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CANADA’S BIOTECH INDUSTRY DRIVING CANADA’S ECONOMIC TRANSFORMATION
CANADA’S BIOTECH
INDUSTRY Driving Canada’s Economic Transformation
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In a post-recession economy, the need for Canada to remain globally competitive has never been more important. Central to Canada’s ability to emerge in a competitive position from the recent economic downturn will be the ability of traditional industries, and the manufacturing sector more broadly, to reengineer themselves and compete in the emerging bioeconomy. And if Canada’s economy is to successfully reengineer itself, it will heavily depend on a healthy and innovative biotechnology sector. But Canada can go beyond simply competing, with the right partnerships and strategic investments it can become a world leader. Despite the recent economic downturn, Canada’s bio-economy has grown 12 per cent over the past four years and now stands as an $87 billion per year driver, representing 7 per cent of national GDP. It is the foundation of the Canadian bio-economy that represents an employment network of one million people from coast-to-coast. All of this has helped stabilize the economy and establish the industry as a central part of Canada’s economic recovery and long-term growth. But the status quo is not enough, the industry must continue to re-invest and innovate to stay ahead of the competition in other nations. Industry must do its part, as must its other partners including governments at all levels.
andrew casey President and cEO, BIOTEcanada
BIOTECH SOLUTIONS ABOUND
Through the recent economic downturn, Canada’s biotech industry has become an essential component of the transformation and redefi ning of many traditional economic cornerstones including forestry, energy, aerospace and other manufacturing industries. In partnership with these other sectors, the biotech industry has helped position the Canadian economy as a leader in the emerging global ‘bio-economy.’ There is now a bio-based component in virtually all sectors of the economy in the form of improved products and processes.
Canadian biotech companies are developing sustainable bioenergy technologies to power cars and jet aircrafts. Renewable composite materials are now an essential component of virtually every aspect of our lives from transportation, to housing, to even food. Clean chemicals are being produced for use in clothing, lubricants and cosmetics along with a host of other consumer and commercial products. Canada’s industrial biotechnology companies are commercializing solutions to address existing and emerging global issues including, but not limited to, the need for renewable energy sources, issues of climate change, and environmental degradation. This is a rather signifi cant attribute given the forecasted growth in global population and the pressures this will place on an already over-taxed land base and climate.
From resource management to renewing manufacturing technologies, from new medicines to healthier foods, from renewable energy sources to cleaner chemical production, biotechnology is driving vast levels of innovation into all elements of the Canadian economy. We are now at a point where biotechnology is an essential component that will facilitate the reinvention of numerous industries that will, in turn, ensure long-term competitiveness and create employment opportunities for our best and brightest. This new reality offers a distribution of economic opportunities across Canada, with a signifi cant emphasis on regions of the country that have been particularly hard hit by the economic downturn.
THE CANADIAN BIO-ECONOMY EXPERIENCES 12% GROWTH OVER THE PAST FOUR YEARS
Billions $ CDN
180.0
160.0
140.0
120.0
100.0
80.0
60.0
40.0
20.0
0.0 + 12 %
Oil & Gas ICT Bio-Economy Auto Aerospace
INVESTMENT: IT’S ALL ABOUT ACCESS TO CAPITAL
However, if Canada is to capture a piece of the global bio-economy pie, it must maintain its competitive position globally. Other leading industrial nations are mov-
THE $87.3 BILLION CANADIAN BIO-ECONOMY BY SECTOR
ing aggressively to position their respective bio-economies at the forefront of the next generation of economic growth. Canada must keep pace or it risks being left behind.
Presently, equity and risk capital investments in Canada’s biotech and life sciences industries are behind what is being invested south of the border. Looking ahead, access to capital will be central to the biotechnology sector’s ability to undertake research and bring new products and processes to commercial development. Capital will always gravitate to where the returns on investment are the greatest and fastest. Recognizing this, a number of countries have implemented aggressive investment strategies, providing their respective biotechnology sectors with a competitive advantage in accessing capital.
In April 2012, the Obama administration launched the National Bio-economy Blueprint, a national strategy to increase research capacity, cut regulatory hurdles, and identify opportunities where the U.S. can be competitive. Similarly, the European Commission recently adopted a bio-economy strategy with a clear focus on innovation for environmental sustainability. Canada is clearly facing signifi cant competitive international pressures to keep pace. If we are to remain competitive in this regard, industry and governments must keep step with what other countries are doing to spur the commercialization of their biotech and life sciences technologies.
The Federal Government has undertaken meaningful initiatives to ensure Canada’s tax system remains competitive with those found in other jurisdictions. Canada’s SR&ED program is one of the most generous tax credit programs in the world and is a catalyst of risk capital formation from foreign sources. Leading industrialized countries including Australia and France have recognized the spin-off benefi ts of investing in R&D tax credits and have recently made signifi cant improvements to their respective programs. In order to ensure Canada retains a competitive edge in attracting foreign direct investment and growing domestic research and development capacity, the SR&ED program should be examined with an eye to ensuring that it remains a global leader. In addition, the SR&ED program supports downstream sectors in the R&D value chain including manufacturers of plants, machinery, equipment, and raw materials processors. Increasing the eligibility criteria of SR&ED will boost the competitiveness of attracting risk capital from foreign sources and will have a signifi cant positive impact on supporting sectors of the innovation economy.
Biotechnology must remain at the leading edge of innovation, but it will not happen in isolation. Canada has made signifi cant progress in securing important building blocks for a growing bio-economy. But the need for coordinated actions from all parties remains. By working together, industry and governments can set in place a competitive market framework that will attract research investment and deliver the rewards of commercialization.
PUBLIC POLICY: WEAVING THREADS INTO WHOLE CLOTH
While much has been done to support the growth of Canada’s biotech industry, more can be done to foster a vibrant biotech sector. Given the diverse nature of the industry, it is not entirely surprising that government policy has grown equally fragmented in response. Depending on the process or the product, biotech companies can be subject to a number of overlapping and duplicative policy regimes. At the federal level alone, the industry falls under the mandates of no fewer than six departments including Industry, Health, Finance, Agriculture, Environment, and Natural Resources. Understandably, this can lead to duplication and confusion for both industry and government, something that will simply compound itself as the industry continues to grow and extend its reach further into the economy. With so many industries and sectors depending on biotech, it is imperative that industry and government work together to develop a strategic and coordinated public policy framework in support of the industry, its products and investments.
The outlook for the Canadian bio-economy is promising. The Canadian economy was not as hard hit by the global recession as other industrialized nations were. Moreover, many sectors took advantage of the economic downturn to begin the process of reinventing themselves and preparing to compete globally in the very promising bio-economy. Canada’s biotech sector has grown to be a core element of that transformation. There remains signifi cant opportunity ahead for the industry and the economy more broadly. However, the industry and government must move swiftly and strategically if we are to get and stay ahead of the competition. With the right elements in place and a clear commitment to future growth and expansion, there is no limit on what Canada can achieve over the next 25 years.
Andrew Casey is President and CEO of BIOTECanada. BIOTECanada is the national industryfunded association with over 250 member biotechnology companies representing health, industrial, and agricultural sectors.
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SCIENCE SOLUTION:
The Business of Innovation
There is little doubt that the federal government is reshaping the public service. For example, Ottawa is getting out of areas of provincial jurisdiction and easing up on its regulatory role. In science, government is also looking in new directions, driving innovation and contributing to national prosperity with an emphasis on creating value through the private sector. In June, Gary Goodyear, Minister of State, Science and Technology spoke with Biotechnology Focus sister publication Canadian Government Executive’s editorin-chief Toby Fyfe outlining this strategy and what it means for industries such as the life sciences going forward.
Q What do you see as the connection between innovation and national competitiveness?
Well, I think when you compare us to our peer nations, Canada has some of the top post-secondary institutions, a well-skilled labour force, and, according to some experts, far too many programs that help Canadians and businesses succeed. That said, though, we are in fact number one in a number of areas, and that’s good news story.
But we’re not number one in some areas that are very important. We are not number one in business expenditure on research and development. We’re trying to identify those reasons and assist business by making changes both in the programs and how we do business as a government to close those gaps; to, in fact, literally create the environment and provide the tools with which businesses can better succeed in a changing global environment.
Q In Budget 2012, a theme related to science and innovation was that the government is going to make it easier for businessled initiatives and easier for the private sector to generate wealth by moving from indirect to direct support. Is the notion to move faster, more effi ciently, or both?
I would say both. Right off the bat, the fi rst priority is more effi ciency. Obviously we want to make sure we return to balanced budgets. But time is of the essence in terms of innovative capacity. So we want to move there quicker than we were going ten years ago.
It is time that the government takes a role in encouraging businesses to recognize the need to be innovative, and become, as a result, more globally competitive. Things have changed, markets have changed, and products have changed, so the majority of our Canadian businesses, while many do great research and development, could always do more.
Q Is it correct to say that the government’s short-term goal is to translate public research into knowledge for the private sector?
Well, the Expert Panel leading the Review of Federal Support to R&D led by Tom Jenkins said we had to fi nd a better balance. There are far too many programs, which not only confuses business but also makes them accessible only to the few that do know about them.
The other identifi ed issue was that we
needed to find a better balance between direct and indirect support. And we have had more investment in science and technology as well as a plan. Let me just tell you in very brief terms what that plan was. You will remember the Knowledge Infrastructure Program. Ultimately that program ended up being over five billion dollars spent specifically on improving infrastructure at our colleges and universities. The second thing we did, pretty much at the same time, was to provide three quarters of a billion dollars that had to be matched to the Canada Foundation for Innovation to put state-of-the-art equipment in those buildings. The third thing we did was fund to significant levels things like our Vaniers, our Banting post-doctoral fellows, the Canada Research Chairs, the Canada Excellence Research Chairs – those alone are $10 million over seven years.
You can see just briefly that we now have a brain gain. We have the equipment for those people to use in brand-new buildings across the country. We are now focusing on the other end of the spectrum. The balance, the natural next step for the nation, is to look at those areas where we can make sure that Canada and Canadians are getting the maximum benefits out of these tax dollars.
Q Are you concerned that the various players – the private sector, universities, the federal government, the provinces – could run the risk of becoming a highly fragmented system?
We all have areas to continue to improve on efficiency, but I will say that no perfect storm lasts forever. Over the past couple of years in the science and tech file, as well as the economic development file, what I have seen is a remarkable team effort. I believe I can say with fairness that the provinces are working hard with us, the universities and colleges are working hard with us, and now, as I say, our focus is the natural next step, the business side of the innovation and job creation section of this plan. And I have to tell you that I see folks working more and more side by side, working together, not competing against each other, but getting the bigger picture, working together as a team to compete against the world.
Q One of the concerns with this focus on direct, as opposed to indirect or pure science, is that we will lose pure science capacity in the long-term and possibly knowledge in the longer-term. Are you worried about that? Not in the least. The last time the nation faced a recession – nothing of this magnitude – we saw the governments cut science and technology. This government has taken entirely the opposite approach. We are now at historic levels of investment in all areas of science from the Perimeter Institute and the Institute for Quantum Computing in Ontario all the way through to Triumph and Neptune in British Columbia, as well as more funding for the next-generation medical isotopes and so on. We have a very strong respect for all levels of science, and why wouldn’t we? The economies of the future, whether it’s ten years from now or 50 years from now, will be bolstered by the discoveries from the investments we make today in basic research.
We have a very balanced approach, now approaching $12 billion per year in science and technology, the full range. I can tell you that when we took government, it was around $5 billion. So for every scientist, whether they’re applied or they run their own companies, or they are on the pure discovery end of something, there is more money for more work. In every spectrum. I don’t see that changing.
This government has provided funding for every level because we respect that those areas that are closest to market will help us now and we need to maximize that, and those areas that are furthest away, the pure, basic discoveries are, in fact, the power for commerce in the future.
Q What’s the cost to Canada if we can’t get better at innovation and performance?
The Institute for Competitiveness and Prosperity estimates the cost to our productivity differential with the United States at over $100 billion a year. I’m not talking about working harder; in fact, quite the opposite: working smarter, adopting the latest technologies, spending money on research, every single business in every sector finding new ways of doing things or new materials to be used in the product they’re making. A different way, for example, to do a procedure or a process. Working smarter and improving our productivity closer to where it should be could translate into ten to fifteen thousand additional income dollars for every family in Canada.
Some businesses say, well, the Canadian dollar has been a very good thing for me, or I’m doing okay – this is a common one that I hear – Canada’s doing okay, what is the need for us to push that envelope? And I say to them, yes, Canada is doing okay, better than most, that’s a good news story. But the world is changing. And you need to be globally competitive. Your competitors are no longer across town or in the next town, they’re across the world.
So, to have businesses perform better in terms of researching and adopting new technologies, and finding new markets for interesting products and so on, can only lead to businesses growing and becoming stronger. And when we can move our new knowledge to our factory floors and make a product creating jobs and more prosperity here at home, we sell those new products and processes to the rest of the world. So that actually improves the quality of life of people around the world.
Q The Government of Canada has multiple departments and agencies involved with science. What steps must we take to make to make sure there is an integrated federal strategy among these players?
That is a very important question. With respect to whole of government and various levels of government, including academia and business, there should be an effort toward harmonizing those efforts and coordinating what is happening across the nation so we do things better, faster and at less taxpayer expense.
This is a process that starts with the National Research Council, changing it into a more business-facing organization that looks at some 60 programs across some 17 federal government departments and begins that process of coordination and harmonization.
I like to say that this is a video we’re watching, not one moment in time. We started in 2007 and here we are in 2012 with a great record and some clear measurable outcomes. I am very hopeful that by improving the innovative capacity of the private sector we will see a very positive future.
Reprinted with permission, Canadian Government Executive June 2012, www.canadiangovernmentexecutive.ca
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