Need more incentive? Taking advantage of government funding opportunities in the life sciences sector

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Each year the federal and provincial governments provide millions, if not billions, of dollars to Canadian industries to encourage economic development. In response to the recent economic crisis, we have seen even more programs introduced in an attempt to retain jobs and ensure Canada remains competitive in the global marketplace.

While certain stimulus programs were introduced to simply stop the bleeding during the downturn, many other programs exist as a tool to push forward certain desired economic or societal outcomes. A good example is the large number of incentives available to encourage clean energy activities, as countries begin to tackle global warming.

Similarly, more and more programs are designed to position us for the 21st century economy. Recognizing that a purely manufacturing or resource-based market can have its vulnerabilities, government fiscal policies appear to reflect an agenda focused on steering Canada towards a more knowledge-based economy. This includes making significant investments in the life sciences sector.

As a result, life science organizations are well positioned to take advantage of government funding opportunities. But one has to wonder whether these programs are being utilized to their full potential? While the political mandate exists to invest in the sector, many funding programs are not well publicized or well understood. Now if you search long enough, the information is out there in the public domain. But it can be a challenge to navigate your way through the detail. So while companies are generally aware of the existence of government opportunities, they are often unsure of specific programs and whether they qualify for them.

What funding options are available?
Government assistance can come in many forms -- grants, loans (on commercial or preferential terms), equity investments, guarantees, cost reimbursements, in kind services, etc. So it’s important to think about the option that makes most financial sense to your organization and its stakeholders. This may depend on your ability to take on debt, the urgency of cash flow needs, appetite for equity dilution, and a variety of other factors.
It’s also important to consider the specific business activities that might be eligible for funding assistance. Depending on your circumstances, a number of options are available.

For example, there are various programs which provide funding to support R&D and innovative technologies. While many people are aware of the Canada Revenue Agency’s Scientific Research and Experimental Development (SR&ED) tax incentive program, there are also numerous non-tax funding opportunities out there as well. A good example is the Industrial Research Assistance Program, funded by the National Research Council of Canada. This program, whose key industry sectors do include biopharma and medical devices, provides financial assistance and other support to enterprises for R&D projects, to help these companies develop technologies for competitive advantage.

As well, various HR-based subsidies exist to facilitate job creation, skills training and partnering between the companies and academic institutions. A few of these programs exist at the federal level -- for example through Human Resources and Skills Development Canada and Service Canada. Additionally, there are even more opportunities through provincial/regional governments, depending on the location of your employees.

Interestingly, what many people may not know is that the government can also provide (or work with private lending institutions to facilitate) more traditional financing products that companies may use to support working capital needs, exporting activities, expansion, acquisitions and other normal business operations. The Business Development Bank of Canada and Export Development Canada offer an assortment of options that fall under this category.

But help doesn’t just have to come in the form of dollars and cents. Many programs exist to provide services and resources which can help propel your organization forward. For example, Industry Canada offers free access to its Canadian Company Capabilities database, which can be searched to locate information on Canadian suppliers, distribution channels, competition, partnerships, etc. Other non-cash assistance can come in the form of access to technical expertise, industry networks, research tools, and more.

The whole is greater than the sum of the parts
Obviously when considering how and where to inject money into an economy, a key strategic goal for any government is to stretch the benefit to as many parties as possible. As such, we are seeing many programs specifically designed to build formal partnerships within the life sciences ecosystem -- namely the private sector, researchers, academic institutions and healthcare organizations. Collaboration is the name of the game.

As an example, the Canada’s Natural Sciences and Engineering Research Council has a Collaborative Research and Development Grants program, which provides financial support for projects undertaken by university researchers and private-sector partners. It’s intended to be mutually beneficial by giving companies access to the knowledge and educational resources available at post-secondary institutions, while also providing training to students in the necessary technical skills required by industry.

This idea also extends to cross-border collaboration. In an effort to promote and enhance Canada’s international innovation efforts, the government has programs to support Canadian participation in bilateral research projects via partnerships with other nations. A good example of this is the Department of Foreign Affairs and International Trade’s Global Commerce Support Program, which provides financial assistance to Canadian companies and/or researchers pursuing international R&D opportunities with players in other countries.

Making it happen
Here’s where the work begins. The first step in the process of obtaining government funding is to research and identify what programs are available and the funding/services they provide. Government websites can be a good start. This can be challenging and it’s important to monitor this regularly, as programs are continually emerging and expiring.

Next, it’s important to evaluate the suitability of your organization’s activities for a particular program, to determine if there’s a logical fit. It’s important to consider what the government’s macro priorities might be for a given program -- for example, job creation, climate benefits, advancing research, etc. Think about what the stated mandate of the program is, and whether your activities align with those goals.

If you decide to move forward with a program, it’s then necessary to drill down to the specific eligibility criteria. These parameters will vary by program, and can include things such as the size of your revenue base, geographic location, number of employees, eligible project costs and various other factors.

Finally it’s time to submit the proposal. While certain applications can be a quick and straightforward form, other programs can have a more involved application process, requiring you to produce a business case, financial forecast, market analysis, etc. The depth and coverage will vary by program, but the ultimate goal here is to satisfy the government that your organization is sound, and those tax dollars are being well spent on your venture.

When opportunity knocks
Answer the door. Government programs can bring great untapped value to organizations in the life sciences sector. Taking advantage of funding can make good business sense, and may help improve the financial position of your company. Some programs can possibly facilitate new initiatives that you might not otherwise have the resources to undertake. Or they might simply provide some financial breathing room, to weather the storm during a tough economic period.

Given our current environment, government incentives are plentiful right now. The question is how long and to what extent will they continue? While certain stimulus programs introduced specifically in response to the economic crisis do have a shelf life, that doesn’t mean government involvement in the private sector will disappear anytime soon. In order to manage the ebbs and flows of industry cycles, employment levels and political priorities, governments will always continue to have a hand in Canada’s economic development in some form or another. At the end of the day, it can pay off to do your homework and ensure that cash isn’t being left on the table.

Neal Madan is a Director in the Transaction Services group within PricewaterhouseCoopers’ Consulting & Deals practice. He provides advisory services in respect of mergers & acquisitions, business reviews and other special projects. Neal also leads a PwC offering which assists companies in making the most of government incentive opportunities, by identifying programs clients may be eligible for and guiding them through the funding application process. neal.madan@ca.pwc.com