Biotechnology Focus August/September 2016 Report

Survey Results

| By Shawn Lawrence

Special Report

Building a better life science and biotech industry in Canada Biotechnology Focus Readers give their input to the “Innovation Agenda”

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s most in the Canadian life science and biotech sector already know, the Government of Canada has spent the summer months engaging with the private and public sectors across provinces, territories and municipalities to formulate a new action plan for how we as a nation can support innovation and business growth. They have embarked on this plan, called the Innovation Agenda, in the hopes of cultivating a nation of innovators that are globally competitive.

Leveraging this call to action, Biotechnology Focus decided to follow government’s lead and continue the Innovation Agenda conversation with its readers. We chose to do this via a special Hot Button Issue Survey which ran from June 24 to July 22, 2016. The survey was open to everyone in the industry, including the business sector, academics, research institutions, service providers and more. We are pleased to say that many of you, 163 people in total, seized the moment by answering all 16 of our questions. In doing so, you helped us not only paint picture of the current state of the industry, but also in understanding the direction you’d like to see the “Innovation Agenda” take.

30 per cent of the vote. On the opposite end of the scale, 16 per cent were launched in the last three years. We expected these figures to be reflected in how companies/research organizations classified themselves in their life cycle, but this wasn’t the case. In fact, approximately

When was your company/research organization established?

1992 or earlier

1992-1997

1998-2002

2003-2007

2008-2012

Snapshot of respondents One of the first question’s we posed to our readers was when was their company/research organization established? Organizations and businesses launched from 1992 or earlier led the way accounting for

2013-present

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August/September 2016 BIOTECHNOLOGY FOCUS 13

Survey Results Where in Canada is your company/ research organization located?

In which category or categories would your company/research organization be classified?

Research & Development

Ontario

Consulting, contract research or other service provider

British Columbia

Manufacturing

Saskatchewan

Distributor, wholesaler or retailer

Manitoba

Health Service Provider

Quebec

Other (please specify)

Alberta 0%

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Yukon

Nunavut

How would you classify your company/research organization in its lifecycle?

Northwest Territories

New Brunswick Emerging phase (radically new products with frequent changes; high technical uncertainty but broad R&D focus)

Nova Scotia

Prince Edward Island

Growth phase (gradual increase in process innovation; at least one stable, high-volume product design emerges)

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Maturity phase (mostly process innovation aimed at cost reduction, incremental product innovations)

0%

In which sub-sectors of the industry would your company/research organization be classified?

Medical technology & devices Health biotechnology & pharmaceuticals Agricultural biotechnology Industrial biotechnology and bioprocessing Natural health products and functional ingredients Environmental biotechnology Bioenergy

Health IT

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resented accounting for 5 per cent, however, the over 100 employee crowd had the second highest figure among the survey groups at roughly 19 per cent. In this group were global biopharma’s Canadian subsidiaries, contract research and manufacturing organizations, but very few Canadian biotech companies.

In terms of geography, the majority of individuals who took the survey were from Ontario (62 per cent), with Québec (12 per cent) and British Columbia (9 per cent) a fair distance behind. Finally, in terms of which subsectors of the life sciences respondents were from, the majority were from Health Biotechnology & Pharmaceuticals (56 per cent) with Medical technology & devices up next accounting for 39 per cent.

What Biotech and Life Science businesses had to say:

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45 per cent of respondents considered themselves in the emerging phase focused on radically new products with a broad R&D focus. A further 37.5 per cent reported being in the growth phase with at least one stable high volume product in the pipeline, leaving 17.5 per cent at the maturity stage.

In terms of the relative size of the companies and research organizations operating in Canada, those employing 1 to 7 employees led the way in taking the survey at approximately 46 per cent, and approximately 62 per cent of respondents were part of staffs equal to or smaller than 15 overall. Respondents from mid-sized companies and organizations with 31 to 100 employees were tremendously under rep14 BIOTECHNOLOGY FOCUS August/September 2016

Access to capital continues to be the chief struggle for Canadianbased enterprises. This was reflected in one of the questions we posed with 69 per cent of respondents saying they received or were able to raise less than $1 million in 2015. In fact, 59 per cent of those surveyed said that funding or financing opportunities were harder to come by in 2015 than in past years, while 37 per cent said they found such opportunities no different than in past years.

It should be noted that businesses aren’t the only ones feeling the financial pinch as research organizations in Canada say they too are somewhat cash strapped. In fact, when combining both the private and public sectors, the majority (54 per cent) answered our survey saying they have less than one year of cash available, while a further 33 per cent said that they had one to three years of cash available.

Survey Results In the last 12 months, how much did your company/research organization spend on R&D?

0-50k

51-100k

101-250k

251-500k

501k-1M

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In 2015, what was the average number of people employed at your company/research organization?

1 to 7

“SR&EDs are a great tool for businesses, but could be made better” While access to capital is a concern, by most accounts, Canada still has a lot going for it. For example, the tax system is considered very competitive compared to other jurisdictions in large part thanks to the federal government’s Scientific Research and Experimental Development (SR&ED) program. When combined with provincial incentives, this has been a significant source of non-dilutive funding for many SMEs. In fact, among the initiatives and programs that currently provide assistance to Canadian based enterprises, SR&EDs led the way in our survey with 67 per cent of respondents citing it as the Canadian program that has been most crucial to their success. But as great as this program has been over the years, respondents say there is plenty of room for improvement. Amongst the responses were recommendations for not only maintaining but actually increasing this R&D subsidy. Moreover, many say it needs to return back to the way it was previously when it was even more generous to private corporations controlled by Canadian residents (CCPCs). Other suggestions included opening up SR&EDs to small publicly-traded companies with market caps of less than $100 million, as well as expanding the SR&ED credit

Which of the following initiatives have you used that you would consider most crucial to your success?

Scientific Research & Experimental Development Program (SR&ED) Industrial Research Assistance Program (IRAP)

8 to 15

Canadian Institutes of Health Research (CIHR)

16 to 30

National Sciences and Engineering Research Council (NSERC) Quebec Consortium for Drug Discovery (CQDM)

31 to 50

Ontario Centres of Excellence (OCE)

51 to 100 Sustainable Development Technology Canada (SDTC)

Over 100

Health Sciences Accelerator (Accel-Rx)

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Health Technology Exchange (HTX) Investment Accelerator Fund (IAF)

Did you find funding or financing opportunities:

Atlantic Innovation Fund (AIF) Atlantic Canada Opportunities Agency (ACOA) Ontario Emerging Technologies Fund (OETF) Business Development Bank of Canada (BDC)

Harder to come by

Private Equity (PE)

Easier to come by

Initial Public Offering (IPO)

Small and Medium-sized Enterprises (SME)

The same 0%

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Survey Results

How much capital/funding did you raise in 2015?

How many months of cash do you have available?

<1 yr Under 1M

1-3yrs

2-5M

5-10M

4-5 yrs 11-50M

5+ yrs

50M+

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qualification in other ways, including offering a similar tax credit for early stages of commercialization, and applying it to clinical phase manufacturing and other testing activities conducted within Canada.

“Increasing the IRAP budget and/or adopting a SBIR grant model would be a huge boost to Canadian life science and biotech SMEs” Another government program that the life science and biotech business sector relies on is the National Research Council’s Industrial Research Assistance Program (IRAP). The program provides technical and business innovation advice, financial assistance, and industry connections to other SMEs in Canada. The funding is non-repayable – meaning users don’t need to pay the money back (as long as the terms of the Contribution Agreement are adhered to, of course). Not surprisingly, approximately 46 per cent of those surveyed considered it an initiative most crucial to their success, ranking second to SR&EDs. Respondents said they have enjoyed the extra cash the program has put in their coffers, but they also feel there is still room to improve the program or even expand it. As one respondent pointed out, the Liberal government promised to deliver $100 million/year through the program last year, but only set aside $50 million towards it in the March 2016 Budget. This was disappointing to many of our readers who believe that going forward, government should follow through with its promise to increase the IRAP budget and make it more competitive with similar programs offered in other jurisdictions, such as the Small Business Innovation Research (SBIR) program in the U.S. This leads into another area of agreement amongst our readers, the need for adopting or emulating this program in Canada. Their reasoning is simple, the SBIR was created to provide early stage funding and has done a great job south of the border enabling younger and smaller firms to cross what has become known as the “Valley of Death”.

Should such grants be offered in Canada, they would be a huge boost to small businesses and start-ups, giving them a new avenue for seed and early stage funding, an area deemed too risky for the VC industry.

One last recommendation regarding both SR&EDs and the IRAP program is to make the application process for such programs simple and more business friendly, with less red tape as startups are in the business of creating products, not writing grant proposals.

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Human Resource Issues Retaining, attracting and growing talent remains a challenge for Canadian biotech and life science companies. Moreover, due to the nature of the industry, many companies rely on a virtual model and outsourcing. As such, they aren’t willing or able to hire co-op students. Those that do hire, say they prefer to hire qualified workers with industry experience as opposed to those with only an educational background.

As such, there is a need to train and develop Canadian talent with translation and commercialization experience. So the question then is how can we help students cross over from academia into industry?

Many respondents pointed out that when government sets out its economic goals, that it’s always preaching job creation as a major measure of success. Our readers suggested that government should either provide tax credits to companies who create co-op positions for these students as well as offer more unique funding programs that reward companies that hire them. This approach would give

Which of the following executive positions are the most challenging for your company/research organization to fill?

Chief executive officer

Chief financial officer

Chief scientific officer Business development and sales Clinical and medical development Engineering

Manufacturing Regulatory affairs Other (please specify) 0%

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Survey Results companies added cash to grow their employment numbers, or help students secure much needed industry experience that is in such high demand. One respondent even suggested designating a wage subsidy program for such hires.

In terms of attracting talent from other jurisdictions, our readers were very much in agreement with the Innovation Agenda’s statement that highly skilled workers, researchers and entrepreneurs should be welcomed to Canada in higher numbers and at a faster rate than in other OECD countries, which are competing for the same talent. One suggestion was expediting immigration for biotech workers in the same manner that Microsoft has done with IT professionals in Vancouver.

As for some of the other more common answers we were able to gather from the business community, many were focused on facilitating the attraction of private funding and creating an investor friendly environment.

They include: • Adopting a flow-through share vehicle • Give investors tax breaks based on amount invested into the sector • Quicker response time from Health Canada and patent offices • The creation of life science specific investment funds • Improve the terms at which government organizations such as BDC provide capital • Investment in early stage research companies • More public-private partnerships and an open door policy at federal research institutions for companies who wish to partner • Ensuring Canada SMEs have access to affordable market intelligence • Create an environment that fosters collaboration • More mentorship programs

“Med tech’s biggest priority isn’t financial; it’s addressing policy around the adoption of new technologies” Med tech businesses represented the second largest industry subsector to respond to our survey, coming in at 39 per cent. While they shared many of the same asks as their biotech and pharma peers, many of their concerns focused on policy and creating a less onerous process for adopting and scaling innovation beginning with a reduction in regulatory barriers for products and devices. They would also like to see more collaboration between provincial and federal health care bodies when it comes to approving and procuring Canadian made technologies. Moreover, they also want a unified national reimbursement strategy that is more efficient shortening the approval process. Another complaint is that the Canadian healthcare body isn’t active enough when it comes to purchasing Canadian technologies, especially those that are the product of government-financed initiatives. If made mandatory within the med tech sector, Canada could serve as a test bed for these new unproven technologies, thus, better positioning them for international buyers.

Another complaint is that under the current system, health technology companies and Health Canada never partner. As one respondent put so eloquently, “financing isn’t our issue, partnering with physicians and hospitals is.” Med tech companies would like to see this change, and the best way is creating incentives for Canadian public institutions (hospitals, universities, research centres) to adopt made in Canada technologies. On this front, respondents suggested a federal smart procurement program.

Some other suggestions included commercial proof of concept funding, commercialization innovation tax credits, a reduction of

What is your reported revenue (product, sales and services) for your fiscal year ending in 2015?

0 to 0.5M

0.5 to 1M

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20 to 50M

>50M

No revenue

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Health Canada registration fees and programs that offer both domestic and international marketing assistance for their products.

Research Organizations By most accounts the new Canadian government has stepped up its game in its support of universities, colleges, research organizations and research institutes. For example Budget 2016 provided support for health research, genomics, regenerative medicine, brain research and drug development, while committing $800 million to support innovation networks and clusters. Furthermore, $95 million was earmarked for the research granting councils, $237 million was directed to Genome Canada, and $12 million went to the Stem Cell Network.

This type of support is indicative that government is serious about backing its world class research facilities and personnel. Moreover, respondents said that they appreciate that this government is open to discussing what comes next with the Innovation Agenda.

And this is where things get a little murky, as there is a divide within

How does Canadian science/ business policy compare with other jurisdictions?

Excellent

Above Average

Average

Below Average

Poor

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August/September 2016 BIOTECHNOLOGY FOCUS 17

Survey Results As for some of the other more common answers we were able to

For example Budget gather from the research community, they include: 2016 provided support • Increase government focus on international partnered projects • Pick winners in terms of regions and in terms of areas of excellence for health research, • Bigger grants, less piecemeal programs Better equipment for universities and research institutes genomics, regenerative •• Open door policy between industry and Canadian research instimedicine, brain research and drug tutes development, while committing $800 Some of the other opportunities and priorities million to support innovation networks put forth: A fairly sizable contingent who took our survey chose not to list and clusters. priorities specific to the needs of their business or organization. Inthe research community on where government should be directing its funding. This was evident by the conflicting responses we got on the types of projects that should be supported, for how long this support should be provided, and what the end goal of the research being supported should be.

On the one side, we had respondents who were looking for funding strategies that encourage a return on investment on publicly-funded research. Namely, they want to see federal funding focused on translational and applied science, and commercializing the innovation as the end goal. As an example, they want to see more universityindustry partnerships and they want government to heavily incentivize academia to collaborate with CCPCs. Likewise, these respondents want improved validation of how funds are granted and to hold fund recipients to performance milestones and measures of productivity.

They place the onus on researchers to first define the need for the innovation they are developing, and they believe that funding decisions should be reviewed by senior experts with granting agencies following up with strict performance management.

On the opposing side are respondents who believe that this is already happening too often, that too many funds are tied up on development projects with a commercial end goal and that basic research funds have already declined too much. They argue that fundamental/ basic research is the foundation for future innovation, the backbone of the Canadian research landscape and as such should get first dibs when it comes to funding.

However, both sides are in agreement that the Federal government needs to change its mentality of making many small pots of money available over short periods of time to individual projects and focus instead on providing larger amounts that last over a longer term. They say this would allow researchers to complete their projects and give them a higher chance of success.

From your responses, it’s easy to see the sector has come a long way from the dark days of 2008/2009, and there’s a real sense that the current government is a much more open to working with our industry than its predecessor.

18 BIOTECHNOLOGY FOCUS August/September 2016

stead, they suggested key scientific areas of excellence or potential excellence for Canada to focus its funding efforts and compete more vigorously.

Topping this list was supporting the development of Canada’s biomanufacturing capacity via a dedicated initiative or strategy. Our readers added that there is a real opportunity to make Canada a global leader in this area, not just in health biotechnology, but also in the agbiotech and bioindustrial sectors.

Clinical trials was also cited as an area of specialization and respondents want to see more support for clinical trial initiatives nationally.

They add that many jurisdictions in Canada have already taken significant steps to streamlining research ethics boards, and clinical trial reviews. They say the infrastructure is already in place, all that’s needed is an increase of marketing activities focused on promoting Canada as the best place to conduct these studies.

As for some of the other common suggestions in terms of areas of specialization, they include: • Stems cells and regenerative medicine • Genomics and genetic research • Personalized medicine • Ag-biotech

Conclusion From your responses, it’s easy to see the sector has come a long way from the dark days of 2008/2009, and there’s a real sense that the current government is much more open to working with our industry than its predecessor.

And yet, as has been pointed out by your responses there are gaps that still need fixing. Moreover, cash is as elusive as ever for our homegrown companies and research organizations. Entrepreneurs must have the support necessary to turn ideas into businesses and innovators must have support to be innovative. Canada has what it takes to become a global leader in biotechnology. Between a skilled and culturally diverse workforce, generous tax incentives and a strong fiscal position, the Canadian industry boasts huge potential.

The Innovation Agenda promises huge changes to researchers and businesses alike. In order to deliver on that potential, however, Canadians must commit – and the Innovation Agenda is the beginning of that commitment.

We’d like to thank those of you who took the survey and for sharing your top priorities with us.

To see this story online visit www.biotechnologyfocus.ca/ building-a-better-life-science-andbiotech-industry-in-canada/