Biotech Is Bubbling Up in Toronto

It isn't Boston or San Diego, but promising startups abound

Earlier this year, two groundbreaking papers appeared in the journal Nature detailing how the genome in a yeast-cell nucleus produces the thousands of proteins in the cell. In essence, the papers provide a road map for protein analysis in humans and should help scientists identify targets for potential drugs.

One of the papers was from a startup called MDS Proteomics Inc. in Toronto. That's not a city most people associate with biotech, nor should they--yet. But an aggressive government financing program and a university determined to become the MIT of the North are turning Toronto into a fertile field.

Certainly San Diego, Silicon Valley, and Boston don't have to worry about Canadian competition. Nor is Toronto alone in trying to gain a berth in the biotech revolution. Cities all over North America and Europe have similar efforts in place. And while one-third of Canada's biotech industry is clustered around Toronto--111 companies in all--75% of them are startups with fewer than 50 employees. Many are fragile ventures, locked in competition for financing and skilled managers.

Still, Toronto does have some advantages over other North American biotech wannabes, such as St. Louis, Denver, or Raleigh-Durham, N.C. Known for its culture, diversity, and low crime rate, Toronto attracts scientists from all over the world. And just one small stretch of downtown turf houses the University of Toronto, six teaching hospitals, and dozens of research operations.

All of this is about to get an important showcase: On June 10, 15,000 researchers and businessfolk were scheduled to converge on Toronto for the four-day BIO 2002 conference. Sponsored by the U.S.-based Biotech Industry Assn., BIO is a forum for deals as much as ideas. Participants were certain to hear about Toronto's nascent biotech industry, including companies such as Lorus Therapeutics Inc., which just won critical fast-track designation from the U.S. Food & Drug Administration for its experimental cancer drug Virulizin. Now in the final phase of clinical trials against pancreatic cancer, Virulizin prompts the body's immune system to attack tumor cells.

Toronto's business, academic, government, and civic leaders have developed an industrial strategy that they hope will produce more Loruses. "Something big is going to happen," says George Adams, head of the University of Toronto's Innovations Foundation, which funds an average of one biotech spin-off from the university every month. For example, he says, the Ontario government is likely to use BIO 2002 to announce a hefty contribution to the Medical & Related Sciences--or MARS--project, which aims to turn the stream of research from the university and its hospitals into businesses.

Compared with U.S. universities, Canadian institutions are behind in the spin-off game. "You would predict that Toronto would be a hotbed of biotech companies, with two to three of them in the $3 billion to $5 billion range," says Dr. John R. Evans, director of MARS. So under Evans--a former head of the University of Toronto, Alcan Inc., and the Rockefeller Foundation--MARS is funding the construction of labs and offices and helping provide infrastructure, including patent lawyers, consultants, and accountants.

The provincial government has an important role. George Adams reckons it now is spending about $1 million a day on life-sciences research at the University of Toronto. And the VC community has begun to take notice, says Mary Macdonald, president of Macdonald & Associates, which monitors Canadian venture-capital spending. In life sciences, first-quarter VC spending was up by a third, to about $120 million, while venture investment as a whole was flat. U.S. investors account for almost half of the total, up from just 3% four years ago.

Will the investments pay off? MDS Proteomics could be the bellwether if, as expected, it attempts an initial public offering this year or next. In light of its deal to develop antibody-based drugs with U.S. biotech star Abgenix Inc. and its research pacts with IBM Life Sciences and with a network of Massachusetts hospitals, some analysts expect MDS to have the biggest IPO in Canadian biotech history. If so, interest in Canadian biotech will go far beyond the occasional industry conference.

By Dan Westell in Toronto

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