Biomedical Innovation Systems: A Comparative Analysis of Six Canadian Regions

1
Biomedical Innovation Systems A Comparative
Analysis of Six Canadian Regions

• Meric S. Gertler
• Uyen Quach
• Program on Globalization and Regional Innovation
  Systems
• Munk Centre for International Studies
• University of Toronto
• Presentation to the 7th Annual ISRN Meeting
• Renaissance Toronto Hotel Downtown
• Toronto, Ontario
• May 5-6, 2005

2
The Case Studies

• Vancouver, British Columbia
• Saskatoon, Saskatchewan
• Toronto, Ontario
• Ottawa, Ontario
• Montréal, Québec
• Halifax, Nova Scotia

3
Definitions

• Life Sciences
• Broad definition that includes biotechnology,
  medical and assistive technologies,
  pharmaceuticals, contract research,
  bioinformatics, etc.
• Biotechnology
• OECD (2002) The application of Science
  Technology to living organisms as well as parts,
  products and models thereof, to alter living or
  non-living materials for the production of
  knowledge, goods and services.
• Statistics Canada uses similar definition

4
Key Questions

• Composition, specialization, strengths
• Scale
• Enabling and triggering forces
• Current challenges

5
Key Questions II

• Role of public intervention
• Catalytic, enabling, impeding?
• Deliberate, accidental (or both)?
• Scale local, provincial, federal?
• Role of civic associations
• Talent, finance local, nonlocal
• Importance of local (vs. global) K flows

6
Vancouver Overview

• Key triggers/enabling factors
• QLT Inc. (1981) UBCs University-Industry
  Liaison Office (UBC-UILO)
• Specialization
• Over ½ of firms in sub-sectors of human health
• Characteristics/strengths
• Fastest growing in Canada based on core biotech
  firms (EY 2002)
• Represented 70 of all biotech firms in BC (2001)
• Presence of lead firm (QLT Inc.)
• Strong RD base
• General and specialized industry associations
• Size
• Life Sciences firms 80-140
• Cdn. biotech firms 48
• Biotech employees 1701 (Industry Canada Life
  Sciences Branch 2005)

7
Vancouver
Source Data compiled and diagram created by
Spencer and Vinodrai 2005.
8
Vancouver Current Challenges

• Research-based cluster with little vertical or
  horizontal integration
• the BC biotech sector does not manufacture
  commercial products its product, if it has one,
  is intellectual property itself (Holbrook et al
  2004).
• Industrial infrastructure
• Lacks pharmaceutical base
• Reference Drug Program (1995) identified as one
  factor discouraging pharma firms to come to
  Vancouver
• Is the Vancouver cluster sustainable?
• NO Too dependent on one firm (87 of the
  clusters revenue generated from QLT Inc.)
• YES New ideas, new firms, new people will come
  (Salazar and Holbrook 2004)

9
Saskatoon Overview

• Key triggers/enabling factors
• Canola development (1940s), Innovation Place
  (1981), NRC-PBI (1980s)
• Specialization
• Agriculture and related areas
• Characteristics/strengths
• One of the leading ag-biotech centres in North
  America
• 82 of all biotech firms in Saskatchewan located
  in Saskatoon (2001)
• RD collaborations between public private
  actors
• Infrastructural support for firm entrance
  (Innovation Place)
• Presence of large, active and sophisticated group
  of farmers
• Size
• Life sciences firms 40
• Cdn. biotech firms14 (2001) 34 (Saskatchewan,
  2003)
• Biotech employment 369 (Industry Canada Life
  Sciences Branch 2005)

10
Saskatoon
Source Data compiled and diagram created by
Spencer and Vinodrai 2005.
11
Saskatoon Current Challenges

• Financing a major challenge for firms
• Lack of venture capital
• Too many targeted/tailored government financial
  programs?
• Some firms benefit more than others (Phillips et
  al 2004)
• Cluster potentially in process of change
• Major public investments in RD infrastructure
  (e.g. CLSI) and various collaborative research
  projects
• Emerging private sector involvement in various
  stages of product development (Phillips et al
  2004)

12
Toronto Overview

• Key triggers/enabling factors
• Diverse economy (sophisticated service industries
  manufacturing base) and human health research
  strengths, home to Canadas pioneering
  biotechnology firm Allelix
• Specialization
• Human health megacentre (Cooke 2002)
• Characteristics/strengths
• Robust diverse range
• About 55 of Ontarios biotech firms (2001)
• Strong RD base
• Canadas largest financial centre
• Diverse industry associations
• Size
• Life sciences firms 400
• Cdn. biotech firms 55 (2001)
• Biotech employment 2661 (Industry Canada Life
  Sciences Branch 2005)

13
Toronto
Source Data compiled and diagram created by
Spencer and Vinodrai 2005.
14
Toronto Current Challenges

• Financing Issues
• Gap in mid-stage financing for biotech
• MAT firms are not well-understood by VC
• Local VC firms investing internationally
• Profile problem
• Local only recognized recently
• Internationally low visibility
• Other Challenges
• Slow regulatory approval process
• dissatisfaction with technology transfer
  agencies(Gertler and Lowe 2004)

15
Ottawa Overview

• Key triggers/enabling factors
• Civic championing for Ottawa Life Sciences
  Technology Park, entry of MDS Nordion (1991), ICT
  bust in late 1990s raises profile of life
  sciences
• Specialization
• Non-therapeutic areas convergent technologies,
  bioproducts, medical assistive technologies
• Characteristics/strengths
• Emergent cluster
• ICT spillovers, biomedical applications
• Strong RD base home to relevant regulatory
  funding agencies in life sciences
• Ottawa Life Sciences Council organizational
  leader
• Size
• Life sciences firms 100-140
• Cdn biotech firms 10 (2001)
• Biotech employment 736 (Industry Canada Life
  Sciences Branch 2005)

16
Ottawa
Source Data compiled and diagram created by
Spencer and Vinodrai 2005.
17
Ottawa Current Challenges

• No life sciences-based VC headquarters/decision-ma
  kers located in Ottawa
• Need to build up industrial infrastructure, lacks
  a pharmaceutical base
• Weak local linkages
• Low commercialization success need linkages
  between universities, labs, firms
• MDS Nordion a potential anchor firm but lacks
  linkages to major local RD actors

18
Montréal Overview

• Key triggers/enabling factors
• Pharma base, NRC-BRI (1983), BioChem Pharma
  (1986), creation of public/quasipublic VC funds
  (1990s)
• Specialization
• Human health megacentre with drug
  discovery/pharma strengths
• Strengths
• Home to 62 of biotech firms in Québec (2001)
• Strong public support coordination VC/RD
  funding, tax incentives, etc. (least expensive
  operating costs in Canada for biomedical R D)
• Strong presence of RD and manufacturing pharma
  (local and MNCs)
• Strong local RD base
• Presence of industry associations
• Size
• Life Sciences firms gt270
• Cdn. biotech firms 80 (2001) 129 (Quebec, 2003)
• Biotech employment 3238 (Industry Canada Life
  Sciences Branch 2005)

19
Montréal
Source Data compiled and diagram created by
Spencer and Vinodrai 2005.
20
Montréal Current Challenges

• Historically strong government intervention and
  coordination
• High dependence on public support especially in
  venture capital financing
• Less than 10 of investment in Québec from
  private sources
• Government withdrawal is occurring but is the
  private sector stepping in?
• Highlights future vulnerabilities
• Private funds in Québec (e.g. pension plans
  assurance companies) avoid Québec venture capital
  
• Investments spread too thin?
• Risky drug development depends on reliable
  injections of financing through various stages
• Merck, Pfizer drug controversies
• Affected biotech stocks
• Stock value decline of large pharma felt
  especially in Montréal
• Neurochem Inc. example
• Private sector investors not as sympathetic with
  failures

21
Halifax Overview

• Key triggers/enabling factors
• Biotech Working Group (1993), Ocean Nutrition
  Canada (1997) Dalhousie University establishes
  Business Development Office (1999)
• Specialization
• Majority of firms in human health but diverse
  sub-sectors (e.g. marine)
• Characteristics/Strengths
• Very young is it a cluster?
• Site of majority of biotech activity in Atlantic
  provinces 42 of biotech firms in region
  located in Halifax (2001)
• Local RD base
• Growing public and private support Bioscience
  Enterprise Centre (InNovacorp), MedInnova
  Partners Inc., Life Sciences Development
  Association (LSDA)
• Size
• Life Sciences firms 60
• Cdn. biotech firms 10 (2001)
• Biotech employment 558 (Industry Canada Life
  Sciences Branch 2005)

22
Halifax
Source Data compiled and diagram created by
Spencer and Vinodrai 2005.
23
Halifax Current Challenges

• Financing
• High dependency on local financing
• But lack of VC main obstacle for growth (Rosson
  and McLarney 2004)
• Currently a collection of firms rather than
  cluster (Rosson and McLarney 2004)
• Relatively young, small private firms
• RD and inward focused
• Lack of core specialization/interests

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Comparative Summary Comparative Summary Comparative Summary Comparative Summary Comparative Summary Comparative Summary Comparative Summary
Vancouver Saskatoon Toronto Ottawa Montréal Halifax
Key Triggers/ Enabling Factors QLT Inc. UBC Canola Innovation Place NRC-PBI Diverse economy Human health research strengths Allelix OLSTP MDS Nordion Tech bubble burst Pharma base NRC-BRI BioChem Public VC funds Biotech Working Group ONC Dalhousie University-BDO
Specialization Human health diverse areas Agriculture Human health megacentre (robust) Non-therapeutics Human health megacentre (pharma) Human health diverse areas
Key Cluster Characteristic Rapidly growing Ag-biotech centre Scale diversity Emergent Drug discovery/ pharma A collection of firms
Strengths High rate of firm entrance supported by UBC Local RD Presence of lead/anchor firm Strong public and private RD collaborations Infrastructure support for firm entry Presence of large, active sophisticated farmers Robust and diverse Local RD Largest financial centre Presence of numerous industry associations ICT Local RD base Federal regulatory/ funding agencies Strong government support Pharma base Major site for biotech activities in Atlantic provinces Strong local RD base Emergent public private support
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Comparative Summary (Continued) Comparative Summary (Continued) Comparative Summary (Continued) Comparative Summary (Continued) Comparative Summary (Continued) Comparative Summary (Continued) Comparative Summary (Continued)
Vancouver Saskatoon Toronto Ottawa Montréal Halifax
Size LS Firms Core Biotech firms Biotech Employmt. 80-140 48 1701 40 14 369 400 55 2661 100-140 10 736 gt270 80 3238 60 10 558
Challenges Research-based IP vendors Weak industrial infrastructure Sustainable? Financing Public financing programs too diverse and targeted? Undergoing change Profile problem local and international Weak commerciali-zation systems Weak domestic linkages Weak industrial infrastructure No local life-sciences VC fund Government dependence Risky drug discovery activities Financing Is it a cluster? Most firms young, small, inward looking, RD focused
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Explaining Cluster Formation and Evolution

• Path Dependency
• Origins of Torontos diverse life sciences
  cluster found in the breadth of its older
  economic activities (Lowe and Gertler 2005)
• Vancouver weak industrial infrastructure to
  support product development, modest pool of local
  venture capital, and absence of a local
  pharmaceutical base has influenced many firms to
  be IP vendors
• Role of key public research institute varies by
  cluster
• Vancouver Saskatoon Continues to be important
  for firm creation (UBC) and RD coordination
  (NRC-PBI)
• Montréal NRC-BRI co-evolved with private sector
• Ottawa Public research actors passive, though
  becoming more active recently

27
Accounting for Change

• Vancouver, Montreal, Halifax
• emergence of a lead firm sparked latent
  entrepreneurialism/provided credibility
  inspiration for the region
• Saskatoon Montreal
• policy-driven through federal decisions to locate
  national laboratories in each city
• Ottawa
• ICT bust in late 1990s raised profile of life
  sciences, attracting political and financial
  support

28
Knowledge Base (1)

• Identified as a critical factor for firms to
  locate or remain in the region
• RD intensive, expertise, key actors in
  technology transfer (out-licensing and firm
  creation), research collaborations, consulting
  services, facilities, RD infrastructure, etc.
• Need to acknowledge interdependent relationship
  between local and global knowledge flows

29
Knowledge Base (2)

• Saskatoon case an extreme example of this
• Foreign proprietary sources of knowledge
  (know-what and why)
• Local knowledge base develops tacit dimensions of
  know-how and know-who to complement non-local
  knowledge flows
• the generation and transmission of the
  non-codified knowledge in the regional system is
  the key factor holding things together. People
  develop skills and working relationships, which
  together convert bits of information into
  operable knowledge (Phillips et al 2004)

30
Skilled Labour/Talent

• Importance of local supply of skilled
  labour/talent
• Often drawn from local research institutes and
  co-locating firms
• Some crossovers in sectors (Toronto pharma,
  Ottawa ICT)
• Consistent problems recruiting managers diverse
  responses
• Halifax Hire retired CEOs that settled in the
  area (Rosson and McLarney 2004)
• Saskatoon Recruit expatriates (Greenberg 1999,
  Spurgeon 2002)
• Toronto Diverse mix of sources (local and
  non-local) and methods
• Gertler and Levitte (2003)
• Innovative Biotech firms devote more resources,
  pursue diverse strategies, and tap into global
  networks for recruiting staff
• Local and global sources once again important

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Summary (1)

• CLUSTER FORMATION
• Cases present a complex causal chain to explain
  cluster formation influenced by historical,
  region-specific context
• Does not offer easily generalizable explanations
  for cluster formation

32
Summary (2)

• LOCAL VS. GLOBAL KNOWLEDGE FLOWS
• Local and global knowledge flows cases confirm
  mutually beneficial, reinforcing nature of these
  two scales of flows (Bathelt et al 2004)

33
Summary (3)

• SPECIALIZATION or DIVERSITY?
• TWO PATHS
• Specialized
• Montreal, Vancouver, Saskatoon
• High potential return
• Risk, vulnerability?
• Diverse
• Toronto, Ottawa, Halifax
• Resilience
• Larger E potential, more diverse mix of
  occupations, employment opportunities, higher
  average cluster income
• Lower coherence, visibility?

34
Thank you

• Meric S. Gertler and Uyen Quach
• Program on Globalization and Regional Innovation
  Systems
• Munk Centre for International Studies
• University of Toronto
• Presentation to the 7th Annual ISRN Meeting
• Renaissance Toronto Hotel Downtown
• Toronto, Ontario
• May 5-6, 2005