Science and Research Committee on March 9th, 2023

[The Vice-Chair, Conservative, Corey Tochor]

I call this meeting to order.

Welcome to meeting number 33 of the House of Commons Standing Committee on Science and Research. Today’s meeting is taking place in a hybrid format, pursuant to the House order of June 23, 2022. Members are attending in person in the room and remotely using the Zoom application. For our first panel today, we are going to continue our study on the support for the commercialization of intellectual property.

I would like to make a few comments for the benefit of the witnesses and members.

Interpretation is available. For those on Zoom, you have the choice at the bottom of your screen of floor, English or French. For those in the room, you can use the earpiece and select the desired channel. I will remind you that all comments should be addressed through the chair. For members in the room, if you wish to speak, please raise your hand. For the members on Zoom, please use the “raise hand” function. The clerk and I will do our best to maintain a speaking order when appropriate. In accordance with our routine motions, I am informing the committee that all of our witnesses have completed the required connection tests in advance of this meeting.

We will start our meeting with two opening rounds of five minutes each from our presenters.

I now welcome Dr. Beauger to present for five minutes.

The floor is yours.

[Nadine Beauger, Former President and Chief Executive Officer, IRICoR, As an Individual]

Thank you, Mr. Chair.

Good morning.

Thank you and the members of the committee for the time you have given me today. I also particularly thank Ms. Diab for her invitation

For the past seven years, I have been the CEO of IRICoR, a centre of excellence in commercialization and research specializing in drug discovery based at the the IRIC, the University of Montreal's Institute for Research in Immunology and Cancer.

Owing to my 14 years at IRICoR, the commercialization of intellectual property piqued my interest because it has been IRICoR’s core activity in pursuing its goal of creating therapeutic solutions for patients with cancer or rare diseases.

Here's what we've seen in recent years. According to Statistics Canada, at the height of the COVID-19 pandemic in 2020, incidence of death from cancer ranked first with 80,000, followed by 50,000 deaths from cardiovascular diseases. Deaths from COVID-19 ranked third.

For cancer, the situation was and still remains particularly alarming because diagnoses dropped dramatically without a decline in incidence.

Discovering innovative therapeutic solutions in this field is more important than ever if we are to cope with the wave of new cancer cases in the coming years.

In my view, one of the solutions is the efficient commercialization of Canadian intellectual property. This activity is central to IRICoR's pan-Canadian mandate, which is to accelerate the discovery and development of projects leading to the commercialization of new therapies. For us, commercialization relates to the establishment of co-development partnerships with the biopharmaceutical industry and the creation of spinoff companies.

The socio-economic returns of our activities go beyond the marketing of new drugs. The IRICoR solution for financing and supporting the best drug discovery projects in oncology and rare diseases, towards their next value inflection point, is of the utmost relevance if Canadian innovation is to actually benefit patients.

Year after year, this model contributes to enhancing the value of government investment in basic research. It also helps to boost activity in Quebec and the rest of Canada, particularly by attracting foreign capital that directly funds Canadian research and development, by creating and maintaining high value-added jobs in a crucial sector for the country, and by creating new spinoff companies.

We have entered into partnerships in Canada and internationally with big private sector players such as Ipsen, AbbVie, and Bristol Myers Squibb, or BMS, to promote Canadian innovation resulting from projects initially supported by us. The key is that we use government funding before establishing partnerships with industry or creating companies. This allows us to create high value intellectual property and achieve major financial returns for our academic institutions, for our research teams and for organizations like ours, while keeping expertise in Canada. This expertise, generated jointly by the public and private sectors, and not traditionally found in academia, is a major asset that is then used to develop new projects.

IRICoR's investments and business support also attract organizations complementary to ours, such as Canadian technology transfer companies, the Stem Cell Network in Ottawa, the CCRM in Toronto, adMare Bioinnovations, local investment companies like CTI Life Sciences and the FSTQ, and international firms like Advent Life Sciences. All of this is focused on the creation of Quebec-based spinoff companies that conduct clinical studies around the world. I am talking here about examples like ExCellThera, Epitopea, and RejuvenRx, which we helped to create.

In 2019, Canada had the lowest level of corporate R&D funding in OECD and G7 countries. Since then, the federal government has deployed several initiatives, such as the Strategic Science Fund, but we can do more.

IRICoR is a benchmark model that the federal government must continue to support, and that should be adopted in other sectors to position Canada among the top countries in terms of the commercialization of intellectual property.

Thank you very much for your attention and I'd be happy to answer your questions.

[The Vice-Chair, Conservative, Corey Tochor]

Thank you so much, Dr. Beauger.

We now have Professor Karim for five minutes.

[Karim Sallaudin Karim, Associate Vice-President, Commercialization and Entrepreneurship, University of Waterloo]

Good morning. Thank you for inviting me to speak.

My name is Karim Sallaudin and I'm the associate vice-president of commercialization and entrepreneurship at the University of Waterloo.

I'll point out that much of our work at Waterloo takes place on the traditional territory of the Neutral, Anishinabe and Haudenosaunee peoples. Our main campus is situated on the Haldimand Tract, the land granted to the Six Nations that includes six miles on each side of the Grand River.

The University of Waterloo started as an unconventional institution and this has led to a leadership position in intellectual property development and commercialization. The university has a creator-owned IP rights policy that grants full ownership to the inventor. This policy has given rise to a university culture that has become the engine for driving commercialization success of student-led and research-based innovation.

I'll draw your attention to two of our important commercialization initiatives currently.

Velocity, Canada's most productive incubator, has incubated 434 companies since 2008. These companies, in turn, have generated more than $35 billion in enterprise value and created more than 5,000 jobs. University industry collaborations have served over 1,100 companies in the Advanced Manufacturing Consortium, a partnership between the universities of McMaster, Western and Waterloo.

Debate on Canada's innovation and productivity gap often centres on research and development within existing private companies. However, the activities and role played by post-secondary institutions like Waterloo are filling the gap today that private enterprises cannot fill effectively. I'll mention three ways in which this is done.

Number one, universities like Waterloo train large volumes of highly entrepreneurial students who, through their experience with co-op education, are motivated to bring productivity innovations to market. Students can often achieve this faster than incumbent enterprises can as students are not constrained by any particular business model as are most SMEs. Given the necessary supports like the Velocity incubator, these students are very successful agents of change and have generated productivity-based start-up unicorns for Canada. Recent examples include ApplyBoard and Faire.

Number two, post-secondary institutions generate the majority of R and D-based deep-tech discoveries. Deep tech is disruptive. Think about what happened to Kodak with the advent of digital cameras and the Yellow Pages with the advent of online search. To commercialize deep tech, both capital and specialized technical labour is required, but most Canadian enterprises have neither the will nor perhaps the ability to commercialize deep tech. An alternate way to commercialize deep tech is through university start-ups. These start-ups involve the university inventor, especially since it is the inventors who have much of the tacit knowledge to commercialize. They also benefit from a supply of specialized trained graduate students who act as diffusers of this knowledge from academia to the start-up. These students often take up leadership positions within the start-up instead of heading south for more lucrative opportunities.

Number three, economic growth and social impact are often not well aligned. Challenges such as a net-zero economy, climate change, sustainable health care, inequality and food insecurity continue to exist despite decades of strong economic growth. Private enterprises do not take on these challenges because the financial returns are modest and the time to returns can be very long. However, sustainable social enterprises founded on university campuses like Waterloo can take on these societal challenges and they do. They attract qualified employees who are motivated by the social mission, and they find capital to grow from a new breed of social impact investors and governments who value social impact alongside financial returns.

I'll make three recommendations.

One, we recommend that the Government of Canada provide more focused investment into increasing university commercialization capacity. Research, innovation and commercialization are part of a continuum. If we constrain one part of the pipeline in favour of another, the whole ecosystem and Canadian society suffer.

Two, universities should be included in any new programming supplied by the CIC to ensure that no innovation opportunity is left on the sidelines. We need CIC and other programs for universities to advance the commercial readiness of new technologies for translation to start-ups or the private sector.

Three, the CIC should engage deeply with experts at universities and incubators who have proven track records of commercializing specialized technology. To close our research and development gap, Canada needs a much more coordinated approach than what is currently happening. If we continue to look at education, research and commercialization as mutually exclusive, the productivity gap will only continue to widen.

Thank you. I can take questions now.

[The Vice-Chair, Conservative, Corey Tochor]

Thank you so much, Professor Karim and Dr. Beauger.

We now will enter our six-minute round of questions.

To kick it off, we have MP Williams.

[Ryan Williams, Conservative, Bay of Quinte, ON]

Thank you, Mr. Chair.

Thank you to our witnesses for coming to this important study today.

Professor Karim, I'm going to start with you, if I may, sir. The president of the university was in front of this committee a little while back in an earlier study. An alarming statistic is that in Canada we lose 75% of our computer science graduates and software engineers to the United States.

I'm curious to know what the rate is for intellectual property. Do we see the same rate of its leaving, of venture capital coming in and taking that IP out of Canada? If we do, how do we stop it from leaving?

[Karim Sallaudin Karim]

That's a great question.

I don't know the exact numbers for how much of our IP is leaving Canada, but I can say one thing: Deep tech, which is where a lot of IP resides, is difficult to commercialize within Canada, for the reasons I mentioned previously. One, our companies do not have the capacity to commercialize or, sometimes, the will. In that situation, it's not unlikely that this IP would leave Canada to find a home where it could be commercialized.

The second part of your question is how we stop that from happening. If we're trying to stop that from happening, we need to enable Canadian businesses to commercialize deep tech and to stay in Canada. I mentioned that existing businesses sometimes don't have the ability or the will to do so. Start-ups are a very interesting alternative. Start-ups are inherently tied to the country because the inventors are tied to the universities, and the graduate students, if you can attract them and prevent them from leaving by offering them leadership opportunities, would stick around.

We are seeing, in a sense, a rise in deep tech in Canada that is focused on start-ups coming out of universities like Waterloo. That's one option.

[Ryan Williams, Conservative, Bay of Quinte, ON]

Then, how are we funding commercialization? We've talked a lot in the past about R and D, and we spend a lot of money on applied research. How specifically or how through the university system, the University of Waterloo, do you see funding commercialization?

[Karim Sallaudin Karim]

Again, I think that's a very pointed question, and I think it's a good question.

The universities, with the current funding that we get from government, can take technologies like deep tech up to prototype stages. For example, the tri-councils like NSERC have I2I programs and others that enable that.

Once that happens, you have to get the technology out of the company, either to the private sector or to a start-up. That money has to come from angel investors or VCs. Now, within Canada, we don't have a very large number of venture capitalists who would go into high-risk deep tech, so you have to rely on angels.

Oftentimes, the other way to do this is to rely on strategic investors, i.e., other Canadian companies that may see a value in the technology but don't have the resources internally to do it, so they'll invest in a start-up to have it grow.

[Ryan Williams, Conservative, Bay of Quinte, ON]

In your opinion, for venture capital, how much is coming from the U.S. and how much is Canadian at this point, percentage-wise?

[Karim Sallaudin Karim]

It's a good question. I don't have the exact numbers off the top of my head, but anecdotally I would suspect that a larger share is coming from the United States than is coming from Canada.

[Ryan Williams, Conservative, Bay of Quinte, ON]

Are there active venture capital groups that operate through the university, that are coordinated through the university at this point?

[Karim Sallaudin Karim]

The university does coordinate with VCs and micro-VCs for sure. The university being a charity, obviously it's not going to run its own VC because it is a for-profit enterprise, but there are interactions that do occur.

[Ryan Williams, Conservative, Bay of Quinte, ON]

Do a lot of those interactions happen with Communitech in Waterloo?

[Karim Sallaudin Karim]

Absolutely, Communitech is part of the big picture. It is a key regional player that helps to provide education and connections.

The other piece is of course Velocity, which is a university incubator. It's a not-for-profit. We've realized a lot of value through that Velocity incubator. Velocity also has quite a few connections, both locally and in the United States, and brings in funding to the start-ups that are in the Velocity incubator space.

There's also, of course, the Accelerator Centre in the Waterloo region that is also coordinating.

All of these work together to make sure the ecosystem is vibrant.

[Ryan Williams, Conservative, Bay of Quinte, ON]

When I've done research for the U.S., they seemed to not even have to look for it. There are enough angel investments and enough venture capital in the universities that they don't have to do that, but in Canada it seems, from other testimony, we really have to work hard at it.

Do you think there are things we could do on the government side to encourage the large network of alumni you have or the swath of businesses, not just in the Waterloo area but across Canada, that have certainly benefited from your institution? Are there recommendations we could make that would encourage more angel investments and venture capital from different human capital sides in Canada and not just from the government?

[Karim Sallaudin Karim]

I'll make an interesting point here. Venture capital is often synonymous with taking risk, but the real question you're asking is this: What types of risks are VCs taking? VCs most often do not take on technological risk, but they take on market risk. What I mean by that is they're happy to take a product or a prototype that is nearly commercial-ready and see how to get it introduced into the market. Most VCs in Canada or the United States do not have the means, the capacity or the intention to take on technological risk.

Technological risk in the United States is overcome by government programs like the SBIR or the STTR. These are very large, substantial pools of funding that can be obtained not just by small businesses but also by universities and university start-ups. Sometimes they can offer up to $2 million U.S. of funding over the course of a year or two. That can be very instrumental in bringing deep tech to market.

[Ryan Williams, Conservative, Bay of Quinte, ON]

Thank you, Mr. Chair.

[The Vice-Chair, Conservative, Corey Tochor]

Thank you very much.

Now we will be moving to Madam Diab, who is online, for six minutes.

[Lena Metlege Diab, Liberal, Halifax West, NS]

Thank you very much, Mr. Chair.

Welcome to both witnesses.

I'd like to welcome the witnesses here with us today.

Ms. Beauger, t's a pleasure to have you with us at the committee meeting this morning. I'd like to begin by by saying that I was delighted to make your acquaintance at the Stem Cell Network lunch organized for the group by my colleague, Ms. Valerie Bradford.

[Nadine Beauger]

It was a pleasure for me too.

[Lena Metlege Diab, Liberal, Halifax West, NS]

I'm sure that you have lots of advice and information for us to use in our study.

Could you tell us a little more about your own experience and work in commercialization, particularly in the health field?

[Nadine Beauger]

Thank you very much, Ms. Diab.

I can provide more details about our sector, which is discovering medicines. As I mentioned, the pandemic showed how important this sector is for Canada's economy.

I'd like to mention something that links to the previous comments. I'm going to use IRICoR as an example, but I believe it's a model that could be applied more broadly in Canada. High-value assets that can be developed in a university environment are needed before establishing companies. Doing this mitigates the potential risk for Canadian and American venture capital corporations. I can also see that my colleague, Professor Sallaudin-Karim, is working on this at the University of Waterloo. I believe that models like this would raise the value of Canadian innovation and intellectual property before establishing industry partnerships.

When I talk about partnerships, as you were pointing out, based on our experience at IRICoR, we mean partnerships with international pharmaceutical companies. Accordingly, what's involved is demonstrating that Canadian innovation can attract major funding. In our first 10 years, we funded drug discovery projects at various stages of development, ranging as high as $5 million or $6 million. These investments attracted $50 million to $60 million in research and development funding from international companies.

Unlike deep tech, pharmaceutical company headquarters are outside of Canada. We were nevertheless able to attract funds.

In addition to the research and development funding that would come to Canada, there are the contracts we sign with these companies. We're talking about intellectual property and expertise development. At IRICoR, working with Canadian research teams, we developed new intellectual property. However, we also afterwards established collaborative partnerships with major pharmaceutical firms, giving rise to knowledge transfers between university and pharmaceutical company research teams.

This jointly developed expertise generates benefits for research teams and universities in Canada, as well as for organizations like ours, and enables us to reinvest in research projects and make them sustainable with federal and provincial funding.

[Lena Metlege Diab, Liberal, Halifax West, NS]

Thank you very much.

Do you feel that the health field in Canada is doing better or worse at commercializing intellectual property than other areas, such as clean technology?

[Nadine Beauger]

I haven't been monitoring other fields as closely. However, I believe that initiatives like the Strategic Science Fund are crucial for fields like health and science. I'm sure that there are other opportunities for the government. It should also be supporting organizations like IRICoR, the one I was heading, to generate this added value.

We were just talking about human capital, and that's added value that you don't find in the traditional university setting. What I'm talking about is the mentality specific to the private sector. I'm talking about people who have worked for venture capital companies or for private intellectual property companies. I'm talking about adding all this knowhow to Canada's scientific expertise and excellence.