Public biotech companies should be aware of Ontario's stricter, U.S.-style disclosure-liability laws, says Cheryl Reicin in The Globe and Mail

June 07, 2006

YM BioSciences, a Mississauga-based cancer drug developer, trades on four exchanges, licenses its compounds to companies in Europe, South Korea and Malaysia, and acquired Pennsylvania-based biotech firm Eximias Pharmaceutical last month. Until its purchase of Eximias, YM BioSciences accomplished all this with just 20 employees—but with a battalion of outside lawyers.

Biotech lawyers must not only protect their clients’ innovations with patents, but also find venture funding, handle large acquisitions and negotiate worldwide licensing deals. And given the litigiousness of the sector, where patents are the main assets and essentially represent legal rights, biotech companies can expect to spend even more to defend their intellectual property.

"There's a saying that if you're not being sued on your patents, your patents probably aren't worth much," says Cheryl Reicin, whose Life Sciences Group has represented YM in several cross-border licensing and U.S. securities deals.

Cheryl, an 18-year veteran of the life sciences field, moved from New York to Toronto in 2004 just as the sector began to revive after years of scarce funding, thanks to renewed interest from venture capital firms, stock market investors and big pharmas seeking to protect new compounds to replace their aging patent li-braries.

Canadian biotech financing is particularly hot: the value of deals in the first quarter reached C$600 million, a pace that could see the industry break through the C$1.5 billion annual record it set at the beginning of the decade. Canada's biotechnology sector ranks second globally, with 459 companies (81 public) versus companies 1,744 in the United States. Ranked third is Germany with 355 companies.

The rise of the Canadian biotech scene also dovetails with Torys' cross-border strategy to serve as a one-stop shop for southbound clients looking to consummate deals. As the average drug costs about C$1.5-billion to move through required clinical trials—more than the entire Canadian industry raises in an average year—foreign equity and licensing deals are vital to keep drugs alive. Among other major deals, Torys represented underwriter Merrill Lynch in Aspreva Pharmaceuticals’ US$300-million IPO in Canada and the United States. Aspreva, based in Victoria, has since seen its shares triple in value. Torys also represented Arius Research, a Toronto-based cancer drug developer, in its cross-border licensing agreement with San Francisco–based Genentech.

Licensing is a way for cash-starved biotech companies to sell future rights to their compounds in selected jurisdictions in exchange for immediate help with underwriting clinical trials. Lloyd Segal, president and CEO of Caprion Pharmaceuticals, a client of Torys, says lawyers "start with the global picture and help us ensure that we're thinking about all the issues—intellectual property, finance, and commercial realities—globally." Caprion, based in Montreal, has signed collaborative research deals with major pharmaceutical companies such as Abbott Laboratories, Wyeth, Merck & Co. and Pfizer.

Litigation, while always central to large pharmaceutical companies, is a growing part of biotechnology. Cheryl says that after the introduction in Ontario last December of stricter, U.S.-style disclosure-liability laws, her Canadian public company clients are having to brace for potential shareholder class-action lawsuits. Biotechnology companies, with their characteristically volatile share prices, are prime targets for plaintiffs' lawyers looking for grounds for a market manipulation or fraud case.

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