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saskatchewan Bioscience
The Galleria Building at Innovation Place in Saskatoon, SK (AWB photo) The College Building at the University of Saskatchewan (istockphoto.com)
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SASkAtchEwAn bioSciEncE
Saskatchewan’s bioeconomy is poised for sustainable long term growth. While attracting investment may be a challenge, there exists in Saskatchewan an enviable mix of capacity spread throughout industry, government and universities.
Saskatchewan has the infrastructure and research expertise to make things happen.
Worldwide, there is no question: bioscience innovation is needed. There will be more people on the planet and many will enjoy rising incomes. The amount of arable land is decreasing; many resources are less plentiful or more expensive to extract; add to this the challenges presented by climate change.
Bioscience innovations will be essential to feed populations and fuel the need for transportation, energy and industrial materials – in a way that is more sustainable and friendly to the environment. Already a Canadian bioscience leader, Saskatchewan is poised to become a bright spot for innovation.
When biotech boomed in the early 1990s and early 2000s, a genetics professor with a new discovery could expect “The good thing is that because of new research technologies, genomics, screening, marker assisted breeding, we have more capabilities on the research side. We also millions from investors eager to be part of the next big thing. Those days are pretty much in the past, says David Gauthier, CEO of the Entrepreneurial Foundation of Saskatchewan. “Getting to cash flow is a huge challenge because private equity has moved to laterstage deals. Investors know it’s harder to make money during early stages. It takes a long time and there’s a high failure rate,” says Gauthier, whose organization advises entrepreneurs seeking financing to grow, transition or reach stability. Gauthier’s background gives him unique insight into the ups and downs of biobusiness. With a Biology PhD and an MBA, Gauthier once managed a national venture capital fund specializing in agricultural science. He moved to Saskatoon in 2005 to become Regional Director of National Research Council’s (NRC) Industrial Research Assistance Program. Gauthier became familiar with Saskatchewan’s ag biotech industry in 1990 while doing his graduate work. He recalls a “palpable” sense of excitement fuelled by ready investment dollars and the significant presence of large multinationals in Saskatoon. promises to capture Today, many of those multinationals have scaled back their presence. The relative scarcity of early investment value from innovation dollars aside, Gauthier believes bio-business has a bright future and Saskatchewan will play a leading role. have more diverse biotech companies in the province. Maybe they’re not as big, or concentrated in one sector, but they’re a diverse group using molecular and biotech tools to support different business models,” Gauthier says.
traditional advantages
Saskatchewan’s traditional strengths as an agricultural centre also play a role, says Jerome Konecsni, director general of NRC’s Plant Biotechnology Institute. “Saskatchewan has many advantages, including 40 per cent of Canada’s arable land. We have skilled producers and a good distribution system,” Konecsni says. Add to the mix a healthy business atmosphere and one of the lowest tax rates for manufacturers, and the province is more than competitive. But Konecsni notes that skilled personnel are still needed on the processing side of the equation. “I believe we’re on the right track. The province has identified three pillars for inno-
Theo Maatman, technical officer, Plant Growth Facilities works in an greenhouse occupied by National Research Council-Plant Biotechnology Institute. The most advanced facility of its kind in the world, VIDO’s International Vaccine Centre (InterVac) in Saskatoon, SK will be used to study containment level 3 diseases affecting humans and animals. Photo courtesy VIDO-InterVac.
vation strategy, based on natural advantages. Encouraging more industrial investment is an important part of the plan,” he says. Konecsni was recently appointed CEO of Innovation Saskatchewan, assuming his new position at the end of September.
Mary Buhr is also confident about Saskatchewan’s role in the future bioscience world. Buhr is Dean of the University of Saskatchewan’s College of Agriculture and Bioresources, moving from Guelph in 2008 to take the helm at U of S AgBio.
“One of the things that blew me away when I got here, was how incredibly effective and functional the research community is here. There is a lot of collaboration whether you’re from the corporate world, university or government,” Buhr says.
“I’ve said this many times before – our research park in Saskatoon, and this extends to Regina as well, is second to none in Canada. Where else can you find facilities like the Canadian Light Source, VIDO-Intervac, a nuclear industry, Agriculture and Agri-Food Canada and various federal and provincial facilities, and generally a sense of optimism from people who work in the sector.”
What needs to improve, says Buhr, is the actual number of companies “on the ground” bringing research and knowledge to commercial markets.
“We still tend to be people who sell raw- or lightly-processed material for export, and leave the fine details to be done elsewhere. Of course transportation is an issue, and we don’t have a large manufacturing industry, but at the same time we can’t limit ourselves to developing great ideas yet having the products created somewhere else. We lose out.”
Need for bio
With plentiful natural resources increasingly in demand, some might think Saskatchewan could enjoy prosperity just relying on its natural bounty. But that would be a mistake, says Peter Philips, an international political economist and head of Political Studies at the U of S.
“This is probably the third commodity cycle I’ve seen during my professional career – what goes up, does come down,” cautions Philips.
“Having a resource is not enough in the 21st century. And the value that can be added to something, whether it’s a pound of potash or uranium or canola, the bulk of that value isn’t in the resource or even the land and capital infrastructure. The bulk of that value is knowledge, and knowledge is very fluid.”
That means a continued investment in creating and sustaining knowledge, and attracting and using the people who create this intellectual capital, says Philips.
Proof of the concept, he notes, lies in the value now being realized because of strategic investment in Saskatchewan’s agrifood cluster in decades past.
“If you look at Canada, every province used to have an agriculture college and federal laboratory. Many now do not. Saskatoon is now extremely competitive because it has these things – if you’re a firm looking to do basic research and adapt technologies and products to new production and supply chains, it’s not like there are hundreds of candidate cities,” Philips says.
Ag-West Bio could be considered one of those early investments, and Wilf Keller, the organization’s president and CEO says it is essential that the public and policy makers understand the potential role of bioscience in economic and human health terms.
“Bioscience is really coming to the fore. You can think of it as the threshold of another era of science. Some people liken it to the computer industry,” Keller says.
It’s a new era, with the potential for developing new genetic strains in crops and livestock, ensuring adequate food as the climate changes, and allowing a better understanding of the role of food and food ingredients in human health, says Keller. Bioscience will provide new methods of diagnosing or preventing disease, and healthier ways of creating renewable energy and bioproducts, such as plastics and lubricants. “Our environment, our economy and our health; these are things that matter to all of us.”
The basic infrastructure already exists for capturing value from bioscience innovation here at home, but Keller says more direct public investment is needed to foster the critical mass of companies needed for any healthy cluster.
“The pool of venture capital in Saskatchewan, and Canada, is too small and riskaverse. We of course have a number of programs and agencies in place, and Ag-West is one of them, but it would be desirable to see more of these, with more funding, working more closely together,” Keller says.
“More public labs won’t be a key aspect going forward, but companies in a cluster can play a much stronger role. We have a vision of where we want this cluster to be in Saskatchewan – a critical mass of companies that supply other companies, a critical mass of managers, researchers and well-trained employees.”
Governments can also assist by easing the regulatory burden that sometimes prevents helpful technologies from ever reaching commercial markets.
“We need to provide the venture capital and remove some of the red tape. If we can do that, I see a very bright future for bioscience in this province,” Keller says.
www.bioscienceworld.ca
A PAth bAck to SuccESS:
How Canadian Biotech can regain lost ground and access capital
With domestic biotech companies capturing just two percent of all global capital raised in 2010 – a drop of five per cent since 2006 – and private financing in Canada at its lowest point in 10 years, it’s clear the industry is losing ground on the global stage. The Canadian biotech industry must return to business fundamentals and reinvent itself to capitalize on the opportunities born fromthe changing health care system.
Few industries face increased demand quite like biotechnology. Medical, pharmaceutical and biotech are critical as demand for health care services continues to grow and expand, fuelled by an aging demographic and new entrants into the healthcare system (China, India). Last year, the industry experienced record-breaking profitability in multiple markets, and in general, funding appears to be rebounding on the international stage.
And yet no one would mistake the current climate as golden days for the life sciences sector. Although funding grew last year, with companies in Canada, Europe and the U.S. raising $25 billion in 2010 and marking a return to pre-financial-crisis averages – that funding is increasingly skewed to a small number of firms, and in particular, is going to mature, profitable firms, meaning funding for ‘innovation’ continues its downward trend.
Meanwhile, biotech firms seeking operating efficiency have sharply reducedresearch and development spending. This is particularly true in Canada, where R&D expenses were slashed by 44 per cent in 2009, followed by a 7 per cent decline in 2010. Clearly this is not a sustainable long-term model for success; innovation in the sector is required.
And while the industry enjoys steady demand, with it has come greater expectations of efficiency and effectiveness, especially from governments straining under ever-increasing health budgets. An outcome-based health care system is the new reality; firms will need to operate more efficiently even as they dedicate more resources to demonstrating value.
Ernst & Young’s annual global biotech industry report, Beyond Borders, noted that as in resource development, the early highreturn opportunities in biotech have been found and now R&D will become even more vital in finding strategic opportunities. This ‘resource’ metaphor should not be lost on Canada, a country long associated with a blessing of rich resources that has not met its full potential in the refinement of finished products. Once again we run the risk of failing to invest adequately where we could realize the most value.
The risk for Canada of reduced funding and strained resources for innovation trends is that we’ll be left behind on the global scene, consigned to become a net importer of the most valuable knowledge, products and services–a model that does not servewell the domestic biotech industry nor the public payers well.
But there is a path back to success. And although the solutions for Canada are not especially different than those for the rest of the world, Canada must act with greater urgency if it hopes to regain lost ground and harness its full potential.
What are those solutions? Firstly, by refocusing on business fundamentals, Canadian industry can reverse its downward trend and establish a more stable footing. Secondly, a resolute willingness to embrace innovation will enable Canadian firms to capitalize on the opportunities born of the changing health care ecosystem.
Four complementary approaches can sustain the innovation needed to succeed:
Prove it or lose it. In an outcomes-driven ecosystem, companies will be under more pressure to prove that their products are differentiated. In an environment where health care needs to become more sustainable and where new technologies are creating opportunities to realize that goal, both health care providers and patients will change their behaviours and expect the same of others. Biotech firms will have to prove they can do more than sell doses; they need to be a part of the improvement of health outcomes, and they need to demonstrate it to regulators, to payers and to investors.
Do more with less. Companies will need to find new ways to manage capital and conduct R&D more efficiently. While raising capital is itself a challenge in the current climate, there are actually four pieces to the capital puzzle: raising, optimizing, preserving and investing. On the capital side, companies will need to be creative in raising,
optimizing, preserving and investing scarce capital – from new ways of monetizing existing intellectual property to pursuing “virtual” company models to reduce fixed infrastructure. On the R&D side, targeted products for smaller populations can be more efficient, requiring smaller trials, less generic competition and fewer safety issues.
Build new competencies. To support the first two imperatives, managers will need different competencies: awareness of changing market dynamics, management discipline, effective performance management, the ability to measure and communicate value, and the creativity to develop new models and approaches.
Collaborate for co-ordinated action.
As with their leaders, biotech companies themselves must adapt to exist in a broad interdependent business culture. Sustaining innovation in an outcomes-based system requires changes that biotech companies cannot make alone, necessitatingco-ordinated action with everyone from investors and policy makers to payers and regulators.
Can the Canadian biotech industry adopt these approaches and grow and sustain innovation? It’s certainly not for a lack of potential. We have intellectual assets, infrastructure and a global reputation; these form a strong foundation that means these four fundamentals are all within reach. But growth, perhaps evensurvival, depends on adaptation; sticking with historical business approaches and attempting to compete by shaving spending on research is neither strategic nor sustainable. Instead, demonstrating a home-grown capacity for both innovation and value can be the hallmark of a reinvigorated Canadian biotech sector. Above all, it’s the intangible factor of the industry’s willingness to embrace new values that will form that path back to success.
Paul Karamanoukian is Ernst & Young’s Canadian life sciences industry leader. Read more in Beyond Borders: Global Biotechnology Report 2011 at www.ey.com/GL/en/ Industries/Life-Sciences/ Beyond-borders--global-biotechnology-report-2011
www.bioscienceworld.ca
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