Thank you very much.
Good afternoon, honourable members of the committee. My name is Graeme McRae and I am president and CEO of Bioniche Life Sciences, a small Canadian company headquartered in Belleville, Ontario. We research, develop, manufacture, and market products for animal health, human health, and food safety.
The company has operated in Canada for more than 26 years. We're currently headquartered in Belleville, and have facilities in Montreal. We also have facilities in the United States, the Republic of Ireland, and Australia.
I would first like to provide you with a brief description of our business and the projects TPC has funded, then talk about our situation with TPC and Mr. Dingwall.
Bioniche is a unique Canadian biotech company, in that we market our products globally, and we generate revenues of more than $48 million per year. Our research and development expenses are currently a little over $15 million per year.
In animal health, our research focuses on developing alternatives to antibiotics by using proprietary technologies. This is increasingly important as we encounter more and more bacteria resistant to antibiotic therapy. Our work with the proprietary technology has already resulted in the development of one product for horses.
Our research focus in humans is on treating cancer. We have a Canadian-developed proprietary technology that we call mycobacterial cell wall-DNA complex--MCC--with which we are now planning a final pivotal phase three clinical trial in patients with superficial bladder cancer. This will be a global trial.
This technology has successfully completed phase two in bladder cancer and phase one in prostate cancer patients. MCC is showing great promise in the treatment of many other cancers in the preclinical research laboratory setting.
In food safety, we've made a significant investment in the development of vaccines for animals, which will prevent animal diseases from infecting humans. The first vaccine in this pipeline is a cattle vaccine against the E. coli 0157:H7 bacterium, the same bacterial strain that infected people in Walkerton, Ontario, through their water supply, costing seven lives and causing long-term health problems that will end up potentially costing the health care system in Canada hundreds of millions of dollars.
This bacterium is now endemic in the cattle industry globally and continues to affect individuals through meat with hamburger disease, produce, water, and contact with farm animals.
The bladder cancer technology and the E. coli 0157:H7 vaccine are tremendous examples of made-in-Canada technologies, which, with the help of Technology Partnerships Canada funding, will continue to be Canadian developed. We would not have been able to accomplish what we have while remaining in Canada without funding from programs such as TPC.
Bioniche received approval for two repayable loans in 2001 from TPC for a total of $17.2 million in support of these two key projects, of which $8,186,000 has been advanced to date, representing approximately 24% of the total amount of $32 million Bioniche has spent on these projects since 2001.
When the company initially decided to pursue TPC funding, we were inexperienced in how to obtain this type of funding, and it was suggested we use a lobbyist to assist us. We employed Walding International in this capacity, with Mr. David Dingwall as our principal contact.
We entered into an agreement with Mr. Dingwall for his services, which contained a success fee, in that a portion of his set fee-for-service would be paid only when Bioniche successfully obtained moneys under the TPC program. This is a standard practice in our industry and was important to Bioniche, given our limited resources at that time. We were unaware that this practice was not permitted under the rules of the TPC program.
When we entered into the agreements with TPC, we learned from our legal counsel that success or contingency fees were not permitted by TPC. At that time we notified Mr. Dingwall of our discovery. We verbally agreed with Mr. Dingwall, prior to signing the TPC agreements, to restructure our arrangement with him and eliminate the agreement to pay him on successfully obtaining TPC moneys. We agreed instead to pay him a monthly retainer for his services.
We subsequently amended our written contract with Mr. Dingwall to reflect this revised agreement, and we thought this was sufficient to comply with TPC rules. In fact, Bioniche had paid approximately 75% of Mr. Dingwall's total fee and had invested approximately $4 million in the research projects prior to receiving any funds from TPC.
Several months ago we were approached by Industry Canada, which was conducting an audit of the TPC program. At that point, funding from TPC to our project was put on hold pending the completion of the audit. We cooperated fully with the audit and were surprised to learn on September 23 that the audit concluded we had breached the terms of our contract with TPC.
We immediately sought to rectify this situation by meeting with Industry Canada and discussing options for resolution.
While we disagreed with the conclusions of the audit, we accepted responsibility for the findings and reached a settlement with Industry Canada. We agreed to pay to the government an amount equal to the portion of the consultants fees that were in dispute, plus costs of the audit, for a total of $463,974.71, plus interest. This put us back in good standing under our TPC contracts, something that was of critical importance to us, since TPC funding had been frozen through the period of the audit, while Bioniche had continued to fund its research projects.
Bioniche acted in good faith when we amended the payment terms in our contract with Mr. Dingwall, upon learning of the discrepancy with TPC rules, and we fully believe we had rectified the situation. We have now taken the required action to put the company back into good standing with TPC, and we wish to move forward with TPC funding and further develop our technologies in Canada.
Thank you very much, Mr. Chairman.