Paul Lucas, head of the Canadian division of GlaxoSmithKline, takes the podium at the ritzy Carlu conference centre in Toronto. It’s early November and he’s here to launch the $50-million GSK Canada Life Sciences Innovation Fund. Managed by GlaxoSmithKline in Canada and GSK’s global corporate venture capital arm SR One, the fund supports pre-clinical, proof-of-relevance breakthrough research. It’s the most significant new private fund to arrive in the life science sector in a long time. With private R&D spending contracting since 2006—at a time when Canada’s private sector sits on $400 billion in cash—GSK’s cash is like fresh water for thirsty biotech firms hoping to commercialize their ideas.

And still it’s more than that. The fund is important to Canada as a whole, says Lucas. “We have an innovation gap in Canada. It’s real, growing, and it threatens our ability to continue to build a strong and sustainable competitive advantage in a global economy.”

Without private investors taking a risk on Canadian life science, Canada’s biotech sector will continue to languish in a state of underfunded research and unrealized potential. Or, as the even-keeled Lucas put it at the press conference: “The absence of risk capital and the impact this has on our collective ability to commercialize discovery has a profound effect on the Canadian pharmaceutical and life science industry.”

A persistent problem
An inability to carry Canadian ideas through to commercialization is an open secret. It’s more than that—it’s fuel for the conferences and conventions that seem to happen weekly across the country. This inability to get the job done is driven by factors as diverse as cautious investors to uptight professors. With the landscape as it is—tepid and dry—the life sciences has had to rely primarily on government funding to buttress Canada’s market. Government knows this and, with austerity on their minds, they want to see change.

“There is no reason why Canada should continue to lag its OECD partners in private-sector innovation performance. We have the people. We have the resources. We certainly have the ideas,” said Finance Minister Jim Flaherty, speaking at the Innovation Nation symposium at the Perimeter Institute in Waterloo, Ontario, in September. It’s part of the refrain the Minister repeated in other forums: Unless private capital steps forward and meets the challenge to fund homemade innovation, Canadians will have to lower expectations about the economy and the country’s competitive aspects. “If we fail to meet that challenge, Canadians will not be the innovators we need to be in a digital economy. At great expense both economically and socially, we will be reactive rather than proactive and our businesses will continue to lag in productivity compared to their competitors in other countries.”

The roots of this challenge to the life sciences find soil in the people running Canadian life science companies, says Lucas. “In the life sciences area, we haven’t had the management talent or the R&D expertise in the industry to go in and work with researchers to help them identify some of these opportunities.” A managerial culture, rather than a culture of entrepreneurism and risk-taking, runs through the Canadian life sciences. It isn’t attractive and it certainly doesn’t attract the confidence or money of investors. “We didn’t have that bent, that culture of moving that research through to true innovation products. That’s part of the problem,” says Lucas.

Related problems compound the stagnancy. Tech transfer offices aren’t well-organized, Lucas says, or focused on getting the right ideas into positions to springboard to commercialization. Venture capital exists in the Canadian market, but it often isn’t available at the right time or in great enough amounts when the right opportunities do come along.

The new GSK fund will, Lucas hopes, fill some of the gaps. The fund will bring money as well as minds to burgeoning scientific enterprises, with a scientific advisory board, an investment committee, and a fund advisory board overseeing the Canadian-specific funds and GSK contributing management expertise to startup companies with the hopes of accelerating commercialization of new discoveries. In return for the funds, GSK will gain an equity stake in the businesses it funds.

The other challenge to address is the divide between Canadian industry and academia—a divide that may be difficult to close. “The academic community in Canada was never really used to working with industry for a long time. That’s a fundamental issue,” says Lucas.

Moncef Slaoui, Global Chair of R&D for GSK, says Canada’s universities are as good as universities in the U.S. but, “The academic world has a cultural abyss between academia and industry.” This problem isn’t unique to Canada. The U.K. is highly productive in academic and clinical sciences but slow to commercialize. Slaoui holds up the U.S., where venture capital thrives, as a model for Canada. “When you’re in the U.S., you can be the most famous professor at Harvard and at the same time the founder of three biotech companies and a multimillionaire and you feel very good about it, and nobody sees you as bizarre.” The same isn’t true in Canadians universities where researchers tend to keep their distance between research interests and corporate interests. “If one wants really the life sciences output from academia to industrialize itself, to commercialize itself, one needs to eliminate that psychological barrier, one needs to allow great academic scientists to move to industry, and great industry scientists to move back to academia. It should be both ways,” says Slaoui.

Changes to SR&ED?
The relationship between startup funding and commercialization is central to Canadian biotech—without startup funding, there’s nothing to commercialize. Yet, in many cases, doom arrives before commercialization, when companies enter the biblical “Valley of Death” phase when funding dries up and they’re left with only prayers.

The most recent official take on the challenges with commercialization came in Innovation Canada: A Call to Action, also called the Jenkins Report, named for Tom Jenkins, Chair of Open Text Corp., who led the Independent Panel on Federal Support to Research and Development that produced the report.

The panel found what many already know: Canadian firms rely more on tax incentives to drive business development than other countries; Canadians fund R&D to the expense of commercializing the fruits of research; and programming geared toward encouraging innovation is extensive, uncoordinated, and bureaucratic.

Regarding commercialization, the panel made two recommendations: the creation of a commercialization voucher pilot program to help fund commercialization activities, and the expansion of the Canadian Innovation Commercialization Program into a full-scale program that will make government a major purchaser of innovative technologies.

But it was the panel’s recommendations for overhauling the Scientific Research and Experimental Development program (SR&ED) that will garner attention from life sciences companies. The panel recommended that government reduce the amount of funding available indirectly through SR&ED tax credits and provide more direct funding through loans, grants, and other mechanisms. The panel suggests any tax credits be based on labour-related costs. A commentary on the report, produced by PricewaterhouseCoopers, notes that moving away from the current SR&ED model toward a mixed model of tax credit and direct funding as proposed in the Jenkins report, “is discretionary and may mean favouring fewer companies and institutions with more emphasis on grants.” The proposal to “[shift] R&D support away from tax incentives and toward direct funding will require reducing the cost of the SR&ED program,” PwC notes, and disadvantage startups that burn money on expenses, not labour.

The river
At the press conference to announce the new GSK venture fund, Slaoui spoke about the need for GSK to contribute to the upstream development of emerging companies. “If we don’t feed the river of ideas and opportunities from which we can later on select and partner and then develop into medicine, that river could dry out,” he said. It’s a sentiment long overdue and an idea biotech will want to hear other pharma firms repeat

Genome BC’s Brad Popovich on Translating Discovery to Business By Dr. Brad Popovich An organism’s DNA offers immeasurable insights into how it functions. As such, a complete study of a system’s entire DNA makeup—the genome—offers a more fulsome picture for analysis. Genomics has only recently become a mainstream scientific discipline, largely due to the advancement of technology to assist in genomics research. The question now is: how to best put this new knowledge to work? In the past decade, this shift toward the translation and application of research has come to the fore in the genomics industry. In order to achieve the goal of taking research from greenhouse to forest, or from bench to bedside, it’s imperative that researchers partner with appropriate end users and relevant stakeholders at the outset of the research continuum. In order to close the gap, and make the most of this perfect B.C. storm of technology, tools and talent, collaboration is the key. Genome BC is at the forefront of translating genomics through a number of programs, investments and many partnerships. Small ‘r’ & big ‘D’ Investment into scientific research must support small/large-scale discovery and translational research. However, in today’s research environment, we are seeing an emphasis on the ‘D’ development and bringing results to a beneficial end point. A balance between basic science groundwork and the fulfillment of an end goal can meet the needs of end users and directly benefit patients, industry and society. Genome Canada is working hard to achieve this objective, in part through its Large Scale Applied Research Project (LSARP) competition. The competition called for applied genomics projects that will generate returns to the Canadian economic structure by addressing forestry and environmental challenges, such as bioenergy and climate change. The road to application, and potential commercialization, has its pitfalls. Many researchers, brilliant in their field, do not have the entrepreneurial skills to bring basic research to application. To help address this gap, Genome Canada recently launched the Entrepreneurship Education in Genomics (EEG) fund, aimed at helping genomics researchers across Canada add value to their research, provide guidance and support, and help them capitalize on viable applications and outputs. Start as you mean to finish The movement to support scientists as they push their work out from the lab and into end users’ hands is spreading across Canada. One group helping address the translation gap is Genome British Columbia (Genome BC). In partnership with Western Economic Diversification Canada, Genome BC launched the Proof of Concept program, which is providing funding to advance discoveries from the laboratory to those that have the experience and know-how to develop the real-world applications. In order to minimize the length of time it takes to get from “great idea” to “great solution,” it is important to invest back into business and assist in the completion of solutions, particularly those that just need a helping hand to reach the finish line: many promising research projects stall and die in the so-called “Valley of Death,” right before they reach their potential. In a move to accelerate research with strong commercialization potential in local companies, Genome BC has opened a new funding competition: the Strategic Opportunities Fund for Industry (SOFi). Building partnerships In the past we have seen that without open dialogue, and a free and complete exchange of needs between research and end users, many focused research efforts don’t reach their optimal outcome. In an innovative approach, Genome BC involved local health authorities in B.C. in the development of their Personalized Medicine Program. This way the health authorities, as end users, were able to identify their needs for genomics research before it began and thus allow this work to be truly solution-oriented. The opportunity for free interchange between researchers and end users, to allow them to fully comprehend the needs of actual healthcare providers, cannot be overestimated. This type of partnership will position genomics research in B.C. ahead of the curve by providing solutions to existing problems rather than applications or tools for a problem that may or may not be useful to end users. Making progress There is no manual for translating discovery research into application, and there is still a long road ahead. But unless we begin with key components such as co-operative research, partnership and an integrated approach to problem solving, discovery research will not move beyond the laboratory to benefit industries and people in B.C. and Canada. Like many countries around the world, Canada faces great challenges; if applied effectively, genomics can provide a wealth of tools to help create efficiencies, improvements and better outcomes across all natural resource sectors and human health. We need to ensure we have the right partners in place to help us build systems and implement processes to maximize the potential of genomics. The return on investment into genomics is a return that will benefit all Canadians. Dr. Brad Popovich is Chief Scientific Officer of Genome British Columbia.