Thank you very much.
Ladies and gentlemen, thank you very much for the opportunity. It's an honour to be here.
I would like to talk to you mainly about the commercialization of technology. Since we're living in an age of knowledge-based industry, I'll share with you my experience in Norgen and various other companies. I'll begin with a timeline. I've been in life technology and biotechnology from the early 1980s to the present. I earned my Ph.D. at McMaster University in 1986. I was a post-doctoral fellow in Labatt's research department, working in yeast. In 1988, I co-founded Procyon Biopharma with colleagues. Later on, I became a professor at Brock University, and 10 years later, I started Norgen Biotek.
Based on all these years, I came to the conclusion that we have lots of science to start a biotech in Canada. We're not short of good science and good scientists across Canada, but we're lacking in commercialization and successful commercialization. We have too many start-ups, but very few make it all the way.
I concluded that you need three key ingredients to form a biotechnology company, and I would like to talk about biotech; that's my area. You need good science, and there's plenty of good science and good scientists across Canada. You need good, experienced executive teams. Very often, those executive teams are very impressive. They call them high flyers. They come from big pharma. They recruit them to the biotech area, to start-ups. And of course you need the money from venture capital, and we do have plenty of venture capital—perhaps not as freely as we think; nonetheless, it's there.
This is the traditional formula. Over the last 20 or 30 years, we've encountered problems with this traditional formula, and you have seen many biotech companies go public. After a short while, they simply were on life support, and finally, they went bankrupt. What's the problem with science? Professors very often lose interest because they become marginalized as soon as they have venture capital coming in. The golden rule is, first, he who has the money rules. Second, the executives who run the company listen less and less to the scientists. The scientists lose interest in driving the science forward or taking it all the way to the end. The executives' primary focus is merely on raising money, polishing the story, and making more and more presentations to raise more and more money. The venture capitalist loses interest. After a short while, there is a lack of progress and they start to find an exit strategy. Very often, the exit strategy is to take the company public sooner rather than later. Most Canadian biotech companies go public much sooner than their U.S. counterparts. They initiate mergers and acquisitions with other companies. It may not be of great benefit to the technology, but it's an exit strategy for the venture capitalist.
Alternative funding strategies: obviously you can see the traditional one on the left side of this slide. I'm not going to repeat it. The one I followed for Norgen was based on experience and the dos and don'ts from my previous ventures with various other biotechs. Earlier, I relied primarily on parental financing, small business loans, and products and services. This isn't new. Biotech companies, like any other company, knowledge-based or non-knowledge-based, must have some sort of revenue, and this revenue must be deliberately designed to grow over time. You don't need to out-license all the technology. You could license part of your technology, but not everything. Part of it is to finance your growth. Of course, there are research grants. Our National Research Council has a pretty good funding program.
Here is an example of a possible problem: the growth rate versus the burn rate. Most start-up knowledge-based companies have a burn rate, which they characterize by how fast they are burning their cash.
Here I just used hypothetical numbers. As a start-up, you may raise $1 million in the first round and burn it in a few months. When you go back and start to sharpen your skills, you raise $5 million, and you burn that pretty quickly. Then you go for $15 million, and you burn that pretty quickly. But if you're producing and selling some sort of product from your knowledge—you have plenty of scientists—this growth rate will be sustainable, and one day you will achieve sustainability.
These are hypothetical numbers I have in here, but they are not too far from reality.