ELEVATINg oNTARIo’S INNoVATIoN EcoSYSTEM

Strengthening the province’s capacity to commercialize oncology breakthroughs

ontario excels when it comes to the concentration and capabilities of cancer researchers developing novel therapies, diagnostic tools and other technologies. To have an impact on the lives of cancer patients, research needs to be translated out of the lab and into the market.

The strength of Ontario’s cancer research infrastructure and the leading minds that have been attracted to the province are testaments to the benefit and impact of the underlying government investment and support. One such example is the Ontario Institute for Cancer Research (OICR), which is funded by the Ontario Ministry of Research, Innovation and Science. OICR is an innovative translational research organization dedicated to research on the prevention, early detection, diagnosis and treatment of cancer that bridges the gap between academic and clinical research.

Health innovation is a high-risk and resource-intensive process, particularly for innovative breakthroughs that are too advanced for academic grants yet insufficiently advanced to prove out predicted outcomes. Despite the available funding, capital across Canada remains scarce for supporting translational innovations, especially later-stage clinical development. Compounding this deficiency are the other inherent obstacles such as the scarcity of industry and management expertise to drive new technologies to market.

To address the need to improve and accelerate translational research, OICR created the Fight Against Cancer Innovation Trust (FACIT), to transform the most promising cancer innovations into opportunities that benefit both patients and the Ontario economy. FACIT leverages the corporate, development and commercialization experience of its management team, alongside OICR’s extensive collaborative network, expertise and research pipeline, to strengthen the province’s innovation ecosystem. Since its inception in 2014, FACIT has begun to realize notable achievements, validating the concept and impact of the business accelerator model.

collaborative models advance innovations

FACIT’s partnership and collaboration with OICR brings much needed expertise in intellectual property (IP) management, product development, business planning, and fundraising capabilities. This reduces some of the risk inherent in early stage technology development while at the same time creating greater value for prospective partners and investors, all of which are essential for a sustainable life sciences cluster.

Ultimately, this creates unique opportunities for innovations to move out of the lab and into the market for the benefit of patients and the province. (Exhibit 1, next page).

Driving Momentum: realizing the benefits from Ontario’s innovations

Over the past 24 months, FACIT has operated at an expedited pace to complete several commercialization initiatives, each with important outcomes and benefits that strengthen the province’s innovation network. Recognizing that economic returns are not the only benefit by which success is defined, FACIT’s mandate importantly seeks to build long term international collaborations with industry partners, attract capital, attract experienced management and build support networks.

Jeff Courtney, FACIT’s Chief Commercial Officer, is committed to catalyzing a sustainable innovation economy. “Our vision is to employ a multi-faceted approach to commercialization to grow local opportunities to fuel new research and breakthroughs, develop and retain talent, and expand the network of industry and investor receptors for these innovations,” says Courtney. “When we have all the key elements aligned and firing we effectively elevate our innovation ecosystem, positioning the province’s life science industry to maximize economic growth.” “Our vision is to employ a multi-faceted approach to commercialization to grow local opportunities to fuel new research and breakthroughs, develop and retain talent, and expand the network of industry and investor receptors for these innovations.”

— Jeff Courtney, Chief Commercial Officer, FaCit

When evaluating opportunities to advance OICR and Ontario’s innovation assets, FACIT engages strategic partners and receptors that maximize the positive impact of commercialization. Potential partners or strategies are assessed using a “Fit List” that considers whether the receptor possesses several key elements including: a) expertise aligned with industry needs, b) product development experience suited to driving technologies to the next point of value-inflection, and c) the commitment to retain and build both product and talent

exhibit 1: FacIT+ OIcr = a formula for more effective commercialization of innovations

as a translational research institute, OiCr brings scientific rigor, access to hospitals and patients and a network of leading-edge oncology experts and expertise to strengthen the identification and quality of oncology innovations. as a business accelerator, FaCit brings an understanding of the market, professional management, investor connections and experience in driving breakthrough technologies forward. together, this collaborative model propels the development of de-risked, partner-ready clinical assets.

development within the province. With the right receptors, Ontario is better positioned to benefit from re-investment to fuel future cancer discoveries, talent and, management. The benefits of this strategy are illustrated by Turnstone Biologics Inc. (Turnstone) and Novera Therapeutics Inc. (Novera).

FACIT created Turnstone under a unique model that unified the interests and IP from multiple research institutions and founders to form a single corporate entity. This enabled FACIT to attract a top-tier healthcare venture capital firm, Versant Ventures (Versant), to lead a Series A financing round, securing $11.3 million for Turnstone to accelerate the development of its oncolytic viral immunotherapies in the clinic. Equally important was Versant’s experience as well as interest in maintaining strong Canadian development, manufacturing and clinical trial activities for the startup. Courtney explains, “Drug development is a high-risk and capital-intensive endeavor and a committed partner such as Versant, with its vast network of resources and partnering experience, improves the likelihood of a successful outcome.”

In a second example, when commercializing a hematological cancer therapeutic developed within OICR, FACIT sought a multinational pharmaceutical partner with a vested interest in blood cancer therapies and a strong network as well as expertise in commercial drug development and regulation. Strong consideration was also given to partners that demonstrated a willingness and desire to increase their presence in Ontario. The culmination of these efforts resulted in the $450 million research collaboration, option and license agreement between Novera, a FACIT creation, and Janssen Biotech, LLC (Janssen), a Johnson & Jonhson company. “Not to downplay the importance of the financial attributes of this partnership, but what is truly valuable is that we have the right groups at the table to ensure this molecule is advanced through development. Leveraging the expertise of a partner like Janssen is critical to success,” says David O’Neill, FACIT’s Vice President of Business Development.

These examples represent important opportunities to shape the path to market for innovations and generate long-term benefits within Ontario that will improve scientific and commercialization competencies, as well as create a benchmark for future industry growth.

Success begets further success

Cumulative and impactful commercialization achievements result in re-investment in the economy, a form of feedback looping wherein new and additional capital, resources and expertise are attracted to the province for the next generation of research and assets. This leads to sustainability and growth.

It is evident that government support has enabled the positive outcomes of translational research institutes like OICR and business accelerators like FACIT. Ontario’s maturing pool of cancer innovations are attracting significant industry and investor interest, improving the province’s track record for innovation commercialization. Continued and increased government support are needed to realize the important impact that innovation in cancer research can have on patient lives.

To see this story online visit www.biotechnologyfocus.ca/ elevatingontarios-innovation-ecosystem/

genetic discriMination:

creating a new canadian law

there is an important process underway that has the potential to lead to a new Canadian statute that will impact the life science sector in Canada. A number of other national governments – for example, in the U.S., Australia and a number of European countries – have already taken legislative action to address genetic discrimination. While Canadian human rights laws, insurance laws and privacy laws do contain provisions that seek to minimize unjustifiable discrimination and prevent improper access to or use of personal information, at present, no laws in Canada provide specific protection against genetic discrimination. However, in light of recent events, it appears likely Canada will join the nations that have enacted legislative action to address genetic discrimination.

Genetic testing, which involves the analysis of a person’s chromosomes, genes, or gene products (proteins) to identify the presence of specific traits, can have many benefits. It allows people to learn about their parentage and ancestral origins, and is helping scientists to map pre-historical routes of human migration. It can be used to diagnose genetic conditions (diagnostic testing) or to identify a predisposition to a genetic disease (predictive testing). This information can help people initiate appropriate treatment early and adopt lifestyles that will minimize the possible harm of a genetic condition. It can also guide the selection of pharmacologic therapies and identify patients who are candidates for gene therapy, an approach that uses various techniques to replace, correct, suppress, or eliminate a mutated gene.

The possibility of improving outcomes and cost-effectiveness by tailoring therapy to a patient’s genetic profile has prompted consider able commercial activity and government funding in the emerging field of “personalized medicine.” Although, at present, relatively few tests for genetic conditions are widely recognized as reliable, and while a positive test result does not necessarily predict the onset or severity of an illness, it is recognized that genetic testing will continue to open up new areas of medical knowledge and new options for treatment. New tests are being developed at a rapid pace and these will increasingly become available.

At the same time, genetic information can, however, also be used for purposes other than for which it was intended, including potentially discriminating against individuals. For example, a genetic test could reveal a person who is otherwise in good health has a higher risk of one day requiring advanced health care or being unable to work because of an inherited condition. This information could affect how decisions are made in such matters as insurance and employment, among other things.

If an applicant for insurance has a higher risk for a certain disease, then that applicant presents a higher risk to the insurer of having to make payments for health coverage or life insurance. This may affect the terms of any policy offered to the applicant. Similarly, an employer may be less willing to hire a job applicant who is genetically at high risk of developing an illness or genetic condition for fear the applicant will not be as productive

as someone with a more favourable genetic profile.

Although the long-term ethical and legal consequences of genetic testing for employment matters, insurance contracts, and preventive medicine and treatment are not yet fully known, cases of alleged genetic discrimination have been emerging in different parts of the world, prompting calls from concerned citizens for government action here in Canada.

For example, the U.S. Council for Responsible Genetics has noted that in one reported case, genetic testing indicated that a young boy had Fragile X Syndrome, an inherited form of intellectual disability. The insurance company for the boy’s family subsequently dropped his health coverage, claiming the syndrome was a pre-existing condition. In another case, a social worker lost her job within a week of mentioning that her mother had died of Huntington’s disease and that she had a 50 per cent chance of developing it.

In the lead up to the last Canadian Federal election, the previous Government of Canada introduced the “Protection Against Genetic Discrimination Act”. However, the Bill died when the House of Commons was dissolved in June 2015.

After a new Canadian government took office last fall, a Senate Bill was introduced and passed entitled “An Act to prohibit and prevent genetic discrimination” (the “Senate Bill”). It was then introduced in the Canadian House of Commons where it is currently being deliberated. Whether the Senate Bill ultimately receives Royal Assent in its current form or in a modified form, it seems quite reasonable to expect federal legislation protecting against genetic discrimination will be enacted in Canada.

The Senate Bill proposes criminal sanctions for actions such as when one person requires another to undergo a genetic test or disclose the results of one as a condition of (a) providing goods or services to that individual; (b) entering into or continuing a contract or agreement with that individual; or (c) offering or continuing specific terms or conditions in a contract or agreement with that individual. The rationale for the use of the criminal law power is to attempt to bolster this federal effort to extend the protection beyond the ambit of traditional federal authority as reflected in the above noted statutes.

In addition, the Bill proposes amendments to several statutes of the Government of Canada – the Canadian Human Rights Act, the Privacy Act, the Personal Information Protection and Electronic Documents Act and the Canadian Labour Code.

The proposed amendment to the Canadian Human Rights Act would deem discrimination on the basis of a predisposition to a disability, as inferred from genetic test results, to be discrimination on the ground of disability. This Act applies to the federal government and First Nations governments, as well as to federally regulated businesses and industries, such as banks and telecommunications companies, in matters of employment and the provision of goods, services, facilities and accommodation.

The proposed amendment to the Privacy Act and the Personal Information Protection and Electronic Documents Act would specify information resulting from genetic testing is among the types of personal information protected by these Acts. The Privacy Act protects personal information collected, used and disclosed by federal government institutions listed in the Act, as well as any parent Crown corporation and any wholly owned subsidiary within the meaning of the Financial Administration Act. The Personal Information Protection and Electronic Documents Act protects personal information that is collected, used and disclosed by private sector organizations in the course of commercial activities. It also protects information on employees who work for a federally regulated business. Under these statutes, the consent of the person is generally required before the person’s personal information can be shared with third parties.

The proposed amendments to the Canada Labour Code would protect employees from being required to undergo or disclose the results of genetic tests and provide employees with other protections related to genetic testing and test results.

Various organizations, legal experts and other commentators have argued in favour of the need to pass legislation in Canada to explicitly address genetic discrimination. At the same time, the insurance industry has noted insurance contracts are generally governed by provincial laws. Although provincial human rights codes may already provide some protection for individuals from genetic discrimination, they also include some exceptions that may allow automobile, life, accident or sickness or disability insurance providers to make distinctions based on an applicant’s age, sex, marital status, family status, or physical or mental disability. The insurance industry has argued a discriminatory practice in insurance may be justified on reasonable and bona fide grounds – in other words, if it is based on accepted and sound insurance practices and if no practical nondiscriminatory alternative exists.

The current position of the Canadian insurance industry is that while companies will not require genetic testing of applicants for insurance, they will ask whether the applicant has been genetically tested in the past, and they will require disclosure of those test results where they exist. This position is generally justified on the basis there exists a good faith obligation under most provincial laws for an insurance applicant to disclose to the insurance company all information that might have a bearing on the company’s assessment of risk. The insurance industry has expressed concern insured persons who learn, after taking a genetic test, they are at high risk for a genetic disease could knowingly take out policies for large amounts of additional coverage without insurers being aware of any increased risk. Disclosing the results of genetic testing would therefore help ensure both parties negotiating an insurance contract would have the same knowledge about the health risks of the applicant.

As is true of many areas of our lives, technology is overtaking the current regulatory regime. It is in the public interest to ensure Canadians have access to medical advances in genetic testing without the fear of negative consequences for them and their families. This means Canada needs a better-defined Canadian legislative framework that will protect against genetic discrimination. The process to achieve that result is underway and further developments can be expected once the House of Commons resumes in the Fall.

Jeffrey Graham is a corporate partner in the Toronto office of Borden Ladner Gervais LLP. He holds B.Comm. and B.C.L./ LL.B. degrees from McGill University and graduate degrees in international legal studies from Cambridge and Columbia universities. He is a member of the Bars of D.C. and Ontario. He can be reached via email at jgraham@blg.com

To see this story online visit www.biotechnologyfocus.ca/genetic-discrimination-creating-a-new-canadian-law/

The Importance of finding investors with great networks

finding an investor is a bit like finding a customer or business development partner – you have to carefully search and identify the best fit, not one with “just money”. As an entrepreneur, you must look beyond the financial needs of your company. By finding the right investor, you can surround yourself with the right people to move your company forward, and importantly, to be able to do so in a time efficient fashion.

If you are a first-time biotechnology start-up founder, you may not know exactly where these investors are, but those with the best value-add and money are likely to have invested many times in the area you are operating. They know the contracting organizations such as CROs, academic institutions, scientific collaborators, and even the service providers such as IP counsel. They can help you identify the good, the bad, and the so-so.

Life science companies have their own unique needs. The right investors will know those needs – even those that you may not have anticipated. Investors may range from technically sound teams, to the best collaborators, or they could have the best scaleup expertise, regulatory advice, and related relationships to ease the challenges in moving a life science company forward – with regulatory always front and centre.

Investors can ‘check off’ all of the above if they have strong networks around them, and your company can reap the rewards of this connected network. These “right relationships” are the most critical in the early going since many early teams are filling multiple roles and do not have access to all the resources and/or knowledge about the best commercial path forward.

Here are some crucial aspects that your investors’ networks can help augment or accelerate.

expertise

The first step in the right direction is to find an investor that knows your sector. They understand not only the science and the technology behind your work, but as critically the market, the opportunities, and especially important in the life sciences sector, the regulatory process that needs to be followed.

For example, Verdex Capital is focused on Ag Tech investments in Canada. The collective expertise on our team ranges from farming and ranching, to biology and chemistry, to life sciences, and digital technology. That expertise is based on hands-on involvement as well as academic backgrounds and business experience. We also have past experience financing companies that have highly specialized technology that needed to fulfill certain regulatory requirements in order to be brought to market.

One other form of expertise that is of importance is negotiation. Any investor worth their salt is good at negotiation typically. They do deals, and always look for the best outcomes – always with an eye to aligning those outcomes with management and shareholders. Life sciences, in particular, is a broad area in which commercial agreements and routes to market can sometimes be murky. Founders are not necessarily experts at this skill. Getting a licensing deal together on your

own can compromise the exit opportunity or limit the potential buyers to the point where an investor does not care about how good the science is – they will not be able to make money.

capital and Talent

In Canada, the life sciences sector is one of the top industries that receives venture capital funding. According to the Canadian Venture Capital Association, 110 deals were completed in the sector in 2015, for a total of $647 million.

There are some pockets of capital available to life science companies in Canada. Some research into the Canadian investment scene will show the networks available to each venture capital firm by looking into who they have partnered with on their funds or have syndicated deals.

When researching these funding partners, it is good to note which venture capital groups have partnered with firms across Canada, but more importantly, which ones have international partners. These international venture capital partnerships may help broaden the network you have access to as a portfolio company, not just financially, but also strategically by having access to personnel you may want at the Board level, and linkages to other sources of management expertise.

Markets

While it helps to have local investors who truly understand your company’s operations in context with your market geography, it is important to know if they have the network to help you identify and break into the markets where your company is most likely to find success.

These markets can be within Canada, but to become a venture grade opportunity (meaning that venture returns are suitable from the particular investment), your company and/or your product must have applicability to be marketed globally. The right investors with extensive networks can help you challenge assumptions, collaborate on strategy, and assist your company break through those markets.

In addition, biotechnology startups can find support from investors and their networks when they need to scale up their operations. Investors can provide advice on the logistics of expanding operations to different markets, from knowledge of the local business scene, to production, to local regulatory frameworks. Having a global network, especially in areas of the world where your company aims on expanding towards, would be extremely beneficial for any startup.

In 2015, our parent company AVAC Ltd. established Verdex Capital to focus specifically on Ag Tech investments in Canada. We are one of the founding partners in the Finistere Ventures II (FVII) Fund, which is a $150 million fund with a mandate of identifying and investing in game-changers in the sector. The FVII Fund was established alongside Agrium Inc., Bayer CropScience (which is Bayer’s agribusiness arm) as well as another top-tier global brand company as well as other strategic investors in agriculture.

In this partnership, we have access to a global network. Finistere Ventures is a top-tier investor based in the U.S., with extensive connections in Australia, New Zealand, and Israel. One of the most interesting aspects of the FVII Fund partnership is that the largest investors are not all strictly financially-oriented institutions. The next closing of the fund is expected to announce additional strategic investors pertinent to the Ag Tech and life sciences sector. Finistere also has active partnerships in place by way of its Radicle Accelerator with DuPont Pioneer as well as other Silicon Valley investors. This is unique, and Verdex Capital is hard wired to this network.

Successful life science and Ag Tech companies don’t just appear. They are built block by block with thoughtful leadership and the input of those that have learned to navigate the business challenges in commercializing technology – which is where having access to a good network is key. Not every network will validate an opportunity as venture grade. However, this is also part of the benefit in seeking input from expert networks. The advice you receive may signal opportunity as strong business, even though not always as a venture grade investment case. You should know this to ensure time is efficiently utilized in either building the business or striking out to raise venture capital at the right time.

successful life science and ag tech companies don’t just appear. they are built block by block with thoughtful leadership and the input of those that have learned to navigate the business challenges in commercializing technology – which is where having access to a good network is key.

Mark Carlson is the Managing Director of the Ag Tech Investment group Verdex Capital Inc., where he is responsible for all aspects of investment operations including seeking Canadian portfolio companies for their $150M Ag Tech fund Finistere Ventures, the FVII Fund. @VerdexCapital

To see this story online visit www.biotechnologyfocus.ca/ the-importance-of-finding-investors-with-great-networks/