Thank you very much, Madam Chair, and members of the committee, for this opportunity to share with you some of my experiences in innovation in medical devices and in drugs in Canada. I'm going to describe a few of my own experiences, and I have some additional examples from my institution in the briefing materials that were provided.
My research is in the application of ultra-high magnetic field MRI machines to the study of brain structure and function. These are MRI scanners that operate at two to seven times the magnetic field strength of the MRI scanners usually found in hospitals. My laboratory in London is the only cluster of such machines in Canada, and it has the highest magnetic field MRI scanner for human and animal use in the entire country.
We use these machines to study Alzheimer's, multiple sclerosis, brain cancer, and Lou Gehrig's disease, as well as to understand how the normal brain works. In developing the potential and unique sophistication of these machines for research and diagnostic use over the past 18 years in my laboratory, we have established a number of medical device technologies that are being, or have been, commercialized. I want to talk to you about this.
The first point the committee should understand is where these innovative medical device technologies come from. They don't come from thin air. They come from basic research. They come from the creative minds of my students and my staff who are trying to understand the laws of physics and then apply them to important medical questions.
My initial basic research in this area was funded by the Medical Research Council of Canada in the 1990s. When we started in 1996, we had one of only four such machines in the world for human studies. We did not know what brain disorders could be imaged with this technology or what they were good for. We just had an informed hunch. We had to beg Varian and Siemens, two enormous multinational corporations, to sell us the parts to build such an instrument ourselves, because the big companies had already tried and failed.
This is what the initial $6 million raised by the Robarts Research Institute to recruit me back from the United States was spent on. It was a big risk for our institute, but being innovative requires risk taking. Canadian companies will not take this risk. Canadian banks will not take this risk. Canadian venture capital companies will not take this risk. This is the role of government, to seed innovation in the laboratory, even when you do not know what it will yield or when it will yield it.
MRI scanners use radio waves as part of their operation. From our fundamental research on radio frequency interactions with the body, we produced a new design for a radio frequency coil that was essential for developing this new MRI market. However, no company in Canada was interested in producing such coils because they thought the potential market was too small. Therefore, two of my staff members and I started our own Company, XLR Imaging, in 1998 to sell these coils around the world. We sold $1 million of coils in the first three years as the market for these new MRI machines grew, but we could not raise the capital in Canada to grow the company.
A similar small company, USA Instruments, started in Cleveland. Because they had much easier access to capital south of the border, they grabbed a significant share of the market for these radio frequency coils. They had the money to hire 250 employees; we had three. There are now 4,000 very high and ultra-high field MRI scanners operating worldwide. Purchasers of these scanners have bought $1.8 billion of radio frequency coils in the last five years. In fact, to secure a coil provider for this rapidly growing market, GE acquired USA Instruments, that small company I talked about, for $100 million in 2002. That could have been us. That could have been this country.
This example of lost opportunity highlights two important points.
First, funding of basic science is important for Canadians. It can create enormous wealth, but it could be five years or five decades before that happens. Once we and a few others had shown the usefulness of this technology, many companies entered what is now a $5 billion per year MRI market for these types of high-field magnets, including Siemens, GE, Philips, and Toshiba. But Canada was left behind even as a component supplier, because we failed to capture the value of our basic research.
This leads me to my second point. The failure was not the fault of scientists. Federal and provincial governments repeatedly blame Canadian scientists for not commercializing their devices. This is not fair. We want to be rich just as everybody else wants to be. In my own research area, the data collected by the Canadian Institutes of Health Research show that neuroimaging researchers in Canada rank number two in the world in academic productivity, yet there is no major manufacturer of a medical neuroimaging device in Canada. Why?
Our scientists would love to commercialize discoveries and to find alternate funding streams for their laboratories in this era of shrinking funding for basic science. The problem is there are no Canadian companies that want to bring our products to market. There is no Canadian capital interested in funding that. Therefore, the ideas either die in the lab or are licensed out of the country. I think the problem is that Canadian industry and investors are pathologically risk averse.
I have many more examples of risk aversion from my own institution. Two of my colleagues, Dr. Holdsworth and Dr. Fenster, developed a micro CT scanner technology 20 years ago. They spun it off as a London, Ontario company called EVS, but couldn't get the capital to grow the company. General Electric bought the company for a song, and sold it, as they often do, to another company, Gamma Medica Inc., which moved 100 jobs to California and then went bankrupt. That was the end of another Canadian success story.
My colleague Ting-Lee has developed special software that allows blood flow in the brain to be measured using a standard CT scanner. It is an essential tool for stroke diagnosis around the world. GE holds the exclusive licence, which yields $4 million a year to our institution in royalties. GE sells $2.5 billion a year of CT scanners that use that software, but we were unable to capitalize on that manufacturing in this country.
My colleague Chil-Yong Kang has begun an FDA-approved clinical trial of an HIV vaccine in the United States. The trial is funded by Sumagen Canada, which is really a subsidiary of Curacom, a South Korean company. If this historic vaccine is successful, it will be a breakthrough in global health, but the vaccine will be made in South Korea, not in Canada. The Medical Research Council and the Canadian Institutes of Health Research supported the basic research for this vaccine, but no Canadian company wanted to invest in it.
These four examples from my institution show how Canada has squandered billions of dollars in potential revenue and taxes by sending technologies that we taxpayers paid for out of the country instead of investing in them.
Canadian companies have to learn to take risks and innovate. I worked at Bell Labs for many years with a colleague, Seiji Ogawa. He worked there for 33 years. It was a company that heavily invested in research. That company has 13 Nobel laureates. No company in Canada has ever produced a Nobel laureate. In fact, Bell Labs has produced more Nobel laureates in just one building in New Jersey than the entire country of Canada has produced since the Nobel prizes were put into place.
We need to develop a culture of corporate research and development in this country if we are to capture the benefits of researchers such as myself. It is, however, dangerous to try to divert money from fundamental research to do this, as is currently happening. We need to look at other solutions.
Thank you very much.