Health Committee on Dec. 11th, 2023

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

In your opening remarks, I believe you said that the vaccine had a 75% effectiveness rate against symptomatic COVID-19 and 100% effectiveness against long COVID-19, which has serious undesirable effects.

As I understand it, the World Health Organization, or WHO, rejected the vaccine purely because of its shareholder and not because of its quality.

Is that correct?

[Toshifumi Tada]

That's our understanding. It has nothing to do with the vaccine's efficacy or quality.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

With regard to plant-based technology, some newspapers have reported that Medicago used a plant similar to tobacco to manufacture its vaccines.

I know I you are not scientists, but I expect you have some basic understanding of this.

What is the difference between the plant that Medicago uses,Nicotiana benthamiana, and the one cigarette manufacturers use, Nicotiana tabacum?

[Toshifumi Tada]

First, I want to qualify that we used a plant called nicotiana benthamiana. This is a relative to the tobacco leaf, but it's quite different from the tobacco you smoke. Our vaccine contains no tobacco or nicotine products.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you very much, Mr. Tada and Ms. Marquis.

I think my time is up.

[The Chair, Liberal, Sean Casey]

Thank you.

Mr. Johns, please go ahead for six minutes.

[Gord Johns, NDP, Courtenay—Alberni, BC]

I would like to get some answers out of this as well.

On a similar track, on December 29, 2022, CBC News reported that the tobacco giant Philip Morris International had divested all its shares from Medicago. In a statement, Philip Morris's spokesperson, David Fraser, said the company decided that this was “the most appropriate way forward”.

Before the decision, Philip Morris owned 21% of your company's shares. Can you confirm how Philip Morris International was compensated for its Medicago shares?

[Toshifumi Tada]

Thank you for the question.

I understand the result was that the share transfer from Philip Morris Investments to Mitsubishi Tanabe Pharma was the result of intensive discussions between the two shareholders. Medicago was not involved in those discussions, so we don't have any knowledge to answer your question.

[Gord Johns, NDP, Courtenay—Alberni, BC]

You have no idea how Philip Morris International was compensated?

[Toshifumi Tada]

No, I don't know. It was between the shareholders.

[Gord Johns, NDP, Courtenay—Alberni, BC]

Okay.

Mitsubishi Chemical Group's consolidated financial results for the fiscal year ending March 31, 2022, note the following:

...MCG has determined that it will not pursue the commercialization of the VLP vaccine. In addition, MCG judged that it was not viable to continue to make further investment in the commercialization of Medicago's development products, and decided to cease all of its operations at Medicago and proceed with an orderly wind up of its business and operations. Consequently, since the investment [has become] unrecoverable, the carrying amount of Medicago's vaccine manufacturing equipment and goodwill related to its business and operations was reduced to the recoverable amount....

Can you outline why MCG came to the determination that it was not viable to continue to make further investments in the commercialization of Medicago's development products?

[Toshifumi Tada]

Thank you for the question.

There are two answers. First, after approval, we faced internal challenges in scale-up for the commercialization and we knew that it would take time to fix it. That's the first.

Second, while we were fixing the issue, we started to observe that the COVID-19 vaccine market was evolving quite a lot and that market demands were shifting to the bivalent vaccine, including the omicron strain. Our vaccine did not contain the omicron strain, so we thought additional R and D investment would be needed to catch up. At the same time, we negotiated with PSPC that because of the market change, PSPC would cancel their order because of their inventory position and the variety of strains in circulation.

Given that situation, we understand that Mitsubishi Chemical reviewed the situation comprehensively and decided further investment would not make a business case for them.

[Gord Johns, NDP, Courtenay—Alberni, BC]

Can you confirm the recoverable amount for Medicago's vaccine manufacturing equipment and goodwill related to its business?

[Toshifumi Tada]

I'm not in a position to comment financially on what the recoverable amount was, but we can understand that our shareholders have invested in Medicago almost $2 million so far.

[Gord Johns, NDP, Courtenay—Alberni, BC]

Okay.

Philip Morris International's 2022 annual report noted the following:

In 2021, our equity method investee, Medicago Inc., initiated additional rounds of equity funding in which we did not participate. As a result, our share of holdings in Medicago Inc. was reduced from approximately 32% at December 31, 2020, to approximately 23% as of December 31, 2021. The ownership dilution resulted in a $0.04 per share favourable impact to diluted EPS and income of $55 million to equity investments and securities (income)/loss, net in the consolidated statements of earnings for the year ended December 31, 2022.

At this committee's meeting last Wednesday, health minister Mark Holland claimed that PMI'S minority position that was held in Medicago did not advance the interests of either nicotine or tobacco. Given that this ownership dilution had a positive financial impact for Philip Morris International, contributing to a net income of $55 million for the year 2021, is it accurate to claim that Philip Morris International's minority position in Medicago did not advance the tobacco company's interest?

[Toshifumi Tada]

First, I can't comment on whether or how interesting Medicago is to the Philip Morris investment decisions, but I can confirm that they are a minority investor, and we didn't have any tobacco research or whatever with the Philip Morris investment. We use nicotiana benthamiana. It is a plant that is related to the tobacco leaf, but it's not tobacco leaves. Our relationship with PMI is nothing more than as a minority shareholder.

[Gord Johns, NDP, Courtenay—Alberni, BC]

Okay. The profit could certainly flow back to the company, so they could advance their interests.

The government invested $173 million in Medicago in 2020 to help your company develop and produce its plant-based COVID-19 vaccine, Covifenz. Can you confirm if the government of Canada received any equity in exchange for its investment in Medicago?

[Toshifumi Tada]

That $173 million is a contribution under a SIF agreement, so we can't—

[Gord Johns, NDP, Courtenay—Alberni, BC]

You can't tell us whether there's a [Inaudible—Editor].

[Toshifumi Tada]

We don't discuss details about the contract. However, I understand the $173 million contracted in 2020 was a contribution by ISED to help Medicago's development of the COVID-19 vaccine and the establishment of the large-scale manufacturing facility.

[Gord Johns, NDP, Courtenay—Alberni, BC]

I think it's very hard for this committee to get a lens without that answer.

[The Chair, Liberal, Sean Casey]

Thank you, Mr. Johns.

Thank you, Mr. Tada.

Mr. Deltell, you have the floor for five minutes.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Thank you very much, Mr. Chair.

Ms. Marquis, Mr. Tada, welcome to the House of Commons.

As an MP from the Quebec City area, I have always been very proud of Medicago. What has happened in recent months and years is very unfortunate, especially the fact that the WHO did not recognize the vaccine you worked on. More disappointing, and even upsetting, is the fact that the writing was on the wall. It was written in black and white in international treaties that the WHO would never recognize the work done by Medicago.

Let us recall article 5.3 of the WHO Framework Convention, adopted on February 27, 2005, which states that “Parties shall act to protect these policies from commercial and other vested interests of the tobacco industry”. Canada is one of the 181 signatories to the convention.

Then, in 2008, Philip Morris International became a minority shareholder in Medicago.

In 2008, did anyone in government or in the company sound the alarm and point out that the WHO would never recognize Medicago's work again? Please answer yes or no.

[Toshifumi Tada]

Thank you for the question.

No.

We had been in conversation with the WHO because we wanted to prepare ourselves to make an application in the pandemic situation. After we made an application, they restricted it because of the tobacco connection reason. The situation was this: When they reviewed the application, they already had other vaccine candidates. Therefore, as we understand it, they made their own decision based on the situation they faced at that point in time.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Mr. Tada, it was written in black and white that the WHO would not recognize the work of a company that included a tobacco company among its shareholders. That had been the case for Medicago since 2008. On March 12, 2020, when you announced your work on the vaccine, and in October 2022, when the Government of Canada gave you $173 million of taxpayer money, did anyone in the company warn the government that, because of the minority shareholder from the tobacco industry, the WHO would never recognize your work? Yes or no?