Carl Hansen, founder and CEO of AbCellera Biologics, chats with Wendy Hurlburt, president and CEO of LifeSciences British Columbia
Canada and B.C. could help homegrown biotech businesses scale by moving to a patent box model that lets them keep more revenue from IP, the billionaire entrepreneur says
Scientist, entrepreneur, billionaire—Carl Hansen can now add tax wonk to his list of credentials, too.
The founder and CEO of AbCellera Biologics revealed that side of himself by pushing for lower taxes on innovation during a virtual chat with Wendy Hurlburt, president and CEO of LifeSciences British Columbia. The Q&A, which explored how the local biotechnology industry can build on its success, was part of industry group LSBC’s sixth annual conference, Access to Innovation.
As Hurlburt pointed out, AbCellera recently become a household name, thanks to the COVID-19 pandemic. The Vancouver-based biotechnology company, which partnered with U.S. pharmaceuticals giant Eli Lilly & Co. to develop the first antibody treatment for the disease, went public on the NASDAQ Stock Exchange last year. With its stock trading at about US$40, AbCellera now has a market capitalization of more than US$10.5 billion.
Top Canadian and international investors have thrown their weight behind AbCellera and other local biotech players, Hansen noted. “That is a terrific leading indicator of the value that will be created in this sector but also in reinforcing the idea that we are playing on a globally competitive scale,” he said. “Once we get to a critical mass, it reinforces itself. And I do feel like we are at a watershed moment for what can happen in biotech here in B.C.”
Thinking inside the patent box
Asked what must happen to ensure that AbCellera and its local peers can compete against their global rivals, Hansen zeroed in on taxes. “Here in Canada, and in B.C. in particular, the way that we tax revenues from innovation, from intellectual property that was developed here in Canada, and revenues that have come from outside the country, is not competitive as compared to other jurisdictions,” he said.
Most European Union nations “have taken measures to install something called a patent box, whereby intellectual property that exists and is held in those regions and results in revenue is taxed at a lower rate,” Hansen added. “And the result is that they’ve attracted IP to their sectors, and they’ve maintained their businesses and their headquarters in those sectors.”
With the exception of Quebec and Saskatchewan, Canada has no federal or provincial equivalent, Hansen observed. “That is something that here in B.C. would make a huge difference to ensuring that we don’t just develop IP and build businesses but that those businesses and IP are incentivized to stay and to grow and to scale,” he said. “And scaling these companies is by far the biggest thing that we can do to help ensure the long-term success of the sector.”
Counterproductive to what we are all trying to achieve
Hansen and his team at AbCellera, which was built on IP developed at UBC, are “patriotic and fiercely proud that a completely homegrown platform could rise to success and compete globally,” he said. But during the IPO process and as it looks to grow so it can make a global impact, the company has talked to tax experts at some of the big advisory firms, he explained.
To AbCellera’s surprise and distress, their unanimous advice for the company was to start by moving its intellectual property out of Canada, Hansen said. “Because Canada’s policy and corporate tax rates on intellectual property–based revenue from offshore, or from outside the country, are not at all competitive with other jurisdictions.”
Moving IP abroad “strikes me as very counterproductive to what we are all trying to achieve,” he continued. “We’re trying to make sure that we’re moving basic science into economic opportunity and impact society—that we’re doing that in Canada.”
The shift to a patent box model would bolster the B.C. biotech industry and increase wealth via job creation and the tax base, Hansen argued. “In the same way that biotechnology is a global business and investing in biotech is a global business, intellectual property is also something that can move across borders,” he said. “And we should do everything we can to make sure that we are attracting investment and not chasing it away.”