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A plan to help our biotech industry be ready for the next emergency

Biotech demands more risk of its investors but the paybacks can create real value.
Biotech demands more risk of its investors but the paybacks can create real value.

Most Canadians see themselves as more than mere diggers of bitumen and assemblers of American and Japanese automobile parts, so it was brave of Prime Minister Justin Trudeau to acknowledge this week that the capabilities of the country that invented insulin have eroded to the point to which it now lacks the factory infrastructure needed to manufacture a COVID-19 vaccine.

It’s generally safer for politicians to let us carry on thinking we inhabit the “greatest” country in the world, rather than to hold up a mirror so we can inspect ourselves more closely.

Unless Team Trudeau was just manipulating us again. A friend who keeps his eye on the Ottawa scene wondered if the prime minister was simply ginning up demand for a major sop that he intends to supply to the life sciences industry in next week’s budget update.

It’s a trick he might have picked up from U.S. President Donald Trump: convince voters that the society they inhabit is terrible, and then anything you do thereafter will be seen as an improvement.

“I really hope so,” Karimah Es Sabar, chief executive of Quark Venture LP, a Vancouver-based investment firm that backs biotechnology and health companies, said when asked if she thought there could be new money coming to help restore Canada’s pharmaceutical industry to its former glory. “I shall be extremely disappointed if not.”

COVID-19 is among the worst things that has ever happened to the Canadian economy, but the pandemic could end up reviving the country’s life sciences industry by forcing governments to get serious about a high-risk, high-reward business that is unusually dependent on public policy.

“There’s a role for government to play, but not forever,” said Ty Shattuck, chief executive of McMaster Innovation Park, a technology incubator owned by Hamilton, Ont.-based McMaster University that caters to biotechnology and advanced manufacturing startups needing specialized infrastructure to scale production.

“If they want to get private-sector leverage, you put in a small amount and it creates value,” added Shattuck, who thinks governments should categorize life sciences as critical infrastructure, an area politicians and bureaucrats typically have little trouble funding.

Trudeau’s remarks sparked another tiresome spat between Liberals and Conservatives over who ruined the country: former prime minister Stephen Harper’s laissez-faire approach to economics, or the current government’s inability to execute any of its big ideas. (Both sides are right.) That’s worrisome because getting back in the biotech game will require a comprehensive approach that requires regular co-operation by multiple jurisdictions on a multitude of issues. Partisan warfare will only slow things down.

“You have to be intentional,” Es Sabar said. “We can no longer inch along.”

Perhaps the biggest reason our capacity to make vaccines has deteriorated is that we no longer have any fighters in the heavyweight division. Maybe the federal government could have done more to get to the front of the queue of importers, but it has placed far more orders per capita than any other country. We’re being left out on the first round of shipments because the developers intend to serve their home countries first. We’d expect a Canadian company to do the same.

The way to respond to this embarrassment is to train a new generation of fighters. Everyone agrees the talent is there. The news this month that Peter Thiel, the billionaire backer of some of Silicon Valley’s most famous companies, has joined the board of Vancouver-based AbCellera Biologics Inc. was the most recent evidence that Canada’s life sciences industry could be on the verge of having a moment.

Seizing that moment will require some adjustments. We’ve become pretty good at churning out promising startups, thanks to a collection of world-class universities and generous support for the incubators that have popped up in every technology hotspot over the past decade. And Canadian governments have always been good at handing over hundreds of millions of dollars to famous multi-national companies, as the recent donation to Ford Motor Co. by the governments of Canada and Ontario attests.

You have to be intentional. We can no longer inch along

Karimah Es Sabar, Quark Venture

The problem is that we tend to fail mid-tier companies that would like to become heavyweights. Banks are wary of handing out mortgages for specialized industrial space, and politicians find it easier to back youngsters toiling in their dorm rooms than to make bigger bets on companies looking to scale. That’s one of the reasons so many ambitious biotech entrepreneurs end up in places such as Boston: their investors want them close, and those cities have plenty of unused factory space.

Shattuck has a plan to address the problem. McMaster Innovation Park’s advantage is that it caters to would-be manufacturers by offering the infrastructure they need to get to the next level. It currently controls about 700,000 square feet of real estate and plans to grow to 2.8 million square feet.

But he’s going to need policymakers, banks and investors to play along, which means confronting something they tend to dislike: risk.

“Startups don’t create value, they consume value,” Shattuck said. “You can’t be all-startups any more than you can have a school with all kindergarteners. You’ve got to have graduates that eventually grow up and do the hard work and create value. And, frankly, we don’t have that yet.”

Copyright Postmedia Network Inc., 2020

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