In a move to support the biotech industry and drum up interest in Quebec among foreign venture capitalists, the government of Quebec announced the Bio-Levier loan capitalization program at the end of March.
The Bio-Levier program is open to biotech companies that have completed a round of equity financing, of which 20% of the financing comes from investors outside Quebec. The program matches the contribution of the outside investors with a loan, explains Robert Davidson, senior advisor for communications with Investissement Quebec, the provincial government agency responsible for trying to create investments and jobs in Quebec’s private sector. Investissement Quebec will oversee the program, which has received CAD$100 million in funding for the 2002-2003 fiscal year, he adds. The program took effect with the beginning of the provinces new fiscal year in April, adds Davidson.
Bio-Levier is open to growing biotech companies in Quebec that are beyond the start-up phase of development, he notes. A minimum investment of CAD$7 million per equity capital per project is required and the program will make a maximum loan of CAD$20 million to any one company, he adds. Companies receiving loans will have ten years repay the loan, Davidson says, adding a company receiving a loan will not have to make any payments on the loan’s principal for three years. He had no information on the loan’s interest rate.
Area VCs praised the new program. “Bio-Levier is a wonderful thing,” says Bernard Coupal, president of T2C2 (Technology, Transfer, Commercialization, Capital), which invests in information technology and biotech companies. Coupal expects T2C2’s portfolio companies to try to use the program. “Biotech here is a young industry, only about 10 years old now, so it is just starting to mature and this will help with that,” he notes.
The additional capital provided by the Bio-Levier program should help Quebec biotech companies develop their products more quickly, says Jean-Denis Dubois, director of health and biotech investments at Fonds de Solidarite FTQ. By providing portfolio companies with more money to pursue their product development, the program will also reduce some of the funding risk for VCs, Dubois notes.
“This is good because it will force Quebec biotech companies to look for money from other areas, widening their spectrum of capital sources,” Coupal adds. “I also think it should attract VCs from the U.S., especially areas like Boston and New York, because this program will add leverage to the money they invest – which already goes farther in Quebec, since every $1 an American invests here is equivalent to CAD$1.50. American VCs don’t have to do anything and they get $0.50 on their dollar.”
Dubois also thinks the program should increase interest among American VCs, who he says are growing more excited about investment opportunities in Quebec since salaries are lower in Montreal and infrastructure costs less to develop, too. “We started talking with American firms a year ago about working together more and we are doing more with them – we have already worked with A.M. Pappas & Associates,” he adds. “When we mention the money we have to invest and all the government help in biotechnoloy research, foreign VCs and entrepreneurs start to listen more closely.”
Portfolio companies are excited by Bio-Levier, too. The program should make a good environment for biotech companies even better, says Doug Jensen, president of Origenix Technologies Inc. “The government works to be helpful…. the biotech industry here is not as mature as it is in the U.S., but this is one of the industries the province has focused on growing,” he adds.
To date, approximately 10 companies have shown interest in the program, says a source familiar with Investissement Quebec and the Bio-Levier program. Investissement Quebec will begin reviewing applications, although it is not entirely clear on what basis the applications will be evaluated, he adds, noting he is not sure if the capital will be parceled out on a first-come-first serve basis or through some kind of merit system.
While Davidson says he has no idea how much funding the Bio-Levier program will receive for fiscal year 2003-2004, he says the program will continue for several years. “A program like this is never created for just one year,” he adds.