Last year, I prepared an article for Trade & Industry Development that painted a broad-brush picture of Canada’s current position in the biotech sector. This year, I want to focus the discussion on two important segments of Canada’s burgeoning biotech industry—life sciences and agro-biotechnologies. Generally speaking, the broader biotech sector is split into two parts:
1. Life sciences, which include bio-pharmaceuticals, nutraceuticals and medical products.
2. Other biotechnologies, which include agro-biotechologies, environmental technologies, natural resources and some manufacturing.
The chart below, which was produced by the State of California, provides some idea of how this complex sector organizes when it ‘clusters’ in particular locations. An argument can be made that companies in this industry sector have a higher degree of inter-dependence for production reasons than many traditional industries, which sometimes locate in close proximity for reasons of market access.
Source: California Life Science Action Plan, Taking Action for Tomorrow, 2005.
Companies in the shaded boxes are biotech businesses per se, while companies in the white boxes are suppliers/supporters that add value and benefit from operating in close proximity to biotech companies. As you can see, the large Life Sciences Products segment is central to the cluster structure. In the top row of the chart, a symbiotic group of smaller related industries feeds into the central activity through the pharmaceutical and medical products industries.
The Global Life Science Landscape
The healthcare and life sciences industries have found it advantageous to locate close to one another, and develop industrial communities now known as ‘clusters’. In the course of the last few years, most large, industrialized countries have defined their biotech industry strategies—among them England, France, Germany, Australia, New Zealand and Sweden. Some of the most dramatic development has occurred in the U.S. In 2001, only 14 American states had life science communities where the industry could develop. By 2004, 40 states were competing to attract biotech companies.
The Canadian life sciences industry is considered among the best in the world, and the Province of Quebec constitutes the most important location for the biotechnology sub-sectors dealing with human health. Research quality is the key; Canadian and especially Québecois research in this sector is world class and recognized as such by the industry’s major sources of financing. As a result, Commerce Magazine ranked Quebec 3rd in North America after California and Massachusetts in terms of biotech cluster size.
The development of this life sciences sector has depended on a group of conditions favorable to innovation and commercialization. The most important are entrepreneurship, financing, human resources, and an environment conducive to business. As well, close relations have developed among several key communities: industry, financial, academic and government. Local university research is outstanding, and plugged into a sophisticated global network. The well-established pharmaceutical industry has helped develop laboratory and manufacturing infrastructures to a high level.
Finally, government is not shy about organizing risk capital, or introducing fiscal measures favorable to research and development. Many countries, including the U.K., Australia and France, have recognized the importance of R&D tax credits for attracting biotech companies. Most of them have adopted or adapted Canada’s successful pioneering model—although none yet matches Canada’s generosity when it comes to the size of the credits. At this point Canada is still the best, but the gap is narrowing.
The robustness of the entire infrastructure is even more important than it looks. The process of developing a life sciences product, from the drawing board through fundamental research, government approval and commercialization can take eight to ten years, or longer. Total investment in one product can reach $5-10 million.
Top Canadian Life Science Clusters
The $650 billion global market for medications is dominated by the U.S., which represents 47per cent of total demand. This market has been growing at two or three times the rate of world economic growth for the past four years. Canada represents about 2per cent of this market ($15 billion), but the average rate of annual growth has been 11per cent for over a decade.
The Canadian life sciences industry is heavily concentrated in four cities that host clusters: Montreal, Toronto, Ottawa and Vancouver. Montreal is a world leader in the fields of neurology, oncology, cardio-vascular disease, virology, epidemiology and immunology. The city has six dedicated applied sciences research laboratories owned by the pharmaceutical giants.
The Toronto cluster has developed its expertise in genomics, proteomics, stem cell research, photonics, drug research and development and neuro-sciences. The $345 million Medical and Related Sciences Discovery District (MaRS) recently opened in downtown Toronto, at the head of the city’s well-regarded ‘hospital row’.
Best known for information and telecom technologies, the national capital of Ottawa also hosts a smaller biotech cluster. Top players are involved in projects such as bioinformatics, stem cells and regenerative medicine, drug discovery, medical devices, bio-products and convergent technologies.
The biotechnology cluster of Vancouver has strength in the areas of health and genomics research with major biotech companies located in the area. Seventy-seven biotech companies are located in the Greater Vancouver Area and employ over 2,600 biotech field-related people.
Top Canadian Clusters for Agro-Biotechnology
Canada is already well known for excellent agricultural practices and safe, high-quality food products. Accounting for more than eight per cent of Canada’s GDP, the agriculture and food sector is one of Canada’s top five industries and third-largest employer. Three Canadian agro-biotech clusters are spread across the center of the country.
Saskatoon is home to North America’s largest legume and cereal microbial inoculants manufacturing center, where new products are researched and developed. Canada’s agricultural genomics centre at Saskatoon places the city in the forefront of this research. When Canada’s first synchrotron facility soon opens, a new chapter will unfold in life sciences research.
The University of Saskatchewan is a world leader in agricultural crop research and home to one of Canada’s largest clusters of agricultural research organizations. At the heart of this advanced technology cluster is Innovation Place located beside the University and the National Research Council’s Plant Biotechnology Institute. The park is supported by government initiatives and driven by public policies for job creation in advanced technology sectors.
Innovation Place has over one million square feet of combined offices, laboratories and growing spaces, including 43 separate greenhouses. One example is the Bio-Processing Centre, which is a plant component extraction facility for customers developing a wide variety of products including nutraceuticals, cosmetics, and foods.
In 2006, the Government of Saskatchewan spent $4.6 million to support two agricultural research projects: frost tolerance for cereal crops, and oilseed diversification. The province also intends to make its corporate tax structure more competitive by phasing out capital tax, reducing income tax rates, and beefing up tax credits for R&D.
The veritable cradle of Québec agro-business, the St-Hyacinthe region can count more than 150 institutions of research, higher learning, technology transfer and specialized industry in this field. ‘La Technopole’ offers a fiscally-advantaged environment, thanks to the Centre de Développement des Biotechnologies (CDB) and a solid tradition of partnership between the sectors of research and industry.
Saint-Hyacinthe alone can boast:
More than 150 businesses involved in agricultural production
More than 20 groups for research and development in the field
1400 research farms on some of the best agricultural land in Québec
The Biotechnology Development Centres (CDB) encourage biotechnology firms to group together in buildings with facilities adapted to their needs, fostering science and technology clusters with a view to maximizing synergies and collaborations.
A company may claim a tax credit on wages until December 31, 2013, after its eligibility certificate comes into force. To be eligible, employees must be full-time and spend 90per cent of their time in the eligible facility located within a BDC, and must execute tasks directly related to eligible R&D activities. The tax credit eligibility period for assets and facilities varies as indicated in the table below.
Subject of Credit Type Duration
Wage paid to an eligible employee 30% of eligible wage (maximum $11,250 per employee) Up to 10 years (not to extend beyond December 31, 2013)
Eligible asset 30% of cost of acquisition or rental charges 3 years (acquisition)
5 years (rental)
Special facilities 30% of eligible rental charges 5 years
Foreign specialist Tax Holiday on employment income
100% for the first two years
75% for the third year
50% for the fourth year
25% for the fifth year 5 consecutive calendar years
Many new technologies are changing the face of agriculture worldwide, such as genetic manipulation of plants and animals, and the proliferation of specialty products. The Province of Ontario fosters a climate of academic research. This has lead to the dynamic growth of advanced agro-food technologies, with more than 500 scientists in the province working in this field. Agro-food represents a $63 billion value chain in Ontario—second in size only to the auto industry—and employs more than 640,000 people in the Province.
Technical expertise at six major Ontario universities is linked closely with federal and provincial food, health, environment and agro-food clusters in such cities as Ottawa, Kingston and Guelph. In Guelph, the heart of biotechnology research resides under the academic supervision of the University of Guelph. Supported by the Ontario Agriculture College and the Ontario Veterinary College, University of Guelph performs some of the most significant agriculture research in Ontario.
Guelph is a recognized leader in biomass conversion, as well as:
Plant and animal genomics
Functional foods and nutraceuticals
Among Guelph’s triumphs is the Enviropig—the first species of transgenic pig with reduced phosphorus output that makes it more environmentally friendly.
In the region of Guelph-Wellington, less than an hour west of Toronto, nearly 5,000 people are employed in this agro-biotechnology. This includes workers government, education, biotechnology, agro-food technology, agricultural supply, equipment, food processing, associations, research, marketing and other services.
For biotech companies looking to expand or relocate, Canada offers a rare combination of low set-up costs, aggressive federal and provincial tax incentives, and a well-established infrastructure that includes clusters in several major cities and provinces. Many of these clusters began building around the Canadian offices of worldwide pharmaceutical companies, which have been operating in the country for decades. The maturity of the clusters now fosters easy and productive relations between universities, businesses, and government officials.
Canada also has a very mature and specialized agro-biotechnology segment. These clusters are distinctly different from, and located independently of, the life science clusters. Because agriculture is such an important part of the Canadian economy, the government has invested heavily in these agro-biotechnology clusters. Companies that choose to locate in these areas will benefit from the excellence Canada is developing in this field.