a city outside of the U.S. hosts the event.Montreal InVivo will head up the Montreal organizing team. Ontario Premier Dalton McGuinty took the trade show

floor to announce over $16 million in new funding for thesecond phase of the MaRS Centre. To date, the governmenthas invested $66.7 million in MaRS to help support the dis-covery, funding and marketing of new ideas all in the samebuilding. Chatting with the Premier, he said: “We are puttingOntario’s money where are our minds are.” Does that mean

that biopharma-clusters in Ottawa, Mississauga—Canada’sthird-largest life science cluster—Kingston, Guelph, Londonand Hamilton can expect an infusion of cash? Stalwarts from the Toronto Biotechnology Initiative

including Grant Tipler, Lorne Meikle, Dale Patterson, JeffGraham, Anita Nador, Matt Buist, Murray Wigmore, andTama Donahue Walker worked diligently and effectively torepresent their home province of Ontario.Director general of the Life Sciences Branch, Janet King,

and a team that included Dr. George Michaliszyn, director ofthe Life Sciences Branch, and Mark Craig, Trade TeamCanada Bio-Industries coordinator, as well as an energeticteam of colleagues from Industry Canada coordinated thingslike the Canadian Pavilion at the trade show, the CanadianSignature Event Dinner and Reception, the CanadaCountry Seminar, and the Senior Federal-ProvincialGovern ment Officials Dinner. Observed at the Canada Country Seminar were Ilse

Treurnicht, CEO of the MaRS Discovery District; Dr. AlanE. Winter, president and CEO of Genome British Columbia;and Dr. Tony Cruz, CEO of Transition Therapeutics. MikeCloutier, president and CEO of AstraZeneca Canada—oneof the most successful promoters of the Canadian research-


based pharmaceutical industry—could be seen everywhere at BIO,tirelessly positioning his companyand the nation.Walking down the trade show floor

one was struck by the fact that leadingsector suppliers were highly visible atBIO. Darrell Ethell, executive directorof CanReg, Canada’s largest regulatoryaffairs consultancy, was typical of exec-

utives working the market for potential partners and clients.Alberta had a strong contingent that included Ryan

Radke, the new president of BioAlberta, Sandra Wilburn,BioAlberta’s events coordinator, and Doug Cameron, direc-tor, Investment Attraction at Alberta Economic Develop -ment, a veteran of many BIO events.Saskatchewan’s Ag-West Biotech Inc. president and

CEO, Dr. Ashley O’Sullivan, and Janice Tranberg, managercommunications, spent hours on the trade show floor andthe back rooms putting the best face forward for Saskat -chewan’s efforts to grow its biotech sector.Russell Williams, president of Rx&D, the national asso-

ciation representing over more than 50 research-based phar-maceutical companies in Canada, helped pull together avery successful event featuring Canada’s major cities—thecountry’s hubs of innovation. It must have been dishearten-ing to discover on his return to Ottawa that at the same timePremier McGuinty was crowing about biotech in Ontario,George Smitherman, his Minister of Health and Long-TermCare rose in the Legislature and ushered in potentially themost ham-fisted, short-sighted and anti-innovation policy inNorth America. Bill 102 takes dead aim at the biopharma-ceutical industry in Ontario (see page 7).

The official ribbon cutting ceremonyfor the opening of the Alberta pavil-

ion at BIO 2006 in Chicago. The ribboncutters (from left to right) are: Mr. CurtisKuzyk, industry and development man-ager, BioAlberta; Mr. Ryan Radke, presi-dent, BioAlberta; Dr. Lorne Tyrell, CEO,Virexx Medical Corp.; Mr. Ken Boutilier,CEO, MBEC Bioproducts; Minister VictorDoerksen, Innovation and Science.

Canadian life science participation,and confidence, reaches new heights

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lliiffee sscciieenncceess cclluusstteerr,, wwiitthh hhooppeess ooff aattttrraaccttiinngg iinnvveessttmmeenntt,,rreesseeaarrcchh aanndd ttaalleenntt.. HHooww ddooeess MMaanniittoobbaa ppllaann ttoo ssttaanndd oouuttffrroomm tthhee ccrroowwdd aatt BBIIOO 22000066??

Our combination of gimmicks and goods has alwaysworked for us. Whether it is our polar bears or memo-

rable events, we try to do things a little differently. Thisyear, we have teamed up with the South Australians. If noth-ing else that combination has got people talking and takingnotice. When they look a little closer they’ll see why suchinnovative international partnerships make sense.

RReecceennttllyy,, MMaanniittoobbaa ppaarrttnneerreedd wwiitthh MMiinnnneessoottaa,, aanneeiigghhbboouurr rriigghhtt nneexxtt ddoooorr ttoo tthhee pprroovviinnccee.. YYoouu mmeenn--

ttiioonneedd tthhee llaatteesstt ppaarrttnneerrsshhiipp iiss wwiitthh SSoouutthh AAuussttrraalliiaa——aawwoorrlldd aawwaayy.. WWhhaatt’’ss tthhee ccoonnnneeccttiioonn wwiitthh tthhee AAuussttrraalliiaannss??

We recently signed Memorandums of Understanding(MOU) with the Government of South Australia State of

Victoria. The State of Victoria is in the process of establishing adisease laboratory and Winnipeg is the centre of two of theworld’s most important infectious disease organizations: theInternational Centre for Infectious Diseases and the CanadianScience Centre for Human and Animal Health. Many ofCanada’s leading infectious disease researchers and practition-ers have received training at the University of Manitoba.We met the South Australians at BIO in 2005 and discov-

ered we have a surprising amount in common…such as thesame basic political system, very similar views on litigationand health care. Our two jurisdictions will share expertiseand co-operate in four areas: Exploring opportunities for col-laborative research projects including the exchange of scien-tific and academic staff in infectious diseases; Exploring

Manitoba MarketsUnique StrengthsThis spring at BIO in Chicago, 27Manitoba companies including Cangene,Medicure, Conviron and Apotex Fer -mentation, led by Manitoba Premier GaryDoer, launched an all-out campaign todraw international attention and participation to their grow-ing biotech sector. Bio Business had an opportunity to speakwith the Premier at length about Manitoba’s strategy andstrengths. The interview took place as rising floodwatersthreatened the province. From the outset, it was clear thePremier was on top of his game, confident, and cool. Manitobahad battled Mother Nature before; his team back home had aplan, they were prepared and ready. That tone, and the energyhe radiated, set the stage for his candid insights on Manitoba’shopes and goals at the world’s largest biotechnology event.

Feature interview with Manitoba’s Premier Doer

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. . . continued on page 13

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opportunities for joint participation in training, bio-science/life sciences symposia, workshops, missions andjoint economic development; Establishing company-to-company business relationships such as joint ventures,licensing agreements and service contracts; and Developinggovernment-to-government relationships to share ideas andbest practices.

WWhhaatt ootthheerr ssttaattee,, rreeggiioonnaall oorr iinntteerrnnaattiioonnaall rreellaattiioonn--sshhiippss aarree yyoouu ccoonnssiiddeerriinngg nneexxtt??Canada and Manitoba are playing catch up in the fastgrowing South Asian markets. While Aus tralians have

geography on their side, they have something to share withus about building mutually beneficial relationships in coun-tries like India, who are developing powerful economies andnew knowledge-based industries in information and biophar-maceutical technologies. In the future, we plan to leverageour relationships and focus on our world-renowned expertisein animal and human health.

WWiitthh tthhee llooccaattiioonn ooff CCaannaaddaa’’ss PPuubblliicc HHeeaalltthh AAggeennccyyaanndd tthhee nneeww IInntteerrnnaattiioonnaall CCeennttrree ffoorr IInnffeeccttiioouuss

DDiisseeaasseess iinn WWiinnnniippeegg,, aanndd wwiitthh ccoonncceerrnnss aabboouutt aa gglloobbaall fflluuppaannddeemmiicc lloooommiinngg,, wwhhaatt ootthheerr ppaarrttnneerrsshhiippss ddoo yyoouu sseeee aahheeaaddffoorr MMaanniittoobbaa iinn tthhee aarreeaa ooff ddiisseeaassee ccoonnttrrooll??

We are talking with China. They see our NationalMicrobiology lab as a big asset. They have been trying

to build their disease control capacity since SARS. The cur-rent concerns about an avian pandemic are fuelling theirinterest in a relationship with us. At BIO, we hope to furtherthese discussions.Manitoba’s team at the International Centre for Infectious

Diseases has a strong relationship with the Centre for DiseaseControl in Atlanta. In the face of increased pandemic pre-paredness planning, we expect to work even more closely withthem and our close U.S. neighbours such as Wisconsin, NorthDakota, and Minnesota. Disease doesn’t recognize borders. I am hopeful that Canada will continue to centralize our

disease control structures and processes in Manitoba andthat it addresses the need to aggressively fund these facili-ties to fill any gaps that exist in our research capacity.

MMaanniittoobbaa hhaass aa hhiigghhllyy eedduuccaatteedd wwoorrkkffoorrccee,, bbuutt bbuuiillddiinnggaanndd rreettaaiinniinngg aa ppooooll ooff ttaalleenntt tthhaatt ccaann ssuuppppoorrtt aa mmaajjoorr

lliiffee sscciieennccee cclluusstteerr iiss aa ttoouugghh jjoobb.. HHooww iiss MMaanniittoobbaa pprreeppaarriinnggiittss cciittiizzeennss ffoorr tthhee ooppppoorrttuunniittiieess aahheeaadd??

To start with, Manitoba has traditional expertise inagricultural life sciences. That strength is building.

Our ‘build from within’ strategy reflects the fact that wehave less difficulty retaining than attracting top talent. Itbodes well for the province that 94% of Manitobans findemployment right at home and they tend to stay close totheir family, friends and communities.During the past four years, the industry has experienced a

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AAbboouutt tthhee aauutthhoorr:: Mark Gregory is a frequent writer on HRissues and trends in Canada’s biopharma industry and vice-presi-dent of the IsaiX group of companies which includesPharmahorizons Inc., Canada’s largest life science site for phar-maceutical and biotech jobs and training; IsaiX Technologies, aleading application service provider of industry CRM tools and e-learning solutions; and Chyma Systems, an easy-to-use tool for doc-tors that combines physician scheduling and shift trades, calendarsand events, documents, contacts, messaging, and discussions.

. . . continued from page 11

. . . continued on page 14

Manitoba Premier Doer (left) and Mike Rann, Premier of the State of South Australia (right) celebrate their recent partnership at BIO 2006 in Chicago.


40% growth rate and now employs 4,200 people in Manitoba.In the years ahead, we will need the talent to drive our knowl-edge-based economy forward. It is exciting to see that theUniversity of Manitoba continues to be a centre of excellencein human health. It is attracting students from across Canadaand the world. Recently, Red River College launched a newstate-of-the-art biotechnology course, the first of its kind inWestern Canada.We need to do a better job at attracting Manitoba stu-

dents to careers in the life sciences. Our annual ‘Business ofScience’ event is one way we are encouraging young peopleto take a look at a science career. To assist them in theirchoices, we have brought new engineering and computerfaculties on board at the University of Manitoba andincreased the number of post-graduate scholarships avail-able to our best researchers. In addition, we have expandedthe life science programs in our community colleges toensure we are graduating young people with the valuabletechnical skills companies need.

IInndduussttrryy lleeaaddeerrss ssaayy CCaannaaddaa nneeeeddss mmaajjoorr rreegguullaattoorryyrreeffoorrmm iinn tthhee lliiffee sscciieenncceess ttoo mmaakkee oouurr ccoouunnttrryy mmoorree

ccoommppeettiittiivvee iinn tthhee gglloobbaall rraaccee ffoorr iinnnnoovvaattiioonn aanndd pprroodduuccttiivviittyy..WWhhaatt aarree yyoouu ddooiinngg ttoo mmaakkee tthhiiss hhaappppeenn??

Manitoba lowered its business taxes in the last budget. Our energy and electrical costs are among the

lowest in North America. More needs to be done nationallyto make Canada more productive and competitive. PremiersMcGuinty and Charest are here at BIO. I hope to raise thisissue with them. I can say that all the premiers are commit-ted to improving interprovincial trade. Issues like increasinglabour mobility are becoming major priorities.

CCaappiittaall,, oorr tthhee llaacckk ooff iitt,, iiss aa mmaajjoorr pprroobblleemm ffoorr ssttaarrttuuppssaanndd eeaarrllyy ssttaaggee ccoommppaanniieess.. YYoouu hhaavvee bbeeeenn wwoorrkkiinngg ttoo

bbuuiilldd aa ppooooll ooff ccaappiittaall ttoo ffuueell tthhee ggrroowwtthh aanndd ddeevveellooppmmeenntt ooffMMaanniittoobbaa--bbaasseedd lliiffee sscciieennccee ccoommppaanniieess.. WWhhaatt hhaavvee yyoouuaacchhiieevveedd?? WWhhaatt’’ss aahheeaadd iinn tthhiiss ccrriittiiccaall aarreeaa??

We have recently set up two special venture capitalfunds targeted towards life sciences. We are watching

their performance and evaluating the capital needs ofManitoba’s life science community carefully. If we have todo more, we will. We have pension funds and other hugepools to draw from, but that said, we must be prudent stew-ards of these funds. Biotechnology companies and otherswho seek community investment must prove there is goodpotential for return on their investment.It is fair to say that across North America, there have been

promising successes but also disappointing failures. We wantto be careful, and encouraging with the right investment,with the right company and at the best time. Medicure is agood example of our venture capital strategy, when it getscloser to commercialization; we look forward to working withits team and private sector fund partners. Their success willleverage our commitment.

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MaRS expansion plans unveiled; $16 million pledgedThe Ontario government will provide $16 million to expandToronto’s MaRS Discovery District, which houses scienceand technology research labs alongside technology compa-nies and investment capital firms. To date, the governmenthas invested $66.7 million in MaRS. Work on the next phaseof the centre is expected to begin this year; Phase II will addanother one million square feet of research and office spaceto the heart of Toronto’s Discovery District—a four-square-mile neighbourhood that is home to the University ofToronto, nine research and teaching hospitals and over 30affiliated medical research institutions.

Merck Frosst and Génome Québec partner for R&DMerck Frosst Canada and Génome Québec signed a researchagreement whereby each will invest $5.28 million over threeyears in the discovery and development of treatments for life-threatening fungal infections. The agreement was announcedduring the BIO 2006 annual international meeting. In additionto its $5.28 million investment, Merck Frosst has pledged near-ly $10 million in additional research funding for a total jointinvestment of nearly $20 million. Merck has been conductingantifungal research since the 1970s.

Québec to invest $50 million in genomics The Jean Charest government announced plans to invest $50million—the largest investment ever to the sector inQuebec—into biotechnology in an effort to ensure Quebec’sleadership in the sector. Forty million dollars will be used tofund seven research projects sponsored by Génome Québec.The remainder will help Génome Québec deploy a businessplan. Four universities—Université de Montréal, McGill,Laval and Université de Sherbrooke—will be able to go aheadwith their respective research projects.

Ontario and Illinois sign MoUThe governments of the province of Ontario and the state ofIllinois signed a five-year agreement to collaborate onbiotechnology research and trade. Among other things, theOntario-Illinois memorandum of understanding covers:Developing bio-products networks to capitalize on trendsand opportunities of interest to both jurisdictions; Fosteringinformation and technology exchanges across business andresearch institutions that will advance research and commer-cialization of biomaterials, bio-fuels, agricultural sciences,plant and animal genomics, environmental sustainability,food science and nutrition; and Supporting trade develop-ment and business partnership opportunities, including suchactivities as business and/or scientific delegations.

BBIIOO 22000066 IInn BBrriieeff . . . continued from page 13

BB


Revenues among Canada’s publicly traded biotechnologyfirms increased by more than 25% in 2005, with net lossesdropping by 24%, matching a trend in the global industry wherefor the first time revenues surpassed $60 billion (all figures in$US), according to professional services firm Ernst & Young LLP’s20th anniversary edition of Beyond Borders: GlobalBiotechnology Report 2006—unveiled at BIO 2006.While the report identifies major challenges facing

the sector, including the continuing predominance ofsmall and early-stage companies, and the fact that 36of the 81 public biotech firms have less than one yearof available cash, several high points leave room foroptimism: funding for biotechs in 2005 rose 28% overthe $791 million raised in ‘04, exceeding a billion dol-lars and approaching the $1.3 billion raised in the ban-ner year of 2003. For the first time since 2000 morethan $100 million in initial public offerings (IPOs) was

raised. While only four companies completed IPOs,these totalled a Canadian record of greater than $160million. As well, it was the strongest year ever for prod-uct approvals (with a total of eight Canadian firmsreceiving product approvals). Key among the concerns of industry watchers was a

decrease in market capitalization of almost half-a-billiondollars in 2005, to $13.2 billion—quite a distance fromthe heady $17.4 billion market cap reached at the end of2000. Of the 81 public biotech companies in Canada, 55have market caps of less than $100 million. Overall, in thepast five years, the Canadian industry has performedpoorly against the rest of the economy as measured bymarket capitalization, further reinforcing the industry’sneed to attract adequate investor interest, reveals theErnst & Young report.

Industry revenues up and losses down in 2005, reports Ernst & Young

Market capitalization decreased by nearly half-a-billion dollars

TM

BioBusiness-June28-outline.indd 1 6/28/2006 10:39:56 AM


Take one industry renowned for jealously and zealous-ly keeping its secrets. Add equal parts optimism, over-emphasis on accenting the positive and under-empha-

sis on reporting the negative. Liberally stir pot while addinglashings of hubris and opaqueness and what do you get? If you’re in the biotechnology and pharmaceutical indus-

tries, you get an all-too familiar recipe for disaster, accordingto Prem Karunakaran, director of Karisma Public Relations.“There’s a real tendency to be reactive, rather than proac-

tive in biotech,” when it comes to communicating toinvestors and the public, says Karunakaran, whose firm repsmore than 80 biotechnology and pharmaceutical brands run-ning the gamut from arthritis treatments to virology products.Given the massive sums of money spent on research and

development, coupled with the pressure to deliver returnsto individual and institutional investors and the often-ago-nizing waits for both regulatory approvals and research studyoutcomes, scientists and executives have to negotiate aminefield every time they make an announcement to eitherthe markets or the public.Missteps are costly, particularly in what an American

biotech communications specialist calls the “post-Enron,post-ImClone era.”

To both protect her sanity and to limit her legal liability,Melanie Holtzman, a Manhattan-based biotechnology com-munications specialist, says she tries to steer clear of lessthan totally transparent clients. “I try not to work with com-panies that hide things. I don’t have the patience for it.”Both Karunakaran and Holtzman offer up German phar-

maceutical giant Merck’s experience with its painkillerVioxx as a cautionary tale. “It’s amazing,” says Karunakaran,“how one drug has changed the whole landscape, simplybecause it wasn’t managed properly.”When Merck brought Vioxx, one of the first of a new cat-

egory of non-steroidal anti-inflammatory drugs known asCOX-2 inhibitors, to market in 1999, it quickly became oneof the hottest prescription painkillers on the market. Mercknever marketed Vioxx as a more effective painkiller, merelyone that didn’t have as many negative side effects likebleeding or stomach inflammation.By 2003, global sales of Vioxx totalled more than $2.5 bil-

lion (U.S.), but those windfall profits evaporated, thanks toa series of crucial missteps in the runup to the glory days.While Merck played up Vioxx’s efficacy and fewer side

effects, the U.S. Food and Drug Administration expressedconcerns about an increased risk of heart attacks in users. A

Transparency key to effectivestakeholder relationsTransparency key to effectivestakeholder relations

Communications

experts sound off

on successful investor

and public management

strategies

BUSINESS MANAGEMENT

By Kevin Wilson


study Merck gave to the FDA in 2001 showed Vioxx userswere five times more likely to suffer a heart attack than usersof Naproxen, a commonly-used early-generation NSAID.Merck insisted that Vioxx wasn’t responsible for theincrease, arguing instead that Naproxen actually preventedheart attacks rather than admitting any flaw with their lucra-tive new drug. At the same time, Merck’s marketing materi-als to physicians downplayed the increased risk of heartattacks, prompting the FDA to rap Merck’s knuckles.In September of 2001, the FDA issued a warning letter to

Merck, stating that their promotional material both “mini-mizes the potentially serious cardiovascular findings,” and“misrepresents the safety profile of Vioxx.”Within a year, the FDA ordered Vioxx’s labelling to be

changed to warn of the increased risk of heart attacks. By 2004,the writing was on the wall. Merck halted a long-term studythat revealed the risk of heart attacks and strokes for Vioxxusers who had taken the drug for 18 months or more was twicethat of the general population, and voluntarily pulled the drugfrom the market. The company has been embroiled in lawsuitsever since, and at present, juries have awarded tens of millionsof dollars to plaintiffs, which Merck has appealed. At present,Merck has been named in over 6,000 lawsuits related to Vioxx,including 160 potential class-action suits.The irony, according to both

Karunakaran and Holtzman, is thatVioxx is actually an extremely effectivedrug. However, says Karunakaran,“something went wrong between thefacts and the packaging.”Merck could have avoided the

Vioxx debacle if it had been more will-ing to highlight potential side effectsearly during clinical research, he adds.“Side effects are bound to happen,” hesays. By not giving enough consideration

to potentially negative side effects,Merck was caught flat-footed. As eventsunfolded, Merck could only react. Allpreventable, according to Karunakaran.“When it’s sunny skies and everything

looks great, that’s when you should be planning. You need tohave an escape route if something’s gone awry, especially ifit’s safety related,” he says.Holtzman echoes the sentiment. New drugs, products

and treatments may perform very well in clinical trials andresearch studies, but that’s no guarantee they will be prob-lem-free. “You never know how something will effect peo-ple when it’s actually put on the market,” she says.Instead of reacting to events that have spiraled out of

control, Karunakaran and Holtzman agree the better

strategy is to be as transparent as possible. While this maynot be music to investor’s ears, it has the twin advantages ofallowing researchers and executives to devise strategies toaddress potential negatives that might crop up, rather thanignoring them. That way, if something negative does occurwith a new treatment or product, its creators can get in frontof the issue, rather than responding to regulators, the mar-kets and the public.While Merck continues to fend off lawsuits, and the likes

of domestic goddess Martha Stewart and ImClone founderSam Waksal have served jail terms forreacting poorly to bad news about aclinical trial, Holtz man still sees executives holding conference calls in which they’re “completely google-eyed” about a promising new or inno-vative treatment.Not only does this carry grave risk

when it comes to dealing with the gen-eral public, but savvy investment firmshave begun to employ armies of theirown researchers to conduct their ownanalysis of research. “You see a moresophisticated level of investor where it’snow necessary to provide a lot moreinformation,” says Holtzman.It is far better, she and Karunakaran

both say, “to over-promise and under-deliver.”

Transparency key to effectivestakeholder relationsTransparency key to effectivestakeholder relations

“You see a more sophisticated level

of investor where it’s now necessary to

provide a lot more information.”

BB

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patients around the world. This visionprovided a clear sense of purpose to thetop level team we have put together.

Q: AAss tthhee CCEEOO ooff aa ssuucccceessssffuullbbiiootteecchh aanndd wwiinnnneerr ooff tthhee 22000055BBiiooAAllbbeerrttaa AAwwaarrdd ffoorr EEnnttrreepprreenneeuurr --sshhiipp,, wwhhaatt oobbsseerrvvaattiioonnss aanndd iinnssiigghhttsswwoouulldd yyoouu pprroovviiddee iinnttoo tthhee ssuucccceessssffuullmmaannaaggeemmeenntt pprraaccttiicceess ffoorr aa ggrroowwiinnggbbiiootteecchh ccoommppaannyy iinn CCaannaaddaa??

A: My views are simple: a strongbelief in the potential benefit of yourtechnology drives the people in yourcompany; small is easier to manage(outsource where you can) in a growthcompany; hire senior experiencedpeople; encourage free thinking tolook at all issues from every direction;and work on your public company pro-file and financing capabilities as ifthey were a core part of your business(which they are).

Q: WWhhaatt iiss tthhee bbiiggggeesstt cchhaalllleennggeetthhaatt yyoouu hhaavvee ffaacceedd aass CCEEOO ooff BBiiooMMSS??

A: Recruiting qualified staff withbiotech and pharmaceutical experiencein Edmonton has been a great chal-lenge, as there are so few companiesthat have developed a labour pool todraw on in this area of the country. Wehave recruited from afar and have evenopted to open an office in Stockholm.

Q: How and why did you getstarted in the biotechnology industry?

A: My start in the biotechnologyindustry was somewhat unique. I am alawyer by training and spent many yearsas a successful businessman in otherindustries before starting up BioMStogether with my brother Clifford in1999. We started BioMS because Cliff’swife Robin was a Phase I MS patientwho received, and continues to receive,our lead drug MBP8298 on a compas-sionate use. It has dramatically changedher life for the better, and the positivebenefits have lasted for nine years now.When the discoverers of the drug, Dr.Ken Warren and Ingrid Catz, and theUniversity of Alberta approached uswith the idea of using our businessdevelopment and financing experiencein the start-up of BioMS we readilyjumped at the chance.

Q: CCaann yyoouu ggiivvee mmee aann oovveerrvviieewwooff BBiiooMMSS MMeeddiiccaall??

A: BioMS has three technologies thathave all come from the University ofAlberta: MBP8298, our lead drug forMS; HYC750, a Phase I blood cellmobilization product; and we alsohave a minority equity investment inBioCyDex, which is a preclinical stagecompany developing a novel way inwhich to deliver drugs into cells.

Q: WWhhyy aarree BBiiooMMSS MMeeddiiccaall’’sspphhaassee IIII//IIIIII cclliinniiccaall ttrriiaall ffoorr MMBBPP88229988ssoo rreevvoolluuttiioonnaarryy ttoo tthhee bbiiootteecchh iinndduussttrryy??

A: We believe that this drug is wherethe biotech industry has been attempt-ing to go. Regulatory agencies havebeen encouraging companies to identi-fy responder groups so that health caresystems can more efficiently providereimbursement to those patients whowould benefit from a drug. We have aneasily identified genetic respondergroup; MBP8298 is in essence a“designer drug” for patients withimmune response genes HLA-DR2and 4, who happen to make up about70% of all MS patients. In an autoim-mune disease such as MS, the goal is tomaximize the effectiveness of a drugbut minimize its overall impact on theimmune system. It seems that we havebeen able to do this by re-educating theimmune system to re-establish somecontrol over the part of the immune sys-tem that is involved in the diseaseprocess while leaving the system largelyunaffected so as to continue to respondnormally to environmental threats.

Q: WWhhaatt wwoouulldd yyoouu aattttrriibbuutteeBBiiooMMSS MMeeddiiccaall’’ss ssuucccceessss ttoo??

A: The vision behind BioMS is a pas-sionate belief in the potential of its leadproduct, MBP8298, to help MS

Question and Answer with Kevin Giese, president and CEO of BioMS Medical Corp

ecipient of the 2005 BioAlberta Award for Entrepreneurship, Kevin Gieseheads up Edmonton’s BioMS Medical Corp (TSX: MS), a leading developer inthe treatment of multiple sclerosis (MS). BioMS Medical is currently the only

biotechnology company in the world with a late stage trial for secondary progres-sive MS medication. Its lead drug, MBP8298, is currently in a pivotal phase II/III clinical trial across Canada and Europe. BioMS is also working on HYC750, a bloodcell mobilization product, and has investments in developing new ways in which todeliver drugs into cells. In the following interview, Giese, who co-founded BioMSMedical in 1999, talks about the company’s start and its vision for the future.

R

By Catherine Muir


The future is ripeThe future is ripePeter Zahradka

Cover Story

Major food companies continue to buyinto the functional food proposition;Above from top: Danone’s Danino yogurtbrand and Yo Baby incorporate OceanNutrition Canada’s MEG-3 brand Omega-3(EPA/DHA) purified fish oil powdered ingredi-ent; Tesco and Wal-Mart-owned Asda (whichcarries the Heartfelt Plus Natural Cheese)have embraced Forbes Medi-Tech’s choles-terollowering Reducol in their products.


As per Agriculture and Agri-Food Canada’s definition, func-tional foods and nutraceuticals are food components that pro-vide demonstrated physiological benefits or reduce the riskof chronic disease, above and beyond their typical nutrition-al abilities. The latter is similar in form to conventional food,while a nutraceutical is isolated and sold as a dosage. In bothcases, the active components occur naturally within the food.In 2003, functional foods accounted for US$63.6 billion of

the $172 billion global nutrition industry. Natural and organicfoods, meanwhile, made up $34.4 billion, and supplements$60.2 billion, of the total. According to San Diego-based Nutri -tion Business Journal, Canada held 3% of the market in thatsame year, compared to 35% for the U.S., and 32% for Europe.

Still, Canadian companies are active in this area, and a2003 survey by Statistics Canada suggests the domesticindustry is gaining momentum. About 17% of 576 compa-nies surveyed had revenues of Cdn$10 million or more relat-ed to sales of functional foods and nutraceuticals in 2002.Naturally, more than half of those surveyed exported goods,mostly to the United States, followed by Japan, which has18% of the market according to NBJ’s calculations. Indeed south of the border is where most pundits see the

greatest growth opportunities. Currently the value of thetotal North American functional foods industry is anywherebetween $10 and $50 billion, says Peter Jones, director of theRichardson Centre for Functional Foods and Nutraceuticals,

Functional foods

and nutraceuticals

are about to take

off—just not in

Canada

By Lisa D’Innocenzo

With an aging population and increasing concerns about obesity and its many asso-ciated health issues, the future is ripe for the North American functional foods

and nutraceutical industry. But thanks to tough regulatory laws, development inCanada has stalled, and the majority of biotech firms have focused almost exclusive-ly on exports to grow their business.

The future is ripeThe future is ripeJohn Kelley Jerome Konecsni Charles Butt Ian Lucas


a bioprocessing facility in Winnipeg where researchers fromdifferent disciplines and industry partners work together todevelop products based on scientific evidence for their effi-cacy and safety.Explaining that the numbers vary depending on how you

define the industry, Jones estimates that the growth rate isbetween 10% to 12% per year. “All major food companiesare buying into this,” he says, citing Danone, with its Activiaand Danino yogurt brands, which contain Bfidus Regularisto improve digestive health and DHA respectively, as oneexample.

AA rreeggrreessssiivvee lleeggiissllaattiivvee ffrraammeewwoorrkkBy all accounts, the biggest challenge facing Canadian com-panies that operate in the functional foods/nutraceuticalssector is this country’s restrictive legislative framework.Jones, whose centre received $4 million in funding fromWestern Economic Diversification Canada last winter, goesso far as to call it “regressive.” He adds: “In Canada, we’reprobably the slowest [growing] of any developed countrieswhich is frustrating for companies, and it’s tough to see thegrowth when facing that kind of regulatory hurdle.” “Health Canada Foods Directorate has taken a very con-

servative approach to functional foods,” agrees LenMonheit, president and editor of Mississauga, Ont-basedNPIcenter, a global online information resource for profes-sionals in the nutraceutical, nutritional, dietary supplement,cosmetic and food industries.

For one thing, Health Canada has so far only permitted fivebroad health claims (see sidebar), rendering it difficult for foodmanufacturers to communicate many benefits to consumers.And to make matters more complicated, the Natural HealthProducts Regulations that came into effect on Jan. 1, 2004 ismandating companies to apply for a product license if theyplan to market natural health goods in this country. (Productsthat fall within this category include herbal remedies, homeo-pathic medicines, vitamins, minerals, traditional medicines,probiotics, amino acids and essential fatty acids.)“You can’t put it on the shelf at all, unless you have at

least your application in for your Natural Product Number.So it’s almost taking a pharmaceutical approach,” notesKristen Reynolds, manager of marketing and sales for

London, Ont.-based KGK Synergize, which producesSytrinol, an ingredient that promotes cholesterol health.Currently sold as a supplement, KGK is hoping to enter thefunctional foods arena with Sytrinol in the near future.The problem with the current Natural Health Products

Directorate process is that the resources to effectivelyadminister the number of applications is lacking, saysMonheit, who laments that “right now the ability to makeclaims on products is absolutely and totally frozen.”Compare that to the U.S., where the FDA has approved

about 25 health claims and also allows companies to make aqualified claim—as in “an examination of the literaturewould seem to indicate that such-and-such is effective forreducing the risk of cardiovascular disease,” explainsMonheit. Japan, meanwhile, is teeming with functionalfoods and nutraceuticals thanks to approximately 300 per-mitted claims. Its government has also developed a categorycalled FOSHU—foods for special health uses—that allowsuch food products to bear a particular signature.Given these differences, it’s certainly no surprise that

most domestic biotech firms have zeroed in on the U.S. aswell as Europe and Japan for the sale of their functional foodand nutraceutical goods.Monheit points out that while there has been talk about

legislative renewal in Canada, those discussions have beentaking place for about 10 years. Still, he says, “there was aconference in March on Smarter Regulations [on Food inCanada] and I think the very fact that it was held was givingevidence of the fact that we currently don’t have smart reg-ulation. Awareness is high, but I’d like to see the action fol-low the awareness.” As would others.

The biggest challenge facing Canadian

companies that operate in the functional

foods/nutraceuticals sector is this coun-

try’s restrictive legislative framework.

Edmonton’s CVTechnologies’top-selling

Cold-FX brandhas been

credited with overcoming

at least one major challenge

unique to thefunctional

foods market.


IInnvveessttmmeenntt iissssuueessUnderstandably, the significant regulatory hurdles have leftinvestors wary. “In many cases, whoever’s investing reallywants the government to push the money in for the earlystage, to take the risk,” says Peter Zaradhka, director of theWinnipeg-based Canadian Centre for Agri-food Research inMedicine, noting that government grants typically amountto about $100,000 per year for project work. “Most of thepeople willing to invest are willing to put in tens of millionsof dollars for something that looks good, but it’s in that $1million to $10 million range that there’s a dearth of money. Ichallenge the venture capital people to do some of [the ear-lier investing] themselves.”John Kelley is executive director of MaRS Landing in

Guelph, Ont., an organization that has a mandate to link agri-culture, food and human health. He explains that while com-panies in the food sector have the likelihood of a high successrate, there is also a lower potential rate of return vis-à-vis thebiomedical/therapeutics side. “It’s just the market dynam-ics—when people are developing therapeutics to treat a spe-cific disease, someone has that disease,” he explains. “On thepreventative side, where functional foods are most common,you don’t see that immediate response you get with thera-peutic.” However, Kelley credits Edmonton’s CVTechnologies’ Cold-FX brand, which has been clinicallyproven to aid in the production of specific immune cells,cytokines and antibodies, for being able to overcome thatchallenge by targeting a very specific human condition: thecommon cold. “They said ‘we can reduce the duration of it,and we have credible data to show it.’ For people who aredoing the functional foods thing identifying a target is veryimportant. So is getting that regulatory claim.”While investment dollars would definitely come easier if

there was a ready path to the Canadian market, NPICentre’sMonheit says that because international markets are sostrong, some companies are nevertheless getting financing.He also notes a couple of investment firms stateside, such asSherbrooke Capital and Canaccord Adams, that have showna significant interest in the health and lifestyle industries.

IItt ttaakkeess vviissiioonn aanndd ssuuppppoorrtt ffrroomm tthhee ppuubblliicc sseeccttoorrDr. Jerome Konecsni says “vision and support” on the partof federal government is essential to improving the businessenvironment in Canada. Konecsni is currently president ofGenome Prairie, but he is also chairman of the board ofdirectors of Ag-West Bio, a membership based organizationin Saskatoon, and was formerly VP of corporate develop-ment for Bioriginal Food & Science, a global provider ofinnovative essential fatty acid (EFA) solutions. Along withthe creation of a practical federal regulatory framework thatenables companies to actually make claims, he calls on thedepartment and ministries of health across Canada to getinvolved. “If you’re a dietary supplement and you have ahealth benefit that’s related to diabetes or heart disease,

you’re competing with pharmaceutical products and pharmaproducts are covered by drug plans,” he explains. On theother hand, if dietary supplements were on the provincialformularies “we could be more competitive.” He adds: “Investment companies will be leery because

margins for supplements aren’t what they are for pharma-ceuticals. That’s another reason why the public sector canhelp. It can benefit from endorsing products that will reducehealth care costs in the long run and at the same time helpbusinesses sell their product because they’ve been endorsedand supported by public institutions.”

TThhee gglloobbaall vviieewwOnce the regulatory hurdles are removed, Konecsni sees anopportunity for nimble small organizations to provide inno-vative solutions to multinational food manufacturers. Thekey, he says, is to present the Nestles of the world with aproprietary product that resolves a business issue. For

London’s KGK synergize

produces Sytrinol, an ingredient that

promotes cholesterolhealth (currently

sold as a supplement).


instance, many firms are looking for ways to eliminate trans-fats from recipes, he says.Regardless of the status of legislation, some biotechs are

already meeting this business need, albeit outside the coun-try. Vancouver’s Forbes Medi-Tech is one. Most recently, theproduct development firm introduced Heartfelt PlusNatural Cheese to the Wal-Mart-owned Asda chain in theU.K. Charles Butt, Forbes Medi-Tech’s president & CEO,says the cheddar cheese brand’s fat content has beenreduced to 12% and that it also contains Reducol, a clinical-ly proven cholesterol-lowering sterile that is sourced fromconiferous trees. According to Butt, this means that, unlikeplant-derived steriles, it is not genetically modified, makingthe ingredient very attractive to the European market andgiving it an edge over the competition. Reducol has alsobeen introduced in products like milk, yogurt and yogurtdrinks, and spreads carried by retailers like Tesco in the UKand Kesco in Finland, that country’s largest grocer.“The European market in terms of functional foods

tends to be more advanced than the U.S., simply becausethere’s a greater acceptance to it, and people are more awareof the functionality of foods,” says Butt. “However, with thegrowing awareness of managing cholesterol, and with obesi-ty, North America is catching on.” Butt hopes to enter the

U.S. market by early 2007 to capitalize on this societal shift.He also adds that the 14-year-old firm, which also has a

pharma development side to its business, is on track to makebetween $7 million and $7.5 million this year. Nonetheless,despite its success and the fact that Canada only representsabout 2% of potential revenues, Butt laments the fact thathe can’t sell any product in his own backyard. He’s not alone. Halifax-based Ocean Nutrition Canada

sells approximately 95% of its products into the U.S., Asia,Europe and Australia, according to EVP, global marketingIan Lucas, who says that at the moment the U.S. holds themost promise for ONC, because of its large population andoverall awareness of the positive characteristics of Omega-3.The company’s MEG-3 brand Omega-3 (EPA/DHA)

purified fish oil powdered ingredient has been incorporatedinto everything from milk and yogurt to bread and frozenpizzas. Thanks to a patented Powder-loc microencapsula-tion technology, each oil droplet has not only a protectiveshell, but single shells are then grouped together and pro-

tected in a second shell. The result is that the EPA andDHA are locked into the microcap, so that the food doesn’tsmell or taste fishy. Food manufacturers in more than adozen countries will produce over two billion food servingsthat include ONC’s MEG-3 ingredient, says Lucas.Like Butt and others, Lucas is somewhat frustrated that

ONC, which with help from the provincial government isbuilding a new $21.5-million manufacturing facility inDartmouth, N.S., can’t sell MEG-3 in the country of its ori-gin. “The reason for that is based entirely on the regulatoryenvironment. Unfortunately, Canada’s regulations do notcoincide with the results of various studies on Omega-3 EPAand DHA.” He says that more than 8,000 studies have deter-mined that these two elements have a positive effect on sev-eral health conditions, including cardiovascular disease,arthritis and asthma. “We hope that in future, the regula-tions in Canada will be changed so that more EPA and DHAcan be provided per serving. We also hope that regulationswill change enough so that we can inform people of thesource of Omega-3 on the packaging.”Richardson Centre’s Jones asserts that the current health-

claim legislation is not only detrimental to Canadian compa-nies, but also consumers, who lack knowledge about the sci-entific advantages of these products, and ultimately govern-ment itself, since many of these products are preventative,and could therefore lower health care costs. “Academics arealso thwarted, because there’s no great impetus to show thenext bioactive, biofunctional components,” he adds. Inother words, all stakeholders can benefit from change.

Claim thisSo far Health Canada has only permitted five generichealth claims that may be used to communicate the benefits of functional foods and nutraceuticals. They pertain to the following:

• sodium, potassium and hypertension;• calcium, vitamin D and osteoporosis; • saturated fat, trans fat and heart disease;• vegetables and fruit and some types of cancer; • sugar alcohol and dental caries.

Examples of health claims would be “A diet low in sat-urated and trans fat reduces risk of heart disease.Product is low in saturated and trans fat,” or “A diet withadequate calcium and vitamin D, and regular physicalactivity reduces risk of osteoporosis.”

It’s no surprise that most domestic

biotech firms have zeroed in on the U.S. as

well as Europe and Japan for the sale of

functional food and nutraceutical goods.

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FINANCING

By Ed Zacharuk, KPMG

Is YourCompanyMaking theMost ofCanada’s TaxIncentivesfor R&D?

ICompanies in the biotech industry need to invest signifi-cantly in research and development to compete in today’smarketplace, and, from a tax perspective, Canada is one

of the best countries in the world to conduct R&D. In fact, the Organization for Economic Cooperation and

Development (OECD) says that strong federal and provin-cial tax incentives for eligible R&D activities make theafter-tax cost of R&D cheaper here than almost anywhereelse in the world. With proper planning, some Canadiancompanies can reduce their actual R&D costs by up to 68%.Canada’s federal R&D program offers tax incentives to

encourage Canadian companies of all sizes and in all sectorsto conduct R&D in Canada that will lead to new, improvedor technologically advanced products or processes. TheR&D program is the largest single source of federal govern-ment support for industrial research and development.Through this program, the federal government delivers over$2.25 billion annually to Canadian companies performingR&D in Canada.

What tax incentives are available for R&D?

Under the federal R&D tax program, eligible companies canclaim R&D investment tax credits for expenses such aswages, materials, laboratory machinery or equipment, someoverhead, and R&D contracts including clinical trials.

Generally, smaller Canadian controlled private corporationswith taxable incomes in the range of $300,000 to $500,000 canreceive refundable investment tax credits of 35% of their qual-ifying R&D expenditures, to a maximum of $2 million ofexpenditures. Provincial incentives may offer significant addi-tional benefits to smaller Canadian corporations.Most other Canadian corporations, proprietorships, part-

nerships and trusts can receive investment tax credits of20% of qualifying R&D expenditures. However, for theseentities the credits are not refundable and may only be usedto offset taxes otherwise owing.

What kinds of R&D activities qualify?

To qualify for R&D tax incentives, work must advance theunderstanding of scientific relations or technologies, addressscientific or technological uncertainty, and incorporate a sys-tematic investigation by qualified personnel. Biotechnologycompanies typically have this type of environment.Work that qualifies for R&D tax credits include:

• Basic research to advance scientific knowledge without aspecific practical application in view• Applied research to advance scientific knowledge with aspecific practical application in view• Experimental development to achieve technological


advancement to create new materials, devices, products orprocesses, or improve existing ones through experimentation• Support work, in areas such as engineering, design, opera-tions research, data collection, testing and psychologicalresearch, but only if done in support of the above threetypes of activities

However, finding your way through the rules and regula-tions of a government-sponsored program can be a dauntingprospect. Eligibility requirements are focused and complex,making it difficult to identify all eligible activities and pre-pare the necessary claims and supporting documentation. Tomake sure your company is claiming all of the tax benefits itis entitled to, qualified advice from both tax and technicalwriters familiar with the program is highly recommended. Companies should also establish a system for capturing

their R&D costs and information about the related activities tofacilitate the task of preparing their tax credit claims each year.

Since R&D can have a significant impact on your compa-ny’s bottom line, comprehensive tax planning is critical. Tomake the most of Canada’s R&D incentives, companiesshould consider:• Conducting a cost-benefit analysis of new R&D projects• Reviewing contracts to determine if your company canclaim any related R&D benefits and how to enhance those benefits• Reviewing your mix of international projects in light of taxbenefits granted by other countries. Such planning can help you significantly reduce your com-pany’s overall costs in conducting R&D in Canada.

Finding your way through the rules and

regulations of a government-sponsored

program can be a daunting prospect.

AAbboouutt tthhee aauutthhoorr:: Ed Zacharuk is senior principal, TaxationServices at KPMG LLP, the Canadian member firm of KPMGInternational, a global network of professional services firmswhose aim is to turn knowledge into value for the benefit of theirclients, their people and the capital markets. www.kpmg.ca

BB

The views and opinions expressed herein are those of the author and do notnecessarily represent the views and opinions of KPMG LLP. The informa-tion contained herein is of a general nature and is not intended to addressthe circumstances of any particular individual or entity. Although we endeav-or to provide accurate and timely information, there can be no guarantee thatsuch information is accurate as of the date it is received or that it will con-tinue to be accurate in the future. No one should act on such informationwithout appropriate professional advice after a thorough examination of theparticular situation.

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With stats like these, it’s little wonder more overseas (and Canadian)biotechs are looking to use the UK as their European gateway. Montreal-based MDS Pharma Services, for one, saw the potential for bioanalysis

services in the UK. The company, which provides drug discovery and develop-ment solutions to the pharmaceutical and biotechnology industries, created astate-of-the-art bioanalytical facility at Sittingbourne in Kent. Toronto-basedEndpoint Research, a privately owned CRO, has also seen success abroad via itsoffice in Edinburgh (see Q&A in this feature). UK companies are also increasingly looking to Canada on the expansion and

dealmaking front. Late last year, British pharmaceutical giant GlaxoSmithKlinefinalized the takeover of Vancouver-based ID Biomedical, one of Canada’s mainsuppliers of flu vaccine. At the time, according to company statements andCanadian news reports, GSK planned to use its $1.7-billion acquisition to enterthe North American flu-vaccine business.

SSTTRREENNGGTTHHSSA world leader in biotechnology, with a sector second only to the US in terms ofsize and importance, the UK boasts many strengths. Its strong points include anexcellent network of advanced biotech clusters; a stellar academic base with sev-eral world-class universities; leading research institutes including the SangerCentre (www.sanger.ac.uk), Roslin Institute (www.ri.bbsrc.ac.uk), and theEuropean Bioinformatics Institute (www.ebi.ac.uk); a wealth of managerial andtechnical skills; a legislative and regulatory framework that ensures safety, whileallowing bio and medical science to progress (for example, the HumanFertilisation and Embryology Authority allows use of embryos under strict safe-guards and licensed by the HFE Authority); a sympathetic and sophisticatedinvestment community; and healthy government support and investment.

MMAARRKKEETT OOVVEERRVVIIEEWW From 1996 to 2002, the number of biotech companies in the UK increased by over200%—from 159 to over 480. After a period of consolidation in the downturn of2002-2003, the sector began a new growth spurt in 2004. The UK was dominant intherapeutics, starting the year with 200 compounds in development, 35 of which

REGIONAL PROFILE

were in Phase III. In second place wasSwitzerland with 41 compounds indevelopment, of which 12 were inPhase III.Today, close to half of Europe’s

public biotechnology companies arelocated in the UK. With about 500dedicated biotechnology businessesemploying around 23,000 people, theUK’s biotechnology sector is thelargest in Europe. Many UK business-es are very small, employing less thanfive people and still at venture capitalstage. However, there are also severalprofitable listed UK companies (15+,among them: Acambis, Shire, Cobraand Celltech). To remain at the forefront of the

life sciences, the UK government willincrease its support in science from£3.9 billion in 2004 to £5 billion by2008. The funding is part of the Scienceand Innovation Investment Framework2004-2014, a 10-year strategy that out-lines the government’s, and theBioIndustry Association’s (BIA), long-term vision for UK science and inno-vation excellence, based on thebiggest policy review of the sector todate, to which more than 70 membersof the industry contributed. Theobjective of Bioscience 2015 is for theUK to maintain its European domi-

UK Biotech Continues to FlourishGovernment, industry support and investmentpropel sector forward

Nearly one quarter of the world’s top medicineshave been developed in Britain. And the UK hasalso claimed over 20 Nobel Prizes in life sciences.Bioscience is one of the fastest growing sectors ofthe British economy.


nance and the global number two spot,by addressing requirements forchange in the regulatory and fiscalframework. Since then, the govern-ment has been proactive; as part ofBioscience 2015, many initiatives werelaunched. The government provided£100 million to establish a NationalClinical Trials Agency, investing £6million in the bioprocessing subsectorand launching various skills initiatives. The UK is also taking a lead in

translating the promise of stem cellsinto new therapies. In 2002 legislationwas passed to ban reproductivecloning and to allow therapeuticcloning under licence. As a result, theUK has attracted internationallyrenowned researchers in the stem cellfield to base themselves in Britain.The UK’s Stem Cell Bank—the firstof its kind in the world—will store andsupply ethically approved, qualitycontrolled stem cell lines for research,and, ultimately, treatment.Leading universities for bioscience

research across the region all havetechnology transfer operations andcaptive seed funds to encourage com-pany formation. In addition, the gov-ernment provides a range of support toencourage technology transfer fromother publicly funded research estab-

lishments such as the research coun-cils and the National Health Service. The UK has also seen rapid growth

of incubators over the last few years—it has the largest number of incubatorsin the EU (there are almost 900 incu-bators across Europe). A full list of UKincubation environments, services andsuccess rates exists at UK BusinessIncubation (UKBI), www.ukbi.co.uk.

KKEEYY SSEECCTTOORRSS AANNDD CCLLUUSSTTEERRSSThere are several key areas of bio-science in the UK: Oncology, Vaccines,Bioprocessing, Drug Discovery andDevelopment, Neurosciences, andStem Cells and Tissue Therapy.Within the UK economy, pharmaceuti-cals are consistently in the top threeindustrial sectors in terms of trade sur-plus, contributing £12,371 million inexports. The industry is a majoremployer, with around 83,000 peopleemployed directly and many more infeeder industries. Of the major medi-cines sold in the UK, around half weredeveloped in British laboratories(Source ABPI, 2004 figures).There is strong support at both

regional and local levels from authori-ties, regional development agencies andthe Scottish Parliament and WelshAssembly. Nine regional developmentagencies in England have policies andstrategies for supporting the growth ofbioscience. There are also specificregional bodies such as the EasternRegion Biotech nology Initiative(ERBI) and the London Biotech nologyNetwork (LBN), that support bio-science clusters. The ScottishExecutive, through Scottish Develop -ment International, its developmentarm, and the Welsh Assembly throughthe Welsh Develop ment Agency(WDA), have set policies for developingbioscience (see sidebars, below).Most of the UK’s bioscience sector is

clustered around a number of geograph-ic areas. The most developed biotech-nology and pharmaceuticals clusters are:EEaasstt EEnnggllaanndd—the largest clusteraround Cambridge, strong in agricultur-al research;

Q&A with Wendy Porter,president, Toronto-basedEndpoint Researchwww.endpointresearch.com

Toronto-based Endpoint Research isa privately owned CRO established in1990, offering Phase I/II-IV clinicaldevelopment services to the pharma-ceutical, biotechnology and medicaldevice industries in Canada, the US,and Europe. Endpoint has success-fully managed over 225 clinical trialsduring this period of time and hasdeveloped an international structureover the past eight years by establish-ing offices in the US (Boston) and theUK (Edinburgh). Its focus is in run-ning complex hospital-based trials inthe areas of oncology, transplanta-tion, HIV, neurodegenerative, respi-ratory and vaccines. Below, presi-dent Wendy Porter offers her take onexpanding to the UK, based on hercompany’s successful progress.

Q: Prior to expanding over-seas in 1998, how did youresearch and investigatepotential expansion destina-tions, and what ultimately leadyou to decide on the UK?A: The decision to expand ourbusiness into the UK was rela-tively easy. First and foremost,we looked at existing key suc-cess factors that were proven inour Canadian business. Thesesame factors, namely the abili-ties that both Canadian andUK-based investigators have insuccessfully conducting clinicalresearch in a publicly fundedhealthcare environment, wereof primary importance. Addedto that, was our perceived abili-ty to mitigate associated busi-ness risks through commonbusiness standards, employ-ment, and tax laws. We couldalso transfer our Canadian staff

Q&AUK Biotech Continues to Flourish CASE STUDY


NNoorrtthh WWeesstt EEnnggllaanndd—especially thebio-medical research base aroundManchester and Liverpool. There are also specialist clusters in:NNoorrtthh EEaasstt EEnnggllaanndd (with strong linksto the region’s pharmaceutical and spe-ciality chemicals sectors), YYoorrkk,NNoottttiinngghhaamm and WWaalleess.

Scottish Life Sciencesoutlook for 2006

LLoonnddoonn—receives two thirds of all bio-science research funding;SSoouutthh EEaasstt EEnnggllaanndd—particularly thetriangle formed by the outskirts of WestLondon, Reading and Oxford; SSccoottllaanndd—primarily the University ofDundee and the universities and insti-tutes in Edinburgh;

Key Sources and ContactsBioIndustry Association (BIA)—www.bioindustry.orgDepartment of Trade and Industry—www.dti.gov.ukUK Trade & Investment—www.uktradeinvest.gov.ukUK trade & Investment Canada—www.uktradeinvestcanada.orgLondon Development Agency—www.biolondon.org.ukForeign and Commonwealth Office—www.fco.gov.ukBritish High Commission Ottawa—www.britainincanada.orgUK Science and Technology—www.britainincanada.org/partners/sandt

that brings together academic institu-tions with commercial partners.According to Wallis, the region also

has tremendous strength in several otherkey areas: bioinformatics; in vitro diag-nostics; clinical research, with severalestablished CROs; ag-bio (largely basedon the region’s Institute of Grasslandand Environmental Research); and, ofgrowing importance (due in part to GEHealthcare’s presence), drug discoveryplatforms and imaging.In the last year alone, the region

has announced several new institutesand centers of excellence within thebiosciences sector as part of its effortto propel the industry forward.Roughly 15,000 people are

employed in life sciences in Wales(out of a total population of 2.9 mil-lion), and there are more than 250companies in the industry, includingspinouts from the universities, smallmanufacturers, and units of multina-tionals. Amersham, acquired by GEfor almost $9 billion in 2003, is thebiggest and best known and is now atthe heart of GE Healthcare. Proth -erics, headquartered in England withits offices in the U.S. and its labs inWales, may have the most unusualstory: it supplies rattlesnake antiveninand is the only supplier in the world. The University of Wales College of

Medicine and Cardiff University com-bined in 2004, creating one of thelargest research universities in the UK.More recently, a pioneering newresearch facility was launched at theuniversity to propel Cardiff and Wales

to the forefront of brain research. TheCardiff University Brain and Repair Imaging Centre(CUBRIC) will contribute to trans-forming the understanding of normaland damaged brain function, as well asto informing the treatment of brainimpairments such as head injury,stroke, dementia and schizophrenia.The university is also a major support-er of Wales Gene Park, a virtual cen-tre connecting schools, research cen-tres and centres of excellence acrossWales for research into genetics, lifesciences and clinical medicine. (A newdevelopment project in Cardiff Baycalled Roath Basin will include abiotechnology incubator.)Swansea University is another

major center of research. The new LifeScience Institute—located at the uni-versity—will include the largest super-computer in the world, supplied byIBM, that is dedicated solely to health-care and life sciences. It will be used toresearch a wide range of pharmaceuti-cal, healthcare and other issues as wellas tailoring drugs for individuals. Thefacility will host a new European DeepComputing Visualisation Centre forMedical Applications. Swansea alsorecently announced the Nanotech -nology Center for researching the useof small-scale devices—it is aimed atputting Wales at the cutting edge ofthe science.

For more information, visit the WelshAssembly Government—Welsh Develop -ment Agency at http://new.wales.gov.uk

Wales leverages biosciences strengths

Wales is another UK nation cur-rently experiencing tremendous

growth in the biotechnology arena. “The biggest strength we have is in

medical devices. It represents the realup-and-coming technologies in theworld. Technology is converging intoproducing products. Wales wasbrought up on engineering skills, andnowadays electronic skills—if you addthose two skills to our strength in bio-science, you end up with medicaldevices,” says Bob Wallis, biotechnol-ogy sector specialist of the WelshAssembly Government, adding that itsets them apart from the rest of theUK. “The Welsh people have realizedthat time to market is important—drug discovery requires a long time tomarket and considerable financing.The latter becomes even more diffi-cult the further you are away fromwhat we call the Golden Triangle ofCambridge, Oxford and London. Notone of our major strengths is drug dis-covery and biotechnology.” The Welsh Development Agency

encourages technology transferthrough the Wales Innovation RelayCentre, which, among other thingsruns outreach programs—both localand international in scope, includinghosting a Bioscience Brokerage Event


The Scottish life sciences communityalso warmly embraces the realitythat international collaboration is thekey to success and welcomes opportu-nities to share information and expert-ise. At the same time, however, ourculture, legislative system, enterpriseand political environment provide con-

siderable advantages which allow us toremain ahead of the game as an attrac-tive destination in our own right.

IImmpprroovviinngg iinnvveessttmmeenntt ccoonnddiittiioonnssSince the single most important factorlimiting drug discovery and growth inthe life sciences sector over the lastfew years has been the chilly invest-ment climate, it is significant that 20percent of all European life sciencesInitial Public Offerings (IPOs) during2005 were Scottish organizations. This not only demonstrates the

business-readiness of many life sci-ences organizations within the rapidlymaturing Scottish life sciences com-munity, but may also help draw theattention of future investors. This sta-tistic is the most visible evidence yetthat the current investment climateallows favourable exit routes forinvestors in Scottish innovation. Scottish based Ardana, ProStrakan,

Stem Cell Sciences and IDMoS allsuccessfully completed their IPO inthe last twelve months. Austrian-owned Intercell also completed itsIPO in February 2005. Intercell has afacility in Livingston in centralScotland, producing novel vaccines forthe treatment of infectious diseases. Domestically, the environment for

early stage companies remains sup-portive, with funding available fromseveral sources, including the ScottishCo-Investment Fund. The Inter -mediary Technology Institute (ITI)Life Sciences has also made signifi-cant investments, including financingfor Stirling Medical Innovations,whose success in theranostic applica-tions has seen the company grow from0-75 employees in less than one year.A £40m equity fund to support

innovative businesses, including lifesciences, was announced by the

for six-month placements fortechnology transfer and trainingwithout the need of employ-ment visas. Given the abovefactors, we were able to easily“mimic” our business model inthe UK. This expansion wascarried out to support our exist-ing Canadian customers whohad UK/EU presence and wastherefore less risky.

Q: Did you experience anygrowing pains particular tothe new location/region? A: Yes. Our growing pains cameprimarily as a result of underes-timating the sales cycle in theUK. Our existing clients miti-gated some of that, but it tooklonger then expected to gener-ate new UK business. Anothernegative aspect is the strengthof the UK currency comparedto the US and Canadian dollars.

Q: Have you used your UKpresence as a stepping-stoneto the rest of Europe?A: Yes. The UK is not the EUhowever, and we found that oper-ationally we could not executejust with UK staff in mainlandEurope due to cultural barriers.

Q: Where is the focus of yourbusiness in the UK, and is itdifferent from that of yourbusiness in Canada? A: We are in the business ofdelivering projects with an inter-national business model and ourtarget market is the biotech andsmall/medium-sized pharmaceu-tical sectors. The only exceptionis that our busi-ness/infrastructure support isheadquartered in Canada. Ourtarget market and business exe-cution model is the same in allthree locations (Canada/UK/US). With the advent ofICH/GCP Guidelines and theEU Directive the playing field is

Scottish Life Sciencesoutlook for 2006

By Ken Snowden

In 2005, the Scottish life sciences community joinedforces to devise a formal andintegrated Life SciencesStrategy. This includes theformation of a Life SciencesAlliance comprised of indus-try, academia, NHS Scot land,financial institutions, theScottish government and theScottish Enterprise Network.


Scottish Executive during 2005, andthe Scottish Enterprise Network haspledged £1.85m to support the com-mercialization of research through theScottish Stem Cell Network for a fur-ther ten-year period. Stem cell research is not, generally

speaking, as thorny a subject in publicopinion in the UK as in the US orCanada. This factor, and the stablepan-European regulatory environmentin which Scotland operates, lend theScottish stem cell community signifi-cant advantages. While investment conditions world-

wide are improving slowly, Scotland’scommitment to supporting its life sci-ences community has never beenstronger or more focused.

HHiigghhlliigghhttssThere are many, many reasons for theScottish life sciences community to becheerful as we enter the second half ofthe current decade. Recent highlightsinclude accolades for the Scottishcompanies Stem Cell Sciences andOptos; both of which were selected as“Technology Pioneers” by the WorldEconomic Forum for 2005. In addi-tion, Stem Cell Sciences was named abusiness leader by Scientific Americanmagazine in its prestigious annualround up for 2005. Galashiels-based pharma company

ProStrakan not only took first positionin accountancy giant Deloitte’s Fast 50survey but recorded sales growth ofmore than 4000% between 2000 and2004. The company now employs 280

people in Scotland. But while conditions domestically

and in terms of the global positioningof home grown talent are providingmuch cause for optimism, we recog-nize that there is no room whatsoeverfor complacency.

SSuucccceessssffuull ccoollllaabboorraattiioonnDespite having a very enviable record ofscientific innovation in both drug devel-opment and delivery, the pace ofresearch through the current decade issuch that innovation alone is not enoughand the Scottish community places greatemphasis on international collaboration.

The most recent and unique inter-national collaboration was announcedin April 2006 when Wyeth Pharma -ceutical Co., one of the world’s largestpharmaceutical companies, signed adeal worth almost £46 million to createthe world’s first Translational MedicineResearch Collaboration in Scotland.This collaboration includes four of

Scotland’s leading universities(Aberdeen, Dundee, Edinburgh andGlasgow), Wyeth Pharmaceutical Co,Scottish Enterprise and NHS ScotlandGrampian, Greater Glasgow, Lothian,and Tayside. This partnership aims toposition Scotland as a world leader in thedevelopment of personalized medicinebringing new treatments to patients suf-fering from a range of serious illnesses.As further evidence of outward

focus, Scotland’s economic develop-ment agency, Scottish Enterprise andits international arm, ScottishDevelopment International (SDI)announced in January 2006 that sever-al Scottish life sciences institutions,including the University of Dundee,have been identified as favoured sup-pliers of their innovation and expertiseby the Singapore government. Massachusetts-based Inverness

Medical Innovations (IMI), a leadingmanufacturer of medical diagnosticproducts and developer of advancedmedical devices recently established asubsidiary in Scotland, Stirling Med -ical Innovations Ltd. The companyplans to invest more than £3.2m inR&D programmes and another £29min manufacturing and commercialisa-tion of new products. This will createup to 500 jobs at a new biomarkerR&D centre, currently under construc-tion at Stirling University’s InnovationPark. Addition ally, Invitrogen Corp -oration plans to expand its operationsin Scotland with a £17m investment,creating one of six new global ‘super-centres’ in Inchinnan, which will alsobecome the company’s expandedEuropean Headquarters.This inward investment success

story is largely attributed to the businesssupport and financial backing provided

The UKTI team in Canada is based in Toronto and works to encour-age Canadian investment into the UK, and promote Canada-UKtrade. Foreign companies wishing to establish a business in the UKcan also apply for R&D assistance under several schemes:

EUREKA—exists to create trans-border, market-oriented,high-tech European R&D projects, www.eureka.be/about.do; LINK, the UK government’s pricipal mechanism to stimulateinnovation, wealth creation and improve quality of life,www.dti.gov.uk/ost/link/links.html; Foresight—brings together key people, knowledge and ideas

to identify opportunities from new science and technologies,www.foresight.gov.uk; EU Sixth Framework Programme (FP6) for research, techno-logical development and demonstration (RTD)—the maininstrument for research funding in Europe,www.europa.eu.int/comm/research/fp6/index_en.html; Grant for Research and Development,www.businesslink.org/r-d;Grant for Investigating and Innovative Idea,www.businesslink.org/innovative-idea; Small Business Research Initiative, www.sbri.org.uk;

R&D Allowances for Foreign Biotechs


by SDI and the Scottish IntermediaryTechnology Institute Life Sciences. Todate, more than 1,300 companies havechosen to invest in Scotland. As hasbeen the case throughout its long histo-ry, Scottish influence on global marketsbelies its size and island status.

IInnffrraassttrruuccttuurree To accommodate this growth, state-of-the-art facilities have been developedacross Scotland, providing a hub for lifesciences exploration and production,and acting as a lure for scientists andmanufacturers from across the world.Perhaps chief among these is the

£0.5b. Centre for Bio medical Researchcurrently under construction on theoutskirts of Edin burgh. This will sup-port Scotland’s expertise in stem cellresearch and will position Edinburghas one of the world’s foremost centresfor biomedical investment. Part of a tri-angle of science and technology cen-tres in Edinburgh and the Lothians,the Centre for Biomedical Research issupported by the University ofEdinburgh, Scottish EnterpriseEdinburgh and Lothian, and LothianUniversity Hospitals NHS Trust.In the west of the country, the West

of Scotland Science Park is thefavoured working environment forpure science start-ups and high growthtechnology companies. The sciencepark is already home to around 30companies. A new multimillion poundBritish Heart Foundation Cardio -vascular Research Centre also openedin Glasgow in 2005.In Dundee, the Medipark is a presti-

gious new development located on thecampus of Ninewells Hospital andMedical School—one of the largest andmost modern teaching hospitals inEurope. This offers opportunities forinnovative companies to collaborate withmedical researchers from Ninewells.And in Aberdeen, the Aberdeen

Science and Technology Park providesaccommodation for high growth compa-nies working in environmental sciencesand medical and bio-technologies.

RReeaassoonnss ttoo bbee cchheeeerrffuull aabboouunndd……Scotland has more than 550 organisa-tions and over 26,500 employees dedi-cated to life sciences R&D.Scotland houses more than 20 per-

cent of the UK’s life sciences compa-nies and is already one of the most suc-cessful life sciences bases in Europe.The biotechnology industry in

Scotland has grown at an average of 20 percent over the last four years,compared with 15 percent for Europeas a whole. Scotland produces 30 percent of

the UK’s microbiology PhDs and 31percent of the UK’s genetics post-graduates. It has 30 university depart-ments and research institutes dedicat-ed to drug discovery related research. Two Scottish universities, Uni -

versity of Dundee and University ofGlasgow, have both been named in thetop five best places to work in Europeby academics surveyed by The Scientistmagazine, with Dundee taking the topslot for the second year running. Some might argue that gaining

maturity within the nascent, interna-tional life sciences industry is not muchof an accolade, but maturity, in terms ofthe Scottish community, representsachieving critical mass, an open-mindedattitude and the confidence to collabo-rate with the very best in the world.That is where I believe we are at thestart of the second half of the decade. Scotland is positively buzzing with

innovation and anticipation, and thecommitment behind the “LifeSciences Scotland” alliance means wemove forward with the interests of thegovernment, financial institutions,academia and industry well aligned. The life sciences sector remains

volatile, fast-moving and undoubtedlytricky to negotiate for scientists andbusiness minds alike. But the poten-tial rewards for investors, the economyand mankind in general are truly awe-inspiring - and who wouldn’t be excit-ed by that. Not even a canny Scot.

AAbboouutt tthhee aauutthhoorr:: Ken Snowden is direc-tor of Life Sciences for Scottish Enterprise.

level.

Q: You’re currently expand-ing your existing UK office.What led to this growth? A: We initially set-up inBellshill (Glasgow area) notEdinburgh, but moved to thelatter in 2005 due to a strongbiotech cluster in the area, aconvenient launch point to therest of the UK/EU and the needfor larger space. Scotland allowsfor access to well-educated staffwhile keeping the cost of doingbusiness relatively moderate.“Locate in Scotland” proved tobe excellent ambassadors forour expansion.

Q: What have been the keys toyour success abroad, and/or inthe UK particularly? A: In my mind, the key hasbeen persistence. Being able toleverage existing NorthAmerican business clients forservice delivery in the UKwhile developing “slow-turn-ing” homegrown UK businessto reach critical mass. Anotherfactor is the ability to exploitthe Internet for both businessdevelopment and business exe-cution activities. Overall, Iwould say that a progressivebusiness model was essential.

Q: Would you do it overagain, or consider a destina-tion country?A: Yes. Would I considerexpanding elsewhere as a firstforay? Probably not. Languageand cultural barriers add toomany variables that are just notnecessary at a first expansionpoint. Expanding to the UKoffered some consistencies thatmade the growth less risky. Theultimate expansion/relocationdecision, though, would have tobe based on where your busi-ness is.BB



One pipette design for all applicationsBrinkmann Instruments Inc. unveiled its EppendorfResearch Family of Pipettes, which includes fixed-vol-ume, adjustable-volume, and multichannel models aswell as the electronic Eppendorf Research pro Pipette. The Eppendorf Research Familyoffers innovative design features which make everyday use more efficient, comfortable,and strain-free. By working with one “family” of pipettes, you can enjoy a single systemfor all volumes ranging from 0.1 µl to 5 ml. Eppendorf has redesigned the ResearchFamily to address the ergonomic concerns of end users with some of the following features: Enlarged operating button for more “thumb-friendly” handling; Large, separatetip-ejector button reduces the amount of force required for tip ejection; and Volume display with magnification improves visibility of set volume.

Automated genomic DNA purificationThe Maxwell 16 Instrument and Genomic DNA purification kits fromPromega—available through Fisher Scientific—provide automated low-to-moderate throughput purification from animal and plant tissue, cells, bloodand bacteria. With hands-free purification of 1–16 sample batches, theMaxwell 16 Instrument provides consistent yield, purity and application per-formance. Save time and labour by eliminating sample preprocessing usingits integrated tissue grinding and pre-dispensed reagent cartridges.

New antibody-free kinase assay technologyPerkinElmer Inc. launched the AlphaScreen Phospho Sensor, a new antibody-free kinase researchtechnology platform. This novel non-radioactiveassay will now allow researchers to perform directmeasurements of kinase activities on full-length protein substrates where no antibody is available.This is important for drug discovery researchersinvolved in the identification, validation and preliminary characterization of any new kinases.

Temperature/humidity data loggerDickson Company introduced data loggers with built-in USB ports fortriple-speed data downloading. The easy-to-use Dickson Pro Series DataLoggers also feature LED alarms, 1-second sampling rates, and accuracyup to +/-0.5o C making them the data loggers of choice for the most criti-cal applications. Like earlier generations of the Dickson Pro Series DataLoggers, the new models (TP125, SP125, and SP175) are in a ruggedcompact design. All of the new and improved features in the Dickson Pro Series Data Loggers are available at no added cost.


High speed homogenizerRecover Proteins or Nucleotides in seconds with this Tissue Homogenizer.Hand-held and fixed homogenizers fromHarvard Apparatus make sample prepara-tion effortless. These light-weight, high-torque homogenizers have variable speed, up to 30,000 rpm. The sealed tube cham-ber assemblies ensure safe operation. Thehomogenizer cannot operate when theblade is exposed, thus preventing injuryand exposure to aerosols.





reply online atwww.biobusinessmag.com

High-speed LC system operates up to 15,000 psiThermo Electron Corporation,world leader in analytical instrumentation, introduced its new Accela High SpeedChromatography System that optimizes 1.9 µM column particle technology.Accela delivers fast, efficient chromatographic separations from conventional to ultra high pressures of up to 15,000 psi. Ready for use as a standalone analyticalHPLC or fully integratedLC/MS, Accela enables users to achieve shorter run times with excellent peak symmetry and superior data quality. It features a quaternary pumpwith the lowest dead volume (65 µL) in the industry, accelerating the gradient to the column.

Reliable, easy-to-use coulometric titratorJM Science announced their newest AQUACOUNTER Coulometric Karl FischerTitrator (AQ-300). With state-of-the-art performance features like a fritless celloption, the AQ-300 offers fast and accurate results. This reliable, easy-to-use coulometric titrator has six built-in calculation modes to accommodate solid, liquidand gas samples. It includes a statistics package with one-touch calculations. Four files with preset conditions can be stored in memory and allow instant recall ofdata for up to 20 samples. A built-in detector monitors titration status. This unit hasbalance and computer interfaces for GLP and ISO documentation. Choice of ionexchange or fritless cell system and thermal printer or impact printer are available.



New Class of MS Technology Waters Corporation unveiled first-of-its-kind mass spectrometry technology that differentiates sampleions by mass, size and shape. The Waters SynaptHigh Definition MS (HDMS) System is designed for researchers working at the limits of conventionalmass spectrometry and who need to further characterize and define complex samples. TheSynapt HDMS system employs new ion-mobilitytechnology and software to enable the analysis of sample ions differentiated by size and shape, as well as molecular mass. This additional dimension of separations fidelity leads to improved specificity and sample definition, meaning scientists can extract more informationabout their samples including the detection of previously undetected constituents.

Protein blotting sandwiches for highthroughput labsMillipore announced the availability ofImmobilon-P Blotting Sandwiches pre-cut to match the most commonly used pre-cast electrophoresis gels. These blottingsandwiches offer convenience and timesavings for high throughput labs usingchemiluminescent or chromogenic detec-tion methods. The Immobilon-P BlottingSandwiches consist of one sheet of Immobilon-P transfer membrane with twosheets of chromatography-grade blotting filter paper. Immobilon-P transfer mem-brane is a 0.45 µm polyvinylidene fluoride (PVDF) membrane for binding proteinstransferred from a variety of gel matrices.

Next generation of Enhanced GreenFluorescent Proteins (EGFP)Invitrogen Corporation announced theavailability of advanced vectors forVivid Colors Fluorescent Proteins,which represent the next generation of Enhanced Green FluorescentProteins (EGFP) for use in fluorescence microscopy or flowcytometry. Improving upon EGFP,Invitrogen’s Vivid Colors, derived from the Aequorea victoris jellyfish,are not prone to aggregation, areenhanced for extreme fluorescenceand are humanized for optimal mammalian expression. Benefits of Vivid Colors vectors and associated products include extended reporter protein fluorescence—up to 24 hours and multiple colors for co-visualization applications.




IN PERSON

AUniversity of Guelph environmental microbiologist has beennamed as a Fellow of the World Innovation Foundation

(WIF), a prestigious international thinktank whose membersinclude numerous Nobel laureates from around the world.

Jack Trevors’ election to the organization adds to his exten-sive involvement with numerous scientific and cultural groups inCanada and internationally. As one of more than 1,000 WIFmembers and fellows, he will consult on technological and sci-entific development projects intended to help governments andtheir nations’ people.

The UK-based WIF was founded in 1992 and is the world’sonly independent think tank intended to provide scientific, tech-nological, engineering and applied economics advice to govern-ments. It has no financial ties to any government or corporation.WIF’s members include many Nobel laureates from around theworld, including James Watson, co-discoverer of the structure ofDNA; Mohamed ElBaradei, director general of the InternationalAtomic Energy Agency; and South African Bishop Desmond Tutu.

An award-winning researcher, Trevors is an expert in the use

of microbes to clean up environmental contamination. Hisresearch interests include infectious pathogens in the environ-ment, space microbiology and the origin of genetic information.He also works with U of G’s Controlled Environment SystemsResearch Facility, which studies plants and micro-organismsgrown in low-pressure and microgravity conditions for potentialuse in long-distance space missions. In addition, he developed aspecific bacterium used at the Johnson Space Centre.

Prof. Mike Dixon, chair of the Department of EnvironmentalBiology, says his colleague’s latest accomplishment is “a testa-ment to the quality of the science that he represents.” Trevors is aFellow of the American Academy of Microbiology, the LinneanSociety (United Kingdom) and the World Academy of Art andScience. The author of more than 240 journal articles, he is theeditor-in-chief of numerous journals on pollution, microbiology,evolution and the environment. He is also one of about 200 sci-entists from 40 countries involved with the Gene EmergenceProject, which investigates how the genetic code arose.Source: University of Guelph

Jack TrevorsProfessor named to world innovation body

BioAdvantage.eps 10/13/05 10:28:15 AM


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