Canada’s Biotech Industry: driving Canada’s economic transformation

by • September 26, 2012 • Health, Industry IntelComments (0)629

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 bio-economy. 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.

BIOTECH SOLUTIONS ABOUND

Andrew Casey, President and CEO BIOTECanada

Through the recent economic downturn, Canada’s biotech industry has become an essential component of the transformation and redefining 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.

There remains significant 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.

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 significant 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 significant emphasis on regions of the country that have been particularly hard hit by the economic downturn.

INVESTMENT: IT’S ALL ABOUT ACCESS TO CAPITAL

The Canadian Bio-economy experiences 12% growth over the past four years

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 moving 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 significant 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 benefits of investing in R&D tax credits and have recently made significant 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 significant 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 significant 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

The $87.3 billion Canadian bio-economy by sector

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 significant 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 industry-funded association with over 250 member biotechnology companies representing health, industrial, and agricultural sectors.

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