Chapter 3

 
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Large pharmaceutical companies used to do all their own R&D. When they realized they could no longer keep up with the fast pace and complexity of biotechnology, they were forced to adopt a new cooperative business model of innovation. Multinational biotechnology and pharmaceutical companies, operating in countries around the globe, no longer have their head offices, R&D facilities and manufacturing centralized in one location. Instead, much of manufacturing and R&D are outsourced, often in multiple countries around the world. While some internal R&D and the acquisition of start-ups still occur, the companies rely on scouts to identify companies with promising drug candidates or technology platforms that the larger firms can either license or buy to fit into the company’s pipeline of research and development.

Biotech scouts are experts who work in technology transfer offices, venture capital firms and large pharmaceutical, chemical and agricultural companies to identify promising research – drug candidates, industrial applications and healthcare solutions – that might be worth licensing or acquiring.

Canada’s biotech sector is ripe for new investments in agriculture, energy, oncology, clinical trials, medical device innovation and personalized medicine.

These cooperative strategic partnerships are mutually beneficial. Emerging biotechnology enterprises rely on these partnerships to get stable financing and the clinical, regulatory and marketing expertise of a large company. They depend on these partnerships because of the complexity of the research and the long time that development and regulatory approval take. Licensing or selling a product or platform tool provides revenue for the smaller firm to grow and to further R&D of its own product pipeline. This hybrid business model, in which a company licenses platform technology to pharmaceutical companies and has its own slate of drug candidates, is attractive for companies that struggle with the high costs and risks of bringing new products to market.

Canada’s biotech sector is ripe for new investments in agriculture, energy, oncology, clinical trials, medical device innovation and personalized medicine. And partnerships are working to reap the rewards by bring together entrepreneurs, research institutions, hospitals, industry, investors and healthcare systems. Together these clusters across the country are enhancing innovation for Canadians and the world and, in the process, growing companies that can compete with the best globally. 

Zymeworks is a great example of a company that has embraced this hybrid model as it licenses its biotherapeutics platforms to Big Pharma while discovering and testing biologic medicines of its own.

Accelerators, such as the NEOMED Institute, were established in response to this changing business model. In NEOMED’s case, it stepped in to bridge the gap that exists between research and the commercialization of pharmaceuticals.

Incubators also exemplify how industry has embraced this global model of collaboration and open innovation. For example, JLABS Toronto allows a large firm – in this case Johnson & Johnson Innovation – to provide space, equipment, financial support and expertise to multiple start-ups. This is fertile ground for new ideas to sprout and for emerging companies to synergize while being under no obligation to share proprietary rights to their products or technology with their host.

 

The Goal – Nurturing Globally Competitive Biotech Companies
Ventures thrive through domestic and international partnerships. This new discovery and commercialization model offers economic and social value as Canada leverages its position to move beyond creating and exporting innovation to building globally competitive biotech enterprises right here at home. The goal is to make Canada a world-class center of biotech innovation. This will lead to the growth of businesses, create well-paying jobs for the middle class and improve the health of Canadians and our environment.

The challenge is that capital is getting harder to access due to competition from emerging economies and countries with established biotechnology industries. Canada is not alone in recognizing the economic value of generating solutions to a growing population, climate change and healthcare problems. The United States has the most successful biotechnology clusters in the world, in San Francisco, Boston and Research Triangle, while the United Kingdom, Belgium, Australia and Israel are among the countries with strategies in place to commercialize the fruits of their robust biotech industries.

And, unlike Canada’s cornerstone resource industries, such as forestry or oil and gas, biotech has non-fixed IP. Ideas, and the people who have them, are mobile and are willing to move where the investments are. Ideally, those investments will be in Canadian biotech companies.

But the road from laboratory to marketing a commercial product is expensive and time-consuming – for example, the development of a new drug can take ten or more years and cost hundreds of millions of dollars. This time is needed to refine the discovery, evaluate its potential and undergo the clinical or field trials needed to win regulatory approval.

A nascent business can transform a good idea into a successful enterprise when it is part of a network of business, financial, legal and regulatory experts and institutions that form its community of support, cooperating for mutual benefit. This is the Canadian biotechnology ecosystem.

Researchers with a promising scientific concept need guidance to drive their innovation through the complex and lengthy development and regulatory process. For this, they often depend on business leaders who can champion their research and navigate the complexities of biotech financing, legal and regulatory environments.

 

THE MOVE FROM STARTUP TO SUCCESSFUL LAUNCH
Moving from an idea and the science to support it, to applications and commercial success requires investment capital. Global investors have a myriad of choices of where to put their capital. 

Unlike the natural resources our economy was grown on – mining, oil and gas, forestry – the main asset of biotech is intellectual property. And IP is portable. Research and development, clinical trials and manufacturing can be done in many places other than Canada.

 

Making Canada a destination for global investment capital
Attracting global investors is a challenge, but Canada can become a preferred destination for investment capital. Early stage companies go where investment is while investors are looking for safe, profitable ventures. Investors – including large companies – are looking to manage risk as they scout for promising products that can be brought to market.

Biotechnology R&D takes time and is expensive. It costs up to $1 billion and can take 10-15 years to discover, test, get approval for and market a new drug. Because of the lengthy development process for biotechnology, regulatory hurdles and the risk of failure, the global biotech investor tends to be patient and have a long term outlook. They are willing to accept the risk profile and time required to see a potential biotech innovation become a commercial success.

The economic and social benefits of commercializing products in Canada cannot be overstated. It will provide well-paying jobs for the middle class, deliver environmental benefits and improve the health and quality of life of Canadians. It allows emerging companies to grow and become successful. This success begets more success and leads to more entrepreneurship and eventually more Canadian companies.

 

Success Begets Success – Spinoffs from QLT
QLT is a biotechnology company founded by University of British Columbia scientists in 1981. The company develops photodynamic therapeutic products – drugs that are activated by exposure to light – with a focus on ophthalmology
and dermatology products as well as cancer treatments. It has been a training ground for many of Canada’s biotech leaders and entrepreneurs.

QLT marketed the oncology drug Photofrin®, first approved in Canada in 1993 and approved as a treatment for bladder, oesophageal and other cancers. Photofrin® was eventually sold to Quebec-based Axcan Pharma Inc.

QLT is best known for its ocular medicine Visudyne®, a treatment for wet age-related macular degeneration, the leading cause of blindness for people over age 55. The FDA approved Visudyne® in 2000. At the time, Visudyne® was the largest ophthalmic product launch in history with sales of $150 million in the first 12 months. QLT sold the rights to Visudyne to Novartis.

In 2016, QLT and Aergerion completed a merger and QLT changed its name to Novelion Therapeutics. Alumni from QLT form a who’s-who among Canadian and international biotech firms, including Aquinox, Valocor, ImStar, Vida Therapeutics, Mati Thetapeutics and VanRx.

 

Canada can’t be complacent
Global competition for this breed of investor – patient, expert venture capitalists and multinationals – is fierce. The United States, the United Kingdom, France, Israel, China and India are all moving forward to capitalize on opportunities to develop their biotechnology sectors. Canada must be as competitive as possible to garner our share. While industry plays a lead role in attracting investment, government policy establishes the hosting conditions that brings in investment that leads to commercial success.

Fortunately, Canada has not been idle. We have the tax incentives, funding programs, science-based regulatory regime and a federal government supportive of innovation that are needed to succeed.

 

BRINGING INNOVATION TO MARKET

Canadian innovation starts with scientific research at universities, hospitals, public research agencies and small private companies. A nonbrowning apple, a flu vaccine grown in tobacco, auto parts manufactured from soy beans, jet fuel from canola seeds – every biotech innovation begins with highly skilled Canadian researchers performing experiments in their labs.

 

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