biomedical innovation systems: a comparative analysis of six canadian regions

Innovation Systems Research Network

Biomedical Innovation Systems: A Comparative Analysis of

Six Canadian RegionsMeric S. Gertler

Uyen Quach Program on Globalization and Regional Innovation Systems

Munk Centre for International StudiesUniversity of Toronto

Presentation to the 7th Annual ISRN MeetingRenaissance Toronto Hotel Downtown

Toronto, Ontario

May 5-6, 2005


The Case Studies

• Vancouver, British Columbia

• Saskatoon, Saskatchewan

• Toronto, Ontario

• Ottawa, Ontario

• Montréal, Québec

• Halifax, Nova Scotia


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


Key Questions

• Composition, specialization, strengths

• Scale

• Enabling and triggering forces

• Current challenges


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


Vancouver: Overview• Key triggers/enabling factors

– QLT Inc. (1981) & UBC’s 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 (E&Y 2002)– Represented 70% of all biotech firms in BC (2001)– Presence of lead firm (QLT Inc.)– Strong R&D 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)


Vancouver

3391Medical equipment

& supplies mfg.

6215Medical & diagnostic

laboratories

4184Chem. & allied prod.

wholesaler-distributors

3254Pharmaceutical &

medicine mfg.

8132Grant-making &giving services

4145Pharma, toilet., cosm.& sundries whole.-dist.

5231Sec. & com. contractsintermediation & brok.

5416Mgt, scientific

& tech. Consult. serv.

3344Semiconductor & otherelectronic comp. mfg.

3345Nav., measuring, med.& con. instruments mfg

3259Other chemical

product mfg

3261Plastic productmanufacturing

1.00.8 1.2

Employment Location QuotientsExternalLinkages

Source: Data compiled and diagram created by Spencer and Vinodrai 2005.


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 cluster’s

revenue generated from QLT Inc.)– YES: “New ideas, new firms, new people will come” (Salazar

and Holbrook 2004)


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)– R&D 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 firms:14 (2001); 34 (Saskatchewan, 2003)– Biotech employment: 369 (Industry Canada Life Sciences Branch

2005)



& supplies mfg.


laboratories




medicine mfg.




5416Mgt, scientific




3259Other chemical

product mfg


1.00.8 1.2


Saskatoon



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 R&D infrastructure

(e.g. CLSI) and various collaborative research projects

– Emerging private sector involvement in various stages of product development (Phillips et al 2004)


Toronto: Overview

• Key triggers/enabling factors– Diverse economy (sophisticated service industries & manufacturing base)

and human health research strengths, home to Canada’s pioneering biotechnology firm Allelix

• Specialization– Human health ‘megacentre’ (Cooke 2002)

• Characteristics/strengths– Robust: diverse & range– About 55% of Ontario’s biotech firms (2001)– Strong R&D base– Canada’s 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)



& supplies mfg.


laboratories




medicine mfg.




5416Mgt, scientific




3259Other chemical

product mfg


1.00.8 1.2


Toronto



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)


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 R&D 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)


Ottawa


& supplies mfg.


laboratories




medicine mfg.




5416Mgt, scientific




3259Other chemical

product mfg


1.00.8 1.2




Ottawa: Current Challenges

• No life sciences-based VC headquarters/decision-makers 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 R&D actors


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/R&D funding, tax incentives, etc.

(least expensive operating costs in Canada for biomedical R& D)– Strong presence of R&D and manufacturing pharma (local and MNCs)– Strong local R&D base– Presence of industry associations

• Size– Life Sciences firms: >270– Cdn. biotech firms: 80 (2001); 129 (Quebec, 2003)– Biotech employment: 3238 (Industry Canada Life Sciences Branch 2005)


Montréal


& supplies mfg.


laboratories




medicine mfg.




5416Mgt, scientific




3259Other chemical

product mfg


1.00.8 1.2

Employment Location Quotients ExternalLinkages



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


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 R&D 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)


Halifax


& supplies mfg.


laboratories




medicine mfg.




5416Mgt, scientific




3259Other chemical

product mfg


1.00.8 1.2

Employment Location Quotients ExternalLinkages



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– R&D and inward focused– Lack of “core” specialization/interests


Comparative SummaryVancouver 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 R&D•Presence of lead/anchor firm

• Strong public and private R&D collaborations• Infrastructure support for firm entry• Presence of large, active & sophisticated farmers

• Robust and diverse• Local R&D• Largest financial centre• Presence of numerous industry associations

• ICT • Local R&D base• Federal regulatory/ funding agencies

• Strong

government support• Pharma base

• Major site for biotech activities in Atlantic provinces• Strong local R&D base• Emergent public & private support


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

>270

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, R&D focused


Explaining Cluster Formation and Evolution

• Path Dependency – Origins of Toronto’s 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 R&D coordination (NRC-PBI)– Montréal: NRC-BRI co-evolved with private sector– Ottawa: Public research actors passive, though becoming more

active recently


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


Knowledge Base (1)

• Identified as a critical factor for firms to locate or remain in the region– R&D intensive, expertise, key actors in technology

transfer (out-licensing and firm creation), research collaborations, consulting services, facilities, R&D infrastructure, etc.

• Need to acknowledge interdependent relationship between local and global knowledge flows


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)


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


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


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)


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?


Thank you

Meric S. Gertler and Uyen QuachProgram on Globalization and Regional Innovation Systems

Munk Centre for International StudiesUniversity of Toronto

Presentation to the 7th Annual ISRN MeetingRenaissance Toronto Hotel Downtown

Toronto, OntarioMay 5-6, 2005

biomedical innovation systems: a comparative analysis of six canadian regions

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