NRC nearly bankrupts startup
Gates-funded PnuVax fell behind on rent
The government agency responsible for fostering scientific excellence nearly bankrupted a Canadian company pioneering a breakthrough inexpensive pneumonia vaccine for children because the business was behind on its rent.
PnuVax, a Montreal biotech company, is the single largest Canadian recipient of funding from the Gates Foundation, arguably the world’s most prestigious charity. Yet the cost of developing a low- cost vaccine to combat a disease that is the world’s largest killer of children under five caused it to fall behind on its land- lease payments to the National Research Council.
In May, PnuVax was given 30 days’ written notice to either pay the outstanding amount, around $ 1 million, or demolish its manufacturing facility in Montreal and vacate the premises.
Company founder Donald Gerson and his son Jonas travelled to Ottawa in early June to meet with NRC president Iain Stewart after receiving notice the NRC would not give the company more time to come up with the rent arrears.
Gerson had already secured grant funding from the Gates Foundation after meeting the Microsoft founder personally in 2013. But he said the NRC refused to review the documents prepared to demonstrate that a grant of around $30 million was expected from the foundation by the end of the summer.
At the meeting in Ottawa, Gerson said Stewart laughed at his suggestion that PnuVax and the NRC could continue to work together if a positive conclusion could be reached.
“That’s exactly what happened,” said Gerson.
PnuVax is working toward clinical trials of the new drug and Health Canada approval, after which the vaccine can be commercialized. The NRC supplied one of the chemicals and would have been in line to receive royalty payments. “But he didn’t want to listen,” said Gerson.
Jonas Gerson said the company needed help from the government, not barriers.
Donald Gerson founded PnuVax in 2008 to develop a dollar-a-dose pneumonia vaccine for children worldwide. He had helped develop and manufacture the first childhood pneumonia vaccine in 2000 at Wyeth, an American pharmaceutical company later purchased by Pfizer.
In 2010, PnuVax offered to buy an abandoned Montreal bio- tech facility that sits on federally-owned land. For 10 years the NRC had leased the land to a Dutch company for $ 1 a year, but that business closed in 2005. The government agency refused to offer the same terms to PnuVax, the Canadian startup.
The Gersons renovated the facility in 2012, investing $10 million to pass a Health Canada inspection, and agreed to a $ 300,000- a- year lease ( in addition to paying $600,000 a year in city taxes).
But in 2015, PnuVax stopped making NRC lease payments to ensure it had sufficient resources to keep developing t he vaccine. Though it had already received Gates Foundation funding, the grant money was required to be used for research.
By the time the Gersons met Stewart last June, they had already received news they had secured a substantially l arger $ 30- million grant from the Gates Foundation, one that would cover vaccine development, clinical trials and facility overheads.
That grant was received in September this year, and the NRC says its rent arrears have since been settled. But in the period between the meeting with Stewart and receipt of the Gates grant, the company was driven to the brink of insolvency.
They managed to keep trading thanks to bridge financing, and now employ 25 highly paid scientists as they move toward the approval process.
But the Gersons say they found it shocking that a government that claims it values science and innovation would not listen to them.
“We knew we were getting a grant in September and we did. We just asked them to give us the summer,” said Don Gerson.
“The NRC ended up being an anchor around our ankles,” said Jonas.
Shocking indeed — particularly given Stewart’s mandate letter calls for him to help build “an entrepreneurial and creative society,” not to mention foster “global science excellence.”
Canada spends $ 160 mill i on on childhood pneumonia vaccine every year and PnuVax believes it can shave $ 100 million off that number, if its low- cost alternative is approved.
The Gersons’ version of events was put to the NRC for comment and it confirmed that it leases land to PnuVax.
“The company was, in June 2017, in arrears on its land lease payments by almost three years (35 months). The company has since settled its debt with the NRC, on November 16, 2017, and is a valued client in good standing.”
By way of explanation for its short- sighted business practices, the agency said it was merely following the rules laid down by the gov- ernment.
“In the conduct of its business, the NRC respects the proper stewardship of financial resources and is accountable for their management to Canadians in accordance with Treasury Board policy,” the statement read.
Diligence with the public purse is one thing. But how about some vision and common sense?
This, after all, is a government that has a partnership with the Gates Foundation to fight infectious diseases worldwide — Justin Trudeau met Bill Gates in Montreal last year and pledged $ 785 million to combat AIDS, tuberculosis and malaria.
Something is wrong when the world’s richest man is backing a Canadian biotech company aiming to eradicate childhood pneumonia worldwide — and the agency charged with leading the government’s i nnovation agenda is actively trying to put it out of business.