The core theme of the 2016 World Economic Forum in Davos, Switzerland was the arrival of the Fourth Industrial Revolution, with its velocity, scope and disruptive impact on almost every industry of every country.1 Much of the change is attributable to the creation and duplication of the digital universe of data, believed to be expanding by 40% per year.2 One of the sectors which is expected to be radically altered, and benefit significantly, is life sciences, and particularly, healthcare.
For Canada, and notably Toronto, the health and medical industry is a natural strength. Toronto is a powerhouse in health and medical innovation and discovery – Toronto is home to over 163 biotech companies, making the city the largest biotech cluster in Canada, and is the Canadian headquarters for more than 50 global pharmaceutical and biotechnology companies.3 According to The Canadian Trade Commissioner Service, the University of Toronto produces more peer-reviewed publications than any other medical centre in the world.4
It has been a common lament that Toronto has traditionally struggled to develop its life science and healthcare innovation economy and commercialize its excellent life science and healthcare related research and development. Nevertheless, there is currently a surge of activity in the life science and healthcare sector across Canada. According to the Canadian Venture Capital Association, health and life science private capital deals in 2015 increased 39% in volume and 35% in dollar value year over year.5 The first half of 2016 saw a CVCA record setting $128 million new venture capital investment in DalCor Pharmaceuticals, and an equally impressive $87 million investment in BC-based Zymeworks Inc. On August 31, 2016, Toronto-based Cynapsus Therapeutics Inc. announced that it would sell itself to Sunovion Pharmaceuticals Inc. for $820 million, a significant premium on the company's $228 million market capitalization.
With natural resources directly or indirectly accounting for 17% of Canada's GDP6, it is clear that energy and natural resources continue to play a tremendous driving role in Canada's economy, notwithstanding cyclicality in the commodities markets. Nevertheless, it would be to Canada’s advantage to drive the technological advances that will comprise the fourth industrial revolution, which would substantially expand the Canadian economy and provide a welcome hedge against the cyclicality of Canada's established industries, importantly harmful commodity price gyrations, such as we are experiencing at the present time.
In a series on the diversification of Canada's economy that appeared in the Globe and Mail, author Brian Milner noted that it is difficult to manage the transition of an economy. Rather than a one-size-fits-all policy to encourage an innovation economy, "each region should focus on exploiting existing strengths, such as energy-related innovations in Alberta or agricultural technology in the grain belt, where strong knowledge bases already exist."7 For Toronto, the life science and healthcare innovation infrastructure that is already in place makes focusing on this niche a natural fit for the region.
In order to capitalize on this momentum and develop a life science innovation economy in Toronto, I suggest three steps could be taken to foster the growth of early-stage life science ventures.
1. Retention of knowledge capital.
Retaining top talent and knowledge capital is critical to drive the development of an innovation economy. In order to further develop our life science and healthcare innovation economy, Toronto needs to encourage experienced entrepreneurs to actively engage in and "champion" the community such that it becomes a robust innovation hub.8
Although knowledge capital is not alone sufficient for the development of a robust innovation ecosystem, it is necessary. The development of modern-day Silicon Valley is an example. Notwithstanding the region's long history in industrial electronics which provided the ingredients for the development of a vibrant tech industry, it was the retention of seasoned entrepreneurs such as Frederick Terman and William Shockley that helped catalyze the San Francisco Bay Area into the innovation ecosystem that we know today. If Toronto aspires to become a life science and healthcare innovation hub, it will need to attract and retain experienced entrepreneurs, who can become spokes in the network of community stakeholders.
2. A clear path from innovation to commercialization to exit.
According to research, process is one of the most important factors in developing an innovation ecosystem. As one commentator put it, "to build capacity in a region, there must be a clear process, or runway, that will lead entrepreneurs from idea to commercialization to exit and provide the necessary support services along the way."9 In huge biotech clusters such as Boston, this process is well established. In some cases, a large venture capital firm will be able to nurture a company from inception through to exit. In Toronto, we can help establish this process by ensuring that investors, service providers and strategic partners are cooperating to create an infrastructure that will guide entrepreneurs through the system. Entrepreneurs who are working to commercialize their life science and healthcare innovations should have clear guidance on their best options, which may include strategic partnerships, acquisitions, or a long term growth strategy.
3. Policy changes that address innovation adoption.
As noted in a 2016 report by the Ontario Bioscience Innovation Organization, "access to Canadian markets is estimated to take more than two years longer than in other developed nations."10 The OBIO report recommended "adoption and reimbursement policies, that streamline a predictable and timely path to market and that favors early adoption of locally developed technologies once approved by Health Canada."11 International markets, and in particular the U.S. markets, continue to be key for the marketing and sale of many Canadian life science and healthcare innovations. Nevertheless, increased cooperation between life science and healthcare entrepreneurs and end-users, as well as an increased emphasis on innovation adoption, will contribute significantly to driving growth locally.
Although the development of a robust life science and healthcare innovation ecosystem involves a number of additional factors, we believe that the above three steps will be key in driving the transition to an innovation economy, in Toronto and Canada.
1 See Klaus Schwab, "The Fourth Industrial Revolution", World Economic Forum (January 14, 2016), online.
2 Vernon Turner, John F. Gantz, David Reinsel & Stephen Minton, "The Digital Universe of Opportunities", EDC Digital Universe, online.
3 City of Toronto, "Key Industry Sectors - Life Science" (2016), See City of Toronto online.
4 Trade Commissioner Service, "Life Sciences and Biomedical Technologies" (October 20, 2015), online.
5 Canadian Venture Capital Association, "Canadian venture capital and private equity activity way up – CVCA Report" (February 22, 2016), online.
6 Natural Resources Canada, "10 Key Facts on Canada's Natural Resources" (August 2016), online.
7 Brian Milner, "How to diversify an economy: Four lessons for Canada" (August 26, 2016), The Globe and Mail, online.
8 Troy Haines, "Developing a Startup and Innovation Ecosystem in Regional Australia", Technology Innovation Management Review (2016) 6:6, online.
9 Ibid at page 26.
10 Ontario Bioscience Innovation Organization, "How Canada should be engaging in a $9 trillion dollar health economy" (April 2016) at page 3, online.