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Cantech Letter interviews Industry Minister Tony Clement

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Whether you agree or disagree with his policies and decisions, one thing is clear; Industry Minister Tony Clement has become a lightning rod for discussion about the future of Canada’s economy. And when Tony Clement talks about the future of Canada’s economy he’s often talking technology. His detractors say his efforts; such as his government’ s Digital Economy Strategy, are mere lip service. But Clement, who tweets voraciously, listens to RUSH and Arcade Fire on his iPod, and is an unabashed Star Wars fan, comes by his love of technology honestly. As former Minister of Health, Clement is also more than familiar with the importance of biotech to the Canadian economy, which by some estimates represents more than 6% of our GDP. So now that he is responsible for all sectors of the economy where do the life sciences fit? Cantech Letter Editor Nick Waddell talks to Tony Clement about the past, present and future of biotech in Canada.

Nick Waddell:

BIOTECanada estimates that Canada’s “bio-economy” which they define as the “production of medical treatments, diagnostics, foods, energy, chemicals, and industrial materials” totals $80 billion, or more than 6.4 % of our GDP. How important do you think this sector is to the future of Canada?

Tony Clement:

Biotechnology is an important part of Canada’s innovation economy and Canada is a leader in biotechnology and genomics research. That leadership extends to research and our industry’s expertise in areas such as cancer, vaccines and clinical trials.

Globally, Canada’s biopharmaceutical companies continue to have the second largest number of products in development, with only the United States ahead of us. The global financial crisis, however, has been hard on the life sciences sector everywhere, not just in Canada— particularly on access to the financing needed for research and development (R&D). But, we are starting to see some signs of a turnaround. According to the Ernst & Young annual report on global biotechnology the Canadian biopharmaceutical industry raised more than $733 million (U.S.) in 2009 — an increase of $255 million (U.S.) from 2008. However, the report cautioned there is a “new normal” where firms best poised for success are those with new approaches to R&D and creative models for funding and partnering.

Canada’s capacity to produce renewable fuels is another sector of the bioeconomy. It continues to grow and so too its contribution to the Canadian economy. There are now some 28 ethanol and biodiesel plants across Canada producing over 2 billion litres of renewable fuels annually.

Canada’s long-term economic well-being depends, as never before, on ideas, innovation and inventiveness. Increasing business investments in R&D is crucial to the industry’s long-term competitiveness.

Nick Waddell:

In your view, have the general industry policies of the Canadian Government had a specific trickle down effect to the life-sciences industries?

Tony Clement:

The government has improved the business climate on a number of fronts. For example, we have addressed a major impediment to the flow of venture capital in Canada by removing tax reporting under Section 116 for investments such as those by non-resident venture capital funds in a high-technology Canadian firm. As a consequence, we have heard from respected U.S. financial analysts that they now see better opportunities for investing in Canada. Section 116 was seen as an impediment for U.S. venture capital (VC) investments in Canada and was a key concern for the Canadian biotech industry. Also, Canada’s Scientific Research and Experimental Development (SR&ED) Tax Incentive program is one of the world’s most generous such programs with over $4 billion in credits in 2008, of which Canadian biotechnology companies account for an estimated 25 per cent of the program. Investments by the Business Development Bank of Canada (BDC) continue to support high-technology, high-potential firms. BDC makes direct VC investments in four sectors: life sciences; telecommunications; information technology; and energy, environment, electronics and materials. With a direct investment portfolio of some $434 million in 91 active companies, 23 per cent (about $100 million) is invested in life sciences companies. The BDC has also committed $284 million in indirect investments through VC funds, which include investments in promising life science firms.

We have also provided funding to Canadian biotech firms through the National Research Council’s (NRC) Industrial Research Assistance Program (IRAP). IRAP provides financial assistance and advisory services to Canadian small and medium-sized enterprises. During the last few years, NRC has worked to provide support to the Canadian biopharmaceutical sector.

We are continuing efforts to further improve the global competitiveness of the Canadian biotechnology industry. For example, we are working on ways to improve Canada’s competitiveness as a location for clinical research. More generally, the Government is setting the right conditions for Canadian enterprises, including firms in the life sciences industries, to compete globally through measures such as reductions in the general corporate income tax rate.

Clement: "Canada’s long-term economic well-being depends, as never before, on ideas, innovation and inventiveness."

Nick Waddell:
How much of an impact do you think technology in general, or more specifically biotech, has on replacing lost manufacturing jobs lost in Quebec and Ontario?

Tony Clement:

Canada has created nearly 423,000 jobs since July 2009 – which is more jobs created than lost as a result of the global recession. Canada’s manufacturing sector directly contributes to over 13 per cent of our GDP and employs close to 1.8 million Canadians, mostly in full time jobs. Quebec and Ontario account for close to three-quarters of manufacturing employment. Budget 2010 and the Economic Action Plan Year 2 is helping Canadian firms create jobs, modernize their operations and better compete globally, including eliminating tariffs on machinery and equipment imported for further manufacturing which makes Canada the first among the G20 countries to be a tariff-free zone for manufacturing and creates jobs. We have extended existing or recently terminated work-sharing agreements, by an additional 26 weeks to a maximum of 78 weeks, and continuing to offer greater flexibility in the qualifying criteria. We’ve also provided support to young people looking to gain education and skills by making further investments in the Skills Link and Career Focus components of the Youth Employment Strategy. We’re also supporting the next generation of business leaders with $10 million in new funding for the Canadian Youth Business Foundation.

The pharmaceutical industry is second after the Information Technology sector in R&D intensity, in fact there are thirty one pharmaceutical and biotechnology companies listed in Research Infosource’s Top 100 Corporate R&D Spenders 2009 in Canada.

Nick Waddell:
Has the Canadian government considered expanding the applicability of flow-through shares to include all life sciences companies? It seems to me capital expenditure process is similar to junior resource exploration companies, which are covered…

Tony Clement:

The Canadian government has sought to improve the business environment and access to capital for high growth firms, such as biotechnology companies. Improvements to the SR&ED program and the elimination of Section 116 of the Income Tax Act, as well as additional investments in BDC and Genome Canada are some of the measures used by the Government of Canada to foster industry competitiveness. The expansion of the applicability of flow-through shares to the clean technology sector, which includes technologies such as biotechnology, is also part of measures put in place by the Government in support of the biotechnology industry. The Canadian Government continues to examine a range of policy options to keep the industry and the Canadian business climate competitive.

Nick Waddell:
Let’s assume for a moment that Canadian universities conducting research is a money losing game. If this is the case do you still see value in supporting it, or should our universities have an eye toward more commercial thinking?

Tony Clement:
Our government understands the importance of the research done in universities across Canada. Basic research helps build a broad base of knowledge, understanding, and expertise relating to scientific, economic, social, environmental, and technological issues. Through associated training, it also enhances the quality of post-secondary education, providing a research-rich environment in which students can acquire the tools required to meet the demands of the knowledge-based economy. That is why the government has continued to support university research through ongoing investments in the granting councils. These investments have helped Canada maintain its position as number one in the G7 for the amount of R&D performed by the higher-education sector as a percentage of our economy. At the same time, we recognize that Canada must build on our strong knowledge base to ensure that the research we support is translated into economic and social benefits for Canadians. Canadian industry must have access to the R&D and the talent that it needs to enhance its productivity and competitiveness. In this context, the federal government is a strong supporter of research collaboration between higher-education institutions and the private sector, through investment in initiatives such as The Centres of Excellence for Commercialization and Research program, which supports the commercialization of university research, the Business-Led Networks of Centres of Excellence (BL-NCEs), which support research partnerships between post-secondary institutions and the private sector to solve real world problems, The College and Community Innovation (CCI) Program, which fosters research collaborations between businesses and colleges, The Industrial Research and Development Internship (IRDI) program, which places graduate students in firms to advance the innovation priorities of the private sector; and The Automotive Partnership Program which supports industry-academia collaborative R&D to help drive the Canadian automotive sector to a greater level of innovation.

Nick Waddell:
Have you followed the recent public life sciences successes? It seems that a lot more companies are passing significant milestones and attracting international attention. I’m speaking of companies such as Resverlogix, Cardiome, Theratechnologies. It seems to be a very active time for life sciences stocks.

Tony Clement:

I’m glad to see recent successes for Canadian biotechnology firms, both in terms of achieving product development and regulatory milestones. For instance, Oncolytics Biotech, Theratechnologies, and Bioniche Life Sciences have announced positive clinical trial results, while Æterna Zentaris and Allon Therapeutics have received orphan designation and FDA fast-track status for certain lead products. In addition, there have been some major alliances between Canadian biotechnology companies and pharmaceutical firms announced in the last year, such as OncoGenex Pharmaceuticals with Teva, and Thallion Pharmaceuticals and LFB Biotechnologies. The biotechnology industry is a high risk high reward industry by nature. Despite the risk and uncertainties faced by the sector, Canadian entrepreneurs succeed at building successful biotechnology companies. These biotech successes are key elements for raising the international profile of the Canadian industry and for attracting interest from potential investors and partners.

Nick Waddell:

Last question. As Minister of Health, and, as perhaps more so now as Minister of Industry, you deal with pressing day-to-day issues. Your schedule seems hectic and mini-crises seem to pop up all the time. It’s the nature of politics. Is it difficult to take the time to imagine what Canada’s future will look like, to sit back and imagine, for instance, how Canada can move up the value chain through technology? I noticed the other day you said on Twitter you had attended nine constituency meetings in a single day. Is there time for Tony Clement to be a futurist?

Tony Clement:

The role of the government is to foster an environment where innovation will increasingly help drive the Canadian economy and improve our quality of life. Support for discovery research, technology development and innovation at all levels and consequently developing the knowledge economy is critical because it creates jobs, strengthens the economy and improves Canadians’ quality of life. It is also important in terms of making Canada a global economic leader for current and future generations. Our government has done much on this front, beginning with the government’s S&T Strategy, Mobilizing Science and Technology to Canada’s Advantage, announced in 2007, which calls for sustained support for research and development and the commercialization of discoveries. Designed to build a sustainable national competitive advantage based on S&T, the strategy recognizes that Canada needs greater business investment in research and advanced technologies. To this end, the government has put in place a strong foundation of S&T support over the past few years, including significant new investments in the
Centres of Excellence for Commercialization and Research, which funds world-class centres to promote commercialization of technologies, products, and services, Business-Led Networks of Centres of Excellence, which funds business-led national research networks and,
the Industrial Research Assistance Program, which provides financial support and technical and business advice to small and medium-sized enterprises, helping businesses develop technologies and commercialize them worldwide. Despite a significant level of government support for commercially oriented research and development organizations such as the Council of Canadian Academies and the Science, Technology and Innovation Council have pointed out that Canadian business innovation lags behind that of comparable economies. Business expenditure on research and development is the key indicator for measuring business innovation. Generally, Canadian firms have lower BERD rates than other OECD countries. As such, on October 14, 2010, my colleague, the Honourable Gary Goodyear, Minister of State (Science and Technology), (Federal Economic Development Agency for Southern Ontario) announced that the government would undertake a review of federal programs that support business innovation, which include tax incentive programs such as SR&ED and other business R&D support mechanisms. For this purpose, the government appointed an expert panel consisting of six distinguished Canadians who will consult broadly and make recommendations on how to optimize federal support for R&D’s contribution to innovation and economic opportunities for business. This review will help ensure federal funding is yielding maximum benefits for Canadians and enable Canada to move up the value chain through technology.

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About The Author /

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.

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