Science and Research Committee on Nov. 3rd, 2025

[The Chair, Liberal, Salma Zahid]

I call this meeting to order.

Welcome to meeting number 13 of the Standing Committee on Science and Research. The committee is meeting to study private sector investment in research and development in Canada.

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

Please wait until I recognize you by name before speaking. For those participating by video conference, click on the microphone icon to activate your microphone, and please mute yourself when you are not speaking. For those on Zoom, at the bottom of your screen you can select the appropriate channel for interpretation: floor, English or French. All comments should be addressed through the chair.

For this panel, I would like to welcome our three witnesses.

We are joined today by Jesse Vincent-Herscovici, chief executive officer of Axelys; Gay Yuyitung, executive director, McMaster industry liaison office, McMaster University; and Sarah Watts-Rynard, chief executive officer of Polytechnics Canada.

Thanks a lot for appearing today. All of you will have five minutes for your opening remarks. Then we will go into rounds of questioning.

We will start with Mr. Vincent-Herscovici.

Please go ahead. You have five minutes for your opening remarks.

[Jesse Vincent-Herscovici, Chief Executive Officer, Axelys]

Thank you very much, Madam Chair.

Good morning, vice-chairs and committee members. Thank you for inviting me.

I am pleased to be here today to share Axelys's point of view. The Quebec government has given our organization the mandate to transform the results of public research into practical innovations that meet market needs, support our businesses, and bring sustainable benefits to society.

The issue before us today is neither technical nor simple. It's about our capacity as a country or province to transform collective intelligence and pooled investments in public research into practical solutions for citizens, businesses and communities.

First, I would like to point out that the calibre of Canadian scientific research is exceptional and recognized the world over. We have lots of ideas. What we lack are the mechanisms to systematically transform our discoveries on a large scale into something of value for society. We are responsible for approximately 3% of global scientific publications, but register only one patent per thousand publications. By comparison, the U.S. registers 2.5 patents per thousand publications, and South Korea, four patents per thousand publications.

The Canadian private sector contribution to R and D is much lower than what we see in the highest-innovation economies. Just to give you an idea, less than 10% of Canadian university inventions gets licensed or transferred to businesses. Meanwhile, the average among members of the Organisation for Economic Co-operation and Development, the OECD, is over 20%. Furthermore, Canadian businesses invest only 0.9% of GDP in private sector R and D, while the OECD average is 1.6%. What that means is that discoveries are made, but creating value falls by the wayside. Talent is not the issue, the innovation chain is. Research is funded, but technology maturation, moving from the idea stage to the adoption stage, is underfunded. Also funding is often fragmented, diluting the benefits for society in the process. In short, we produce amazing vegetables, but we barely harvest them.

Since its creation in 2021, Axelys has held consultations that have all led to the same conclusion: this is a structural issue, not an occasional problem. As a result, Quebec set about reinventing the process of unlocking the value of public research. This policy resulted in the creation of an integrated model to identify high-potential inventions, promote their maturation, coordinate efforts, and support the transfer of those inventions to businesses that can bring them to market. This model led to the creation of Axelys. Thanks to this model, we were able to draw three essential conclusions.

To begin with, well-managed intellectual property becomes a collective economic asset, and its benefit is not secondary or optional. It is nothing short of a strategic asset and a lever for economic sovereignty.

In the innovation sector, we often talk about “death valley”, meaning the gap between invention and commercialization. Canada actually has many death valleys. When technological maturation lacks funding, most promising innovations don't move past the prototype stage in public research labs.

Finally, when it comes to identifying needs, business participation in public research projects increases private sector research and development, and makes inventions that come out of laboratories more relevant, which creates a positive loop.

That is quite the challenge in a fast-changing global environment. A strong economy no longer relies on its production capacity alone. It must also be able to adapt to market changes in real time by having, protecting and using technologies through IP ownership.

The United States, Europe and Asia have already made the shift and have all adopted strategies to support the innovation cycle value chain.

Threat and competition come not from other provinces, but from other countries. The most innovative economies are the ones that stand out, those that are better at capitalizing on their public research investments. Nowadays what's at play is skilled jobs, our capacity to develop our own technologies, and our economic sovereignty.

There are four federal levers that can help us face these important issues and reach the shared objective of keeping the value we create here.

First, we recommend that the federal government implement an IP action plan, with support for capturing the value of public research. These measures need to align with the various provincial programs in place.

Second, we recommend that the federal government fund and support technological maturation, not only discovery.

Third, we recommend that the federal government boost domestic private investment by encouraging Canadian businesses to invest earlier in public research inventions through tax incentives based on national impact.

[The Chair, Liberal, Salma Zahid]

I'm sorry for interrupting. Could you wind up in a few seconds, please?

[Jesse Vincent-Herscovici]

I will with pleasure, Madam Chair.

Finally, I would like to talk about a collective challenge we face. Canada has already shown it can rally around a priority issue. We did it in the case of research security, and the principles of diversity, equality and inclusion, and we can do it to promote public research. We've already shown in Quebec that a coordinated and structured approach can transform scientific discoveries into innovations. Thanks to this approach, 89.5% of the technology transfers supported by Axelys have been to small and medium-sized businesses in Quebec.

It can be done. We just have to focus on the structural aspect.

[The Chair, Liberal, Salma Zahid]

Thank you.

We will now proceed to Madam Yuyitung, who is representing McMaster University.

Please go ahead.

[Gay Yuyitung, Executive Director, McMaster Industry Liaison Office, McMaster University]

Good morning, Madam Chair. Thank you for the opportunity to speak today.

McMaster University ranks among Canada's most research-intensive institutions and is in the world's top 100. With $425 million in sponsored research income, nearly half from non-government sources, we are a leader in industry engagement, advancing discovery and applied research that fuels innovation and improves human and societal well-being.

The role of colleges, polytechnics and universities in Canada's innovation ecosystem is a means to an end. They lay the foundation by generating IP, training talent and supporting the ecosystem, but their full impact depends on mobilizing these assets with private sector partners to bring products to market and drive growth.

At McMaster, we've expanded our commercialization and innovation efforts to build a culture where entrepreneurship is integral to education and research. Through initiatives like the McMaster seed fund, The Forge, The Clinic and the Heersink school, we've trained thousands of students, faculty, staff and clinicians at our affiliated hospitals. We've mentored over 400 student-led companies and invested in more than a dozen research-based start-ups. These ventures have created over 1,000 jobs and raised more than $80 million in the past decade.

Universities also help small and medium-sized enterprises, SMEs, create IP and access research expertise and infrastructure. McMaster and its affiliated hospitals carry out over 500 partnered projects annually. A new partnership with Western University will provide shared assets to 13 research facilities, creating a regional node that supports SMEs and maximizes federal and provincial investments.

These successes show what's possible when post-secondary institutions, the private sector and government work together. However, Canada still faces challenges. The first is a lack of enough experienced executives who can scale ventures. Without these leaders, companies often turn to C-suite talent based in the U.S., leading to company expansion beyond our borders. The second is that limited risk capital—from seed to large investments—forces start-ups to seek funding abroad at a much earlier stage, increasing the likelihood of these ventures leaving Canada. The third is that partnership, tech transfer offices and entrepreneurship programs at colleges and universities remain underfunded despite being critical to these commercialization pathways.

To address these gaps, we recommend three actions.

First, invest in talent, from students to executives. National programs like the Dalhousie-led Lab2Market or the SFU-led invention to innovation, alongside university and college initiatives, are building entrepreneurial mindsets and should be continued. However, Canada needs a federal attraction strategy for experienced executives with wraparound supports to retain them, particularly to address gaps in key growth sectors such as AI, nuclear, life sciences and defence. By combining business leadership with technical expertise here at home, we can scale and keep companies in Canada.

Second, strengthen risk capital across all stages of growth. Canada needs a federal program, similar to the U.S.'s SBIR, which provides non-dilutive funding to small businesses. Building on successful early-stage funds, like Calgary's UCeed, the MaRS investment accelerator fund and McMaster's seed fund, we should expand seed equity financing and also create incentives for Canadian VCs to make follow-on investments in life sciences and deep tech. Ensuring that Canadian capital is available means our most promising start-ups can scale without surrendering control to foreign investors.

Third, ensure stable funding for partnership, tech transfer offices and entrepreneurship infrastructure. These programs are essential for moving ideas from lab to market, yet they often operate as unfunded mandates. A dedicated federal stream tied to performance metrics, patents, licences, partnerships and start-ups would build lasting commercialization capacity and allow institutions to scale their impact.

Focused action can create strategic innovation clusters in high-growth sectors. Consider radiopharmaceuticals, which is a global market projected to reach $33 billion in five years. McMaster is home to Canada's largest research reactor and world-class nuclear facilities, which enable cutting-edge research and produce medical isotopes that treat 70,000 cancer patients annually.

This infrastructure, combined with our nuclear-enabled McMaster Innovation Park, is creating a radiopharmaceutical hub. The park is home to the Centre for Probe Development and Commercialization, CPDC, which was originally a federal centre of excellence founded by former McMaster professor John Valliant. The CPDC has already produced two major spinoffs: Fusion Pharmaceuticals, which was acquired by AstraZeneca for $2.4 billion in 2024 and still headquartered and growing at the park, and AtomVie, which was incubated at McMaster and is expanding to a new Hamilton facility with a $90-million investment.

A strong pipeline of medical isotope start-ups is emerging across the country. These can leverage university infrastructure, but they still need executive talent and financing to scale. With coordinated government support, Canada can lead globally in nuclear medicine. By investing in people, capital and infrastructure, we can turn Canadian discoveries into companies that scale at home and compete globally.

Thank you.

[The Chair, Liberal, Salma Zahid]

Thanks a lot.

We will now proceed to Ms. Watts-Rynard, representing Polytechnics Canada.

Please go ahead. You have five minutes.

[Sarah Watts-Rynard, Chief Executive Officer, Polytechnics Canada]

Thank you, Madam Chair.

I am pleased to be back before this committee as you study how to promote and grow private sector investment in research and development in Canada.

Polytechnics and institutes of technology are experts in partner-driven problem solving, helping organizations of all sizes adopt new technology, implement new systems and commercialize new products. They offer space, equipment and expertise to businesses that either lack their own R and D capacity entirely or stand to benefit from additional external support. In short, they are Canada's innovation intermediaries, and they make research and development activity attainable to the many rather than reserved for the few.

To undertake this work, polytechnics engage faculty and students in industry-designed projects of all descriptions. Businesses bring them a problem to be solved, a process to be streamlined or a product to be prototyped and tested. When the collaboration is complete, the intellectual property rests with the business partner, leaving it in the hands of people who create jobs, sell products and grow the economy.

This is research with a defined purpose and recognized economic value. It is also the sweet spot for private sector investment in R and D. For every $100 polytechnics receive in federal research investments, business partners contribute $72. By comparison, this country's elite universities leverage less than four dollars for every $100 they receive.

There are important reasons for these differences. Discovery research is responsible for things we haven't even begun to recognize as having economic value. Applied research, on the other hand, puts those discoveries to work.

Artificial intelligence is a great example. In the early days of AI research, it was theoretical—science fiction. It was the same with plug-in cars, 3-D printing and autonomous robots. These are great ideas and interesting research questions, yet the value of AI won't be realized until companies of all sizes have found ways to integrate it into their operations.

Robots need a purpose. Even the widespread use of electric vehicles is a challenge given Canada's geography and cold climate. This is where the real-world application of research becomes an economic engine, and this is where private sector investment ramps up.

To grow R and D investment in Canada, I urge you to consider the value proposition of the entirety of the research ecosystem. We sink billions of dollars into discovery research but spend precious little to spur adoption and experiment with implementation. In a country of small and mid-sized businesses, particularly one where the government prefers to buy from established firms overseas rather than its own innovators, it is hard to bet the store on an interesting idea.

Many smaller firms have limited technical staff, inadequate facilities and tight budgets. The risks of going it alone are significant. According to a recent Statistics Canada report, post-secondary institutions are well positioned to serve as innovation catalysts. More than 19,000 small and medium-sized enterprises pursued this type of support in 2023.

Approximately 10% of those SMEs were served at one of Canada's 13 polytechnic institutions. More than half said their collaborations increased their R and D capability, 48% indicated this work improved their competitiveness, 26% gained access to new markets and 21% reported increased productivity. At the same time, more than 18,000 students were part of these projects, developing Canada's innovation-enabled talent pipeline.

Once businesses engage with supports at polytechnics, they tend to come back for more, often at their own expense. Simply put, polytechnic applied research de-risks innovation and supports companies on their R and D journeys.

If the federal government wants to see more private sector investment in research and development, it needs to enrich the programs that enable it. We continue to undervalue this part of the research ecosystem, investing less than 3% of federal resources in polytechnics and colleges. It isn't that the private sector isn't interested in R and D, but we've done a poor job of activating the near-to-commercialization end of the R and D ecosystem. We could do much better.

Thank you for inviting me to be here today. I look forward to your questions.

[The Chair, Liberal, Salma Zahid]

Thank you.

Thanks to all three witnesses for their opening remarks.

We will now go into the rounds of questioning.

MP Ho, please go ahead. You have six minutes.

[Vincent Ho, Conservative, Richmond Hill South, ON]

Thank you, Madam Chair.

My first question is for Ms. Yuyitung.

Canada is in the middle of a cost of living crisis, an affordability crisis. We're in a productivity crisis as well. We're seeing GDP per capita going down in real terms after adjusting for inflation. We're seeing investment flee at a record level. It's gotten worse this year. It's been pretty bad for the last 10 years, but it's gotten worse. We're seeing investment-per-worker collapse by 10%.

We're seeing talent and capital flee. What are some ways we can stop that flight from happening?

[Gay Yuyitung]

I can speak from our experience, which is that having more Canadian companies here would help do that. I have nieces and nephews who are going down to the States for jobs because jobs are paying higher there. I think having opportunities here for investment in Canadian companies would help shore up Canadian...and help grow talent. We have a lot of students who want to grow and stay in Canada, so as I mentioned before, having investments and early-risk capital for those companies to grow and stay here is important. Having universities, polytechnics and colleges that can help support the R and D effort at the early stages is also critical, as is having the follow-on to keep them here.

[Vincent Ho, Conservative, Richmond Hill South, ON]

What's stopping early-stage capital from forming here? What are you seeing as your challenges? You work with a lot of...research and innovation. In your experience, is it high taxes, high regulation, a combination of both or other factors?

[Gay Yuyitung]

I'd say it is probably a combination of both. Speaking personally from what we've seen, we've created our seed fund specifically to address that gap. We're trying to find where we can do that, but it's not sustainable, so I think that's where the private side and government can help step in and shore up risk.

I've heard this asked before: How do we get the return to stay in Canada, whether it's actual equity investments that can help companies...? Canada keeping a piece of that would probably help.

[Vincent Ho, Conservative, Richmond Hill South, ON]

That's a good point. We're seeing 50% of university-funded intellectual property ultimately get assigned to foreign firms. This is taxpayer money being spent on research that is ultimately going to be put in the hands of foreign ownership. We know how important intellectual property is. I think there's a statistic saying that 90% of the market capitalization of the publicly listed companies in the S&P 500 is represented by intellectual property. For most of those firms, value is derived from intellectual property.

What are some ways to keep ownership in Canada? Is it through existing government programs? Are they writing cheques without any equity ownership or without any strings attached?

[Gay Yuyitung]

I'd say it's a combination. I think that we as universities, colleges and polytechnics are teaching about the importance of IP and the importance of keeping it in Canada. We're teaching that to our students and start-ups.

I think they are facing a big hurdle if they get American investors. If they get American CEO talent, that tends to move companies to other areas. If there's no follow-on financing that VCs can provide that stays in Canada, then those companies will go where the market is welcoming them.

I think it's a combination of the tax incentives and the regulatory side that can help these companies stay here.

[Vincent Ho, Conservative, Richmond Hill South, ON]

My next set of questions is for Mr. Vincent-Herscovici.

You mentioned the theme of economic sovereignty and how we can strengthen it. In the last committee meeting, we were talking about how the Liberals established the strategic innovation fund and spent tens of millions of dollars writing cheques to foreign companies that are multinational. Mastercard was one of them. At the same time, we have a start-up ecosystem in Canada that is starving for capital. It could use some of the tens of millions of dollars—billions of dollars—that they fund every year.

How do we make sure that this money goes to Canadian companies and that Canadians benefit from the use of those tax dollars?

[Jesse Vincent-Herscovici]

First of all, it's important to work with multinationals. Obviously, we need multinationals in Canada. They are part of the innovation ecosystem. There's nothing wrong with having a place for multinationals. However, we need to make sure, especially for our SMEs—we're a nation of SMEs—that there is a mechanism to get intellectual property out of public research and into SMEs if there is an opportunity to do that.

Of course, start-ups have their place as well. There is a much higher risk when you talk about start-ups, because there are so many other factors that could influence their survival. Is there a reflex to look within the Canadian geographical market? Are there existing SMEs that could put to use the fruits of an invention from research? Have we structured the intellectual property well, and do we have a mechanism to get it to SMEs?

There should be a prioritization to look at this. When there are public dollars, do we first consider an SME, which is the fabric of the nation? There may be an opportunity for a start-up if we feel like there is a place for that start-up in the Canadian ecosystem and Canadian market. If not, there's nothing wrong with considering working with a multinational.

[The Chair, Liberal, Salma Zahid]

The time is up for Mr. Ho, so maybe you can come back to that in the second round.

We will now proceed to MP Jaczek for six minutes.

Please go ahead.

[Helena Jaczek, Liberal, Markham—Stouffville, ON]

Thank you so much, Madam Chair, and thank you to all our witnesses.

I would like to start with Mr. Vincent-Herscovici.

In the strategy you developed at Axelys, you described a continuum going from the research piece all the way through to commercialization. A previous witness told us that there were real risks of hosting Canadian and Quebec data on servers located in the United States or under the jurisdiction of U.S. courts.

From your perspective, how do you feel about the issue regarding sufficient data hosting infrastructures in Canada that are not subject to U.S. control?

[Jesse Vincent-Herscovici]

There are not...and this is of utmost importance. We're becoming more and more aware of this. It is such a costly space to get into. Other players are so advanced that the situation is dire enough to activate very serious mechanisms to ensure that.... The word sovereignty comes into play here in terms of data—who hosts it, who has access to it and who can profit from it.

The answer would be no, there are not enough Canadian resources to keep the data and exploit AI tools to then drive intelligence from that data, which is so critical, as we're seeing it more and more now.

[Helena Jaczek, Liberal, Markham—Stouffville, ON]

What would you recommend there? What initiatives might be necessary in order to achieve protection for the digital data of Canadians?

[Jesse Vincent-Herscovici]

To be clear, this is a bit outside of my domain of expertise, but I'm happy to weigh in with regard to some of the interactions that Axelys has had.

There are two recommendations. One is to identify large enough technological players invested in Canada that have an interest in further investing, making sure they have the support to do that. The second is to identify strategic partners across the country that are able to pilot initiatives on these platforms very early on.

I'll give a quick example on the Axelys side. In the last 18 months, we've developed in-house a national language-based AI platform, GenAI, in order to mine our own data. We've done years and years and thousands of reviews—landscape analysis. I cannot afford to put this on a server if I don't know that I can control the safety of it. We've developed it in-house, and right now we're storing it very locally as much as possible. We would be very happy to have a domestic provider with pure Canadian servers that are truly controlled by Canadian companies.

I'm looking for that. We're having a few early discussions. There are a few contenders that would be open to exploring these kinds of pilots, but we need support because it's so costly to do that.

[Helena Jaczek, Liberal, Markham—Stouffville, ON]

Thank you so much.

Ms. Watts-Rynard, you represent Polytechnics Canada. In the course of this study and in previous studies this committee has embarked on, I've become really impressed with how applied research seems to be leading to opportunities for commercialization, IP protection and so on.

From your perspective, when there is a proposal and an idea that seems to have some commercial opportunity, what processes do polytechnics go through to assess the potential for a particular project? Is there a review committee at each polytechnics that looks at an idea and determines whether it is worth pursuing through to commercialization and IP protection?

[Sarah Watts-Rynard]

For the most part, the companies that are coming to polytechnics already have a sense of the idea themselves and are trying to pursue it. Within each institution, there is an intake process as we're thinking about those projects, but it's really designed around whether we have the expertise and the faculty to be able to contribute. Also, is the idea connected to the curriculum so we know that students will be able to learn from it too?

It's a lot less about trying to assess whether an idea has commercial value and more about how we help a company or an entrepreneur who has come in and get them to the next stage of their own journey. They're going to retain their IP, so it's very infrequently about creating IP and much more about how we can take things to the next level and prepare a business partner for whatever they need, whether it be in process improvement or prototype development.

[Helena Jaczek, Liberal, Markham—Stouffville, ON]

How much time do I have?