We need a multi-decade, sustained effort to move country in right direction

Ted Hsu
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Politicians rarely think on those time scales, too often developing four-year policies that align with election dates. To survive changes in the government of the day, a comprehensive industrial strategy needs broad support across party lines and regional divides.

biotech

This article appeared in the Hill Times Biotechnology Policy Briefing on Monday, September 22, 2014.

We often wring our hands at the Canadian economy’s relative lack of capacity to innovate and commercialize. This is not a recent phenomenon. J.J. Brown, a historian of Canadian technology, wrote in his 1967 book, “Ideas in Exile”, that this was Canada’s most pressing issue, “… which leaves us increasingly weak in competition with other nations.”

Any solution to this problem must include a multi-decade, sustained effort to move the country in the right direction. Politicians rarely think on those time scales, too often developing four-year policies that align with election dates. To survive changes in the government of the day, a comprehensive industrial strategy needs broad support across party lines and regional divides.

Canadian researchers have been fantastically innovative, especially in the area of biotechnology. The discovery of insulin is a commonly known example; much less known is that Canadian-made vaccine made up roughly half the supply used to eradicate smallpox. Its higher quality even made it preferred by vaccinators. Most recently, an experimental therapy for Ebola of Canadian origin was in the news (but it is not clear whether it will be commercialized in Canada).

It is not sufficient to merely scale-up these Canadian innovations. In order to reap the long-term economic benefits it is important to have not only companies, but also industries. An industry includes things like suppliers, training, applied research, spin-offs, a sector-specific investment community and continual investment in new technology. Industries not only sustain job creation, but also the cycle of innovation itself.

What we need in Canadian biotechnology is a serious commitment, one that can nurture the biotech industry and one that represents an ongoing commitment by government which is sheltered from the election cycle.

Why might it make sense for the government to subsidize this risky commercialization enterprise when private enterprise is reluctant to do so? What is the market failure that justifies government intervention? Canadians as a whole are probably more risk-averse than what is optimal for a healthy innovation and commercialization ecosystem. This has served us well when we simply had to make good use of our natural resources, and sell to the big single-market south of the border. But when it comes to commercializing research I think there is a good argument that economic imperatives require that our government nudge us towards risk-taking and tolerance of failure.

We all know Tesla Motors as the innovative electric car manufacturer led by a brilliant man. Less known is that a majority of Tesla’s investment was secured by hundreds of millions of dollars in U.S. federal loan guarantees, secured through the highly innovative, “Advanced Research Projects Agency – Energy” (ARPA-E) program. Without that program, Tesla may not exist as we know it today.

Failures happen, but the reward is that the United States is now home to the first large-scale, fully electric, car manufacturer. It is that comfort with failure that has made ARPA-E successful.

ARPA-E has in-house, world-class experts in the field of energy, identifies strategic areas of development before looking at specific technology, and relies on an internal competition and external peer review to choose and fund very high risk, game-changing projects in the energy sector. It provides expertise to help bring innovations to market with domestic industrial partners. That is an important feature of ARPA-E. During 2009-2011, about 150 projects were funded in the U.S. with an investment of over $400 million.

It is well known how reluctant Canadian investors are to fund biotechnology. A biotechnology loan-guarantee program modeled after the ARPA-E program could certainly melt the ice and stimulate the Canadian industry. The market could then help do the work of vetting and supporting winning companies. This program would also help attract foreign investment to Canada – often the source of specialist investors with the technological and market expertise to understand the risks and be willing to take them on.

Stipulating that the money be spent in Canada, for Canadians, we can hope to not only grow a Canadian industry but also attract investment and prevent brain-drain, all while providing long-term, high quality jobs for our world-class workforce.