The Time is Right to Invest in Canadian Biotechnology and Stop Subsidizing Foreign Biotechnology Companies

Twenty pharmaceutical companies make the Fortune 500 annually. The global pharmaceutical market reached $1.6 trillion in revenue in 2023 alone. Overwhelmingly, these companies are based in the United States and Europe. Although Canadian scientists have made many life-saving discoveries that have impacted millions of individuals worldwide, the billions in revenue generated annually by the pharmaceutical industry have exclusively gone to foreign companies.  

A Canadian Discovery, a Foreign Profit

For example, in the 1980s, a clinician scientist working in the McMaster Thrombosis Program discovered a new class of blood-thinning drugs called low molecular weight heparins (LMWH) that led to the development of the first approved LMWH (enoxaparin); however, Sanofi-Aventis, the French pharmaceutical company, owns enoxaparin. The FDA approved enoxaparin in 1993 for clinical use, and its average annual sales are over $2 billion globally. In 2023, Sanofi-Aventis paid more than $3 billion in income tax.  

Why is it that Canada has outstanding medical innovation and is building capacity for biomanufacturing and life sciences (e.g., Canadian Government’s Biomanufacturing and Life Sciences Strategy, Ontario government’s Life Sciences Strategy), but there is not a single large brand Canadian pharmaceutical or medical device company?  

The Missing Piece: Clinical Trial Investment

Canadian researchers have developed many important innovations, often with substantial government funding, and have sold these innovations at a discount to European and American companies, who have then undertaken the required regulatory clinical trials to bring these innovations to market. Canada should continue to invest in foundational research; however, what is holding Canadian companies back from becoming large brand pharmaceutical or medical device companies is inadequate investment to undertake the required randomized controlled trials (RCTs), which are commonly referred to as clinical trials.  

RCTs are a study design that randomly assigns participants to receive the experimental intervention (e.g., drug) or the control intervention (e.g., placebo). Clinical trials are required for regulatory approval before new drugs, vaccines, or devices can be prescribed for patients. Phase-2 RCTs typically randomize 100 or fewer patients to assess tolerability and inform dosing. Phase-3 RCTs typically randomize 1000 or more patients to establish the efficacy and safety of a drug and are required for regulatory approval.     

Canada should learn from Europe, which continually invests substantially in RCTs. The European Union (EU) Horizon 2020 invested EUR 75.6 billion between 2014 and 2020 (i.e., EUR 12.6 billion annually) into research and innovation. Horizon 2020 awarded RCT grants five to 10 times the funding size of grants provided by the Canadian Institutes of Health Research, with the requirement that trialists include small or medium-sized EU biotechnology companies in their trials. The EU did this not only to advance healthcare but also to grow their economy. They appreciated that the economy is a major determinant of health.  

Each EUR of Horizon 2020 funding resulted in a private for-profit sector investment of EUR 0.57 with researchers bringing an additional EUR 0.23 of their own resources (i.e., each EUR 1.0 of Horizon 2020 funding was matched with EUR 0.80). The overall impact of this program has resulted in the following:

1. An annual average increase of EU GDP of EUR 15.9 billion
2. A net gain in employment levels of 220,000 individuals
3. Creation of 4000 intellectual property rights (2/3rds in the form of patents)

By 2040, it is estimated that every EUR invested by Horizon 2020 will result in EUR 5.00 of benefits for EU citizens. Horizon 2020 has proven so successful that the EU is currently investing EUR 95.5 billion in research and innovation funding between 2021 and 2027.  

Canada’s Missed Opportunity—and What Must Be Done

Canadians have lost out on healthcare opportunities and large revenue streams because of Canadian bio-innovations being sold off to European and American companies. The Canadian government can address this problem through the following actions:

1. Establish ring-fence funding designated for trials of Canadian biotechnologies (e.g., a $2.5 billion endowment that would facilitate $100 million in annual investment in RCTs evaluating Canadian biotechnology)
2. Provide significant tax incentives for Canadian biotechnology companies that remain in Canada and run clinical trials in Canada
3. Create substantial tax incentives for venture capitalists to invest in Canadian biotechnology companies
4. Create platforms that bring Canadian biotechnology companies, trialists, clinical trial units, venture capitalists, and governments together.  

With $100 million in annual investment, Canada could get four phase-3 trials ($20 million/trial) and 10 phase-2 trials ($2 million/trial). Biotechnology companies and venture capitalists will provide additional funding for these trials, doubling or tripling the funding for each trial. Each phase-3 trial will take an average of three years, and each phase-2 trial will take an average of two years. Canada can expect one in five phase-3 trials to lead to a regulatory approval with the potential to create a Canadian anchor company, and two in five phase-2 trials to go on to phase-3 trials.  

1,400+ New Jobs and Billions in Opportunity

At steady state, Canada can expect the following: 12 active regulatory phase-3 trials that will seek Canadian, EU, and United States (US) regulatory approval and will need to be conducted in all three regions; and 20 active phase-2 trials that can be restricted to Canada (i.e., a total of 32 active trials in steady state). Phase-3 trials will on average include 100 to 150 sites per trial, of which there will be 75 Canadian sites, 25 in the EU, and 25 in the US. Phase-2 trials will, on average, include two to 10 sites per trial, and all these sites will be Canadian. Participating sites will hire one new full-time equivalent (FTE) research position for every two trials. Canada’s steady state of 12 phase-3 trials will result in six FTEs per site, and with 75 Canadian sites recruiting participants, there will be a total of 450 FTEs. Canada’s steady state of 20 phase-2 trials will result in 10 FTEs per site, and with 10 Canadian sites recruiting participants, there will be a total of 100 FTEs. Therefore, the steady state of 32 active trials will result in 550 FTEs (i.e., 450 + 100) across Canadian sites.  

Canada has world-leading clinical trial units (CTUs) and trialists with the knowledge and expertise to design, run, and lead these clinical trials. For each trial, a Canadian CTU will hire eight new FTEs for the coordination office, which will result in 256 new FTEs (i.e., 8 X 32) in CTUs across Canada. At a steady state of 32 active trials evaluating Canadian biotechnologies, we can expect two new FTEs at Canadian biotechnology companies per trial (i.e., 64 new FTEs). For every new direct FTE hired through this funding (i.e., 550 + 256 + 64 = 870), Canada can expect 0.65 additional support FTE positions in Canada (i.e., 870 X 0.65 = 566 FTEs).  

This investment will therefore result in 1436 new FTE jobs in Canada (i.e., 550 site FTEs, 256 CTU FTEs, 64 biotechnology FTEs, and 566 support spin-off FTEs). Beyond FTEs and based on the EU experience, Canada can expect private for-profit sector investment of at least $0.5 per government invested dollar (i.e., $50 million annually). Finally, Canada can expect one in every five phase-3 trials to result in a regulatory approval that can then result in over $100 million in annual sales, which will create a large tax base for Canada. Beyond these financial benefits, Canadians will gain health opportunities through this investment.

The time is now to invest in keeping Canadian biotechnology Canadian.