Innovation is happening every day and broadening the horizons of science. The Canadian life sciences industry is burgeoning with new drug development, technologies, and therapies that will improve the lives and health of Canadians. As the scope of this sector changes, it is important for the industry to concrete a voice to share their input with the government, investors, and health care institutions.
Two years ago, Biotechnology Focus posed an innovation survey that expressed some of the inner workings of the life sciences sector in Canada. This year’s survey has unveiled comparable results but convey a slightly contrasting snapshot than in 2016. In support of Global Biotech Week (http://globalbiotechweek.ca/ September 24th to 30th) Biotechnology Focus conducted this survey to gauge Canada’s innovation sector. It ran from July 9th to July 27th and was open to everyone in the industry, including the business sector, academics, research institutions, service providers and more. We would like to thank all 96 respondents who participated in this year’s innovation survey that helped provide an outline of the current state of the industry.
Snapshot of respondents
Similar to the original survey, the first question we asked our readers was when their company/research organisation was established. Unlike in 2016 when it was dominated by companies or research organisations from 1992 or earlier, we can see that there has been an influx of newer companies or organisations coming to market from 2012 to the present. Comparatively, recent companies have been sprouting at almost double the pace jumping from 16 per cent to almost 30 per cent of the accounted vote in the last two years. Bearing that in mind, we were surprised to see that the majority of the companies (42 per cent) classified themselves in the growth category with at least one stable, high-volume product design; although those with radically new products in emerging phase (41 per cent) pulled a close second, with mature phase (18 per cent) coming out as the smaller section of the bunch and down from previous years.
In terms of geographic regions, Ontario packed a punch with the bulk of individuals identifying they were from this region (58 per cent), while Quebec and British Columbia were neck and neck for second, but still fell way behind in contrast with close to 14 per cent representation.
The sizing of the companies and research organisations operating in Canada reflected comparable scoring to the 2016 innovation survey with those employing 1 to 7 employees leading the way in taking the survey with approximately 38 per cent, and an approximate 57 per cent were part of staffs equal to or under 15 employees overall. Mid-sized companies and organisations were underrepresented but have stepped up since the last survey coming from 5 per cent in 2016 to 18 per cent in 2018. However, the larger companies and organisations with over 100 people on staff had the second highest figure at 25 per cent. In this group were the global biopharma Canadian subsidiaries, contract research and manufacturing organisations, but very few Canadian biotech companies.
There are many subsectors of the life sciences industry that are covered across Canada, but the ones that stood out with the most respondents were in the fields of Health biotechnology & pharmaceuticals (63 per cent) and Medical technology & devices (32 per cent). The category that largely dominated the focus for most of the companies participating in the survey this year was research and development with 67 per cent of the respondents, while trailing a little way behind was consulting, conduct research or other service provider at approximately 34 per cent.
What biotech and life sciences businesses had to say:
One of the topics that is always on the table and thwarts this industry is access to capital. From conferences that address this issue to blogs and subjective opinions, it is posed as one of the most difficult obstacles to overcome as a start-up or mid-sized enterprise. This is reflected in the questions we asked our readers so that we could better gauge where Canadian companies lay on the frontier of biotech and the life sciences industry.
The majority of respondents fall into the under one-million-dollar category (64 per cent) when asked how much capital they acquired in 2017. Roughly 25 per cent were within the 2-10 million range, with 5 per cent within 11-50 million and 5 per cent in the 50+ category. This response carries the idea that most companies are in the emerging phase and may be competing for the same buck. Most of the respondents (52 per cent) found funding or financing opportunities harder to come by, which further elucidates the previous point. Only 13 per cent of respondents found capital easy to come by. These results reflected both years of the survey.
Some Canadians are feeling a bit of a financial pinch this year as interest rates continue to rise, and for several start-up companies, access to capital can feel like it’s spread a bit thin. In fact, when combining both the private and public sectors, the majority of those that answered the survey (51 per cent) made under one-million, with the bulk of those falling on the lower part of the scale, while another 19 per cent made no revenue at all. Only 13 per cent of companies or organisations have over 5 years cash on hand, while roughly half of respondents (50 per cent) have a year or less. This is representational for both years of the survey.
The revenue made is in sharp contrast to how much companies and organisations are spending on research & development, with 43 per cent climbing over the million-dollar mark while the other remaining 57 per cent were more or less under half a million. Considering the duration it takes companies to bring a drug to market (10-15 years and approximately $1.5 billion to commercialise a biotechnology product), it is pivotal for companies to raise capital and retain revenue.
There are several ways to raise capital for a company or organisation. This year the federal Liberals made significant commitments to research and innovation spending in Budget 2018. According to Finance Minister Bill Morneau, this budget represents the “largest investment in fundamental and discovery research in Canadian history”. Overall, Budget 2018 proposed an investment of nearly $4 billion in Canada’s research system.
There is also an increased focus on supporting entrepreneurship and high potential businesses. However, as much as there has been an overall increase in the level of investment for industry innovation support programs, there has also been a reduction of the overall number of programs available. Other potential methods of acquiring funding would be angel investors and venture capital investors.
Access to talent is an imperative part of growing a business, and this is where Canada does not lack. According to the results, 100 per cent of employees have graduated from a post-secondary establishment, with an impressive 60 per cent having obtained a PhD.
However, sometimes roles and especially executive roles, can be difficult to fill regardless of how big the talent pool may be. For survey respondents the most challenging positions are in business development and sales (35 per cent). While others that stood out that were very similar in number were clinical and medical development, regulatory affairs, chief executive officer, and the “other” category all roughly hovering around 14-20 per cent.
But what initiatives make a company or organisation successful? The program that overwhelmingly was rated the most crucial was the Scientific Research & Experimental Design Program (SR&ED) at 66 per cent. The Scientific Research and Experimental Development Program offers tax incentives that encourages and supports scientific research and experimental development. The program lets you deduct your SR&ED costs from your income for tax purposes. Also, the program gives you an investment tax credit that you can use to reduce your income tax.
The Industrial Research Assistance Program (IRAP) rated second highest at 44 per cent that is a vital component of the National Research Council (NRC) and a cornerstone in Canada’s innovation system. Private equity took third place at 33 per cent as most crucial initiatives for companies’ success.
Looking again at Budget 2018, the Government of Canada proposes to invest $925 million over 5 years with an ongoing amount of $235 million per year to Tri-councils such as the Natural Sciences and Engineering Research Council (NSERC), Canadian Institutes of Health Research (CIHR), and the Social Sciences and Humanities Research Council (SSHRC). The government is also proposing a new tri-council fund and is heavily investing into the Canada Foundation for Innovation and big data funding.
So how does Canada stack up in comparison to other jurisdictions? Despite all the recently announced investments, respondents say that Canada is mostly average. Only a mere 4 per cent consider Canada excellent in that regard, which is on par with the response to that same question only two years ago. The hope is that all that will change as the funding takes possibilities to new heights.
With all the investments the Liberal government has promised in the upcoming years ahead, it does appear as if the scope of innovation in Canada is changing. The funding is on the way for researchers and provides opportunity to conduct clinical trials, further drug development and bring new medicines and technologies to commercialisation to this knowledge-based economy.
Comparing the results from both years of the innovation survey, there is momentum to invest in health and life sciences research from the government, increasing interest from entrepreneurs and investors, and an amplified awareness from the public that make striving for a cure to diseases, cancer, and other conditions that ail us a potentially attainable goal. One thing to be sure of is that Canada’s support for science will position Canada as a global leader in research excellence.
We would like to thank those of you who took the survey and for sharing your top priorities with us.