Corporate Structures for Early-Stage Canadian Biotechnology Firms

Corporate Structures for Early-Stage Canadian Biotechnology Firms

Biotechnology firms, or at least those that commercialize their technology, inevitably license their products or processes to a larger pharmaceutical firm.

The Canadian biotech ecosystem is evolving rapidly and it is largely viewed as the most significant player outside of the United States. Our counterparts to the south, however, have two enduring advantages. The number and size of pharmaceutical firms that enter into licensing arrangements and the breadth and depth of their capital markets.

Accordingly, early-stage Canadian biotechnology firms are wise to plan early for the eventual alliance and capital injections. The planning and resulting structures can be broken down into commercial and tax structures, with the former determining the latter.

Strategy first.

Tax practitioners like us often quip that you can’t let the tax tail wag the dog. What we mean, is that value creation and strategy should determine the business structure, which is then optimized to minimize global tax liabilities.

Several significant business concerns involve the legal structure of IP ownership, funding of R&D, employment jurisdiction and exit-preparedness.

Strategic alliances are constantly evolving.

Many biotechnology firms want to retain their IP while gaining upside from their discoveries. Conversely, most pharma’s are comfortable outsourcing the drug discovery process and know-how as long as they control the marketing and distribution. Moreover, pharmaceuticals generally reinvest profitable marketing activities into costly trials in their pipeline. Any range of structures that meet these broad objectives can be negotiated.

Canadian biotechnology firms must also structure their assets and entities for the inevitable inbound flow of capital that materializes upon successful discovery. That involves issues pertaining to transfer pricing, withholding tax, executive compensation for foreign talent, and financing structures used so that non-resident investors can move capital efficiently.

Most Canadian biotechnology firms are funded by VCs so there should also be early planning for an eventual liquidity event. Exits can occur via IPO, strategic divestment, recapitalization or sales to other PEs or VCs.

If you’re a founder or VC setting up your firm in the early stages, now is the time to consider these commercial and tax planning opportunities.

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Rebecca Scott
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Rebecca is a Web Designer at BluePrint CPAs. She is a graduate of St. Clair College’s Internet Applications and Web Development Program and has worked as a freelance web designer before joining the BluePrint team.

BluePrint CPAs is a management consultancy that simplifies digital, financial and talent strategies. Our team helps entrepreneurs and their teams grow profitable and modern businesses.

Kit Moore, BluePrint CPAs President & Lead Tax Advisor
Kit Moore, CPA, CA
President & Lead Tax Advisor

Kit Moore, is an entrepreneur that simplifies digital strategy for other business owners. The team at BluePrint CPAs can assist you with web design, development, analytics, management systems and, more importantly, your overall business strategy. The toughest part of digital transformation is re-training your team - and we have pros to help with that as well.

BluePrint CPAs is a management consultancy that simplifies digital, financial and talent strategies. Our team helps entrepreneurs and their teams grow profitable and modern businesses.

Kit Moore, BluePrint CPAs President & Lead Tax Advisor
Kit Moore, CPA, CA
President & Lead Tax Advisor

Kit Moore, is an entrepreneur that simplifies tax and financial strategy for other business owners. The team at BluePrint CPAs can assist you with financial technology, tax strategies, mergers & acquisitions, succession & exit planning and, more importantly, your overall business strategy.

BluePrint CPAs is a management consultancy that simplifies digital, financial and talent strategies. Our team helps entrepreneurs and their teams grow profitable and modern businesses.

Joe Marra, MBA
Senior Associate, Strategy Consulting

Joe is a Senior Associate, Strategy Consulting at BluePrint CPAs. He is a recent graduate of the MBA Program at the Schulich School of Business and has most recently worked for Bayer Inc and the Ford Motor Company of Canada. His experience in marketing, sales, and human resources spans various industries including hospitality, logistics, life sciences and automotive manufacturing. Joe loves working with entrepreneurs to develop their digital strategies and help them grow their business.

BluePrint CPAs is a management consultancy that simplifies digital, financial and talent strategies. Our team helps entrepreneurs and their teams grow profitable and modern businesses.