BC Business
Don’t knock scare tactics. They’ve worked well for B.C.’s so-called fragile biotech industry, whose boosters might say dire predictions are the best way to squeeze industry tax credits out of provincial government coffers.
Don’t knock scare tactics. They’ve worked well for B.C.’s so-called fragile biotech industry, whose boosters might say dire predictions are the best way to squeeze cash out of provincial government coffers. It’s worked to varying degrees for the film industry in B.C., quick to forecast its demise should support from the province wane. Both sectors say provincial tax incentives and subsidies are necessary to keep companies on B.C. soil, and the argument is working surprisingly well – even on a provincial government that was not elected for its inclination to slide subsidies to business. On the biotech front, B.C.’s top life sciences lawyer – and one of its biggest promoters – Hector MacKay-Dunn, 54, of Farris, says B.C. is “punching above its weight” in producing profitable life sciences companies (local darlings include QLT, Angiotech and Aspreva ) but falls short when it comes to supporting their continued growth. He’s been involved in nearly every biotech offering or transaction in the province and has made a name for himself as one of the country’s leading biotech dealmakers. MacKay-Dunn is also a pal of the premier and along with PWC, he compiled a list of recommendations on how the province should support the burgeoning industry. Biotech is known as risky territory for investors (QLT burned cash for 20 years before turning a profit). Government incentives – often in the form of tax breaks to help early-stage companies afford the R&D necessary to get drugs and products to market – have provided a leg-up. For companies in B.C. to grow from discovering drugs to selling them worldwide, MacKay-Dunn says the province must cough up subsidies (stock-option credits to reduce the amount of personal income tax triggered when options are exercised, create a personal income tax exemption on income of foreign researchers and expand current R&D tax credits) equal to those being offered in competing jurisdictions such as Quebec, San Diego and Boston. He has strong praise for the $20-million tax gift the industry got in the September budget, aimed at easing the tax burden for firms that are selling products globally, and brushed aside questions about whether his personal friendship with the premier played any role in the new funding. The money is meant to keep companies selling products overseas in B.C. (They’re up against pressure to relocate to a low- or no-cost tax haven such as New Jersey, Switzerland or Barbados to avoid paying Canadian taxes on international sales.) “The economics have to work and if the returns aren’t there, shareholders will demand better,” MacKay-Dunn says. If, say, QLT or Angiotech were gobbled up tomorrow, there could be pressure to skip town. “In a heartbeat, one or both could be acquired and the new owner will look to find the best place for it to grow.” MacKay-Dunn says B.C.’s biotech industry is at a tipping point – and government support is needed to ensure it stays put and grows. That may be true. It’s certainly an argument that got a lot of traction during the NDP reign.