The impacts of COVID-19 on the Canadian life sciences sector

Raj Saxena:

Welcome everyone to today's webcast. We will present today a very important topic: How the COVID-19 pandemic has impacted and reshaped the Canadian life sciences sector.

Before we dive in, just a quick introduction. My name is Raj Saxena and I'll be the moderator of today's session. I'm a partner with EY Canada and also lead the Canadian life sciences practice. I've been with the firm for more than 12 years and have been providing consulting services to local and global clients for more than 23 years.

Here's the agenda of topics we’ll discuss. We have about 90 minutes to go from here. In today's session, we will discuss local manufacturing capacity, generic medicines related supply chain, and the investments going into the sector.

From an agenda perspective, I'm going to introduce our panellists, provide a brief overview of the recent trends and transformation happening in the sector. Bulk of the discussion is going to be a panel discussion where I'm going to ask panellists a set of questions and to get their perspective on their experience and sector knowledge. 

There's also going to be polling questions and then the Q&A panel. Please feel free to ask any questions. If we have time at the end, we're going to ask our panellists those questions.

We have three panellists today. We have Nawel Rojkjaer. Nawel is the president of SmokePond Biologics which is building Canada's first commercial scale biomanufacturing facility in Quebec. Previously, she was head of International Affairs at Mylan and represented the generic industry at various global trade negotiations. She was also the board member at Medicines for Europe and established and chaired its global policy and markets committee.

Next on our panel, we have Jim Keon. Jim is the President of the Canadian Generic Pharmaceutical Association and Biosimilars Canada. Prior to joining CGPA, Jim held senior positions in the federal government and was directly involved in international trade negotiations for NAFTA and the world trade organization, as well as Canada's interprovincial trade negotiations.

We also have Benjamin Rovinski on our panel. Beni is a managing director with Lumira Ventures. He has more than 30 years of investment, operational and research experience in the sector and has helped build Canadian Life Sciences company at all stages of development. Then he joined Lumira Ventures in 2001 and has served on the board of various companies, Life Sciences Ontario, and he's also a member of the government of Canada COVID-19 Task Force.

Before we get started with our panellists, I would like to set the stage for today's discussion with a quick polling question. And the question is, how many Canadians have received their first dose of vaccine for COVID-19? While we are waiting for everyone to respond, maybe I can share some of the context on the pandemic impact on the sector.

As we have all seen, this pandemic has exposed major gaps in Canada's capacity to produce drugs and vaccines to meet domestic needs. Given the struggle that Canada faced in securing enough vaccines, the government was thinking about how to respond to future challenges and further built a life sciences sector. We all know that these investments will not only protect Canadians, but also provide economic benefits to businesses, especially in the manufacturing sector for vaccine developers and also connecting researchers with startup companies.

I am not sure how many people know but one of the key foundations of the sector is the generic pharmaceutical industry. Last year alone for example, about three quarters of the drugs dispensed in Canada were generic medicines. Jim will touch on this in more detail but it's really important for the Canadian pharmaceutical industry.

As we all know, this pandemic has been among the worst to hit our modern world, but we also saw a strong innovation in the sector, especially with our investment community as always supporting the growth of early stage biotech and medtech companies and Beni will touch on those topics as well.

What we are realizing now is that to protect the future for the sector in manufacturing capacity and the stable generic medicine supply chain is great, but we also have to ensure that in the long-term, Canada has the talent, R&D pipeline, strong, small and medium businesses and a secure supply chain.

What we are hoping today during the panel discussion is to get a perspective from our panellists and how they're seeing the changes impacting the companies and the impact of the sector overall.

And can we have the polling results now please? As you can see, majority of the people said answer is 35%. The latest data from today is 35%. So, we're working on it, but we still got a long way to go.

So, on this topic, maybe perhaps Nawel I can start with you and get your perspective on the biomanufacturing sector. There's a general feeling among Canadians that we as a country are lagging behind when it comes to vaccine manufacturing. What is your experience with both Canada and other countries as you've gone through this process before?

Nawel Rojkjaer:

Thanks for having me here. I think Canadians have that feeling because unfortunately we are lagging behind other countries and I'm not speaking about the vaccine rollout necessarily, but more in terms of the awakening we've had as a country to our lack of biomanufacturing capacity and the resulting lack of medical sovereignty from that. So COVID-19 drew the curtain back on what over-reliance on foreign production means when you're hit by a public health emergency. I would think that very few Canadians were aware before COVID-19 that we couldn't make our own vaccines or our own biological medicines, and what people have to understand when it comes to making these is that biomanufacturing, which is to say manufacturing complex biologic medicines, and that includes vaccines, it's not simply a question of throwing up a facility. The facilities to produce these medicines are incredibly expensive to build. They take time to build. They take even more time to get them approved by health agencies like Health Canada, or the FDA. You can't make these types of medicines out of the small molecule facilities that we do have in Canada.

You also need, as you mentioned, really highly qualified people inside them with the knowledge on how to develop and manufacture these types of drugs. So, I think another part too of what COVID-19 showed, and Canada's experience with COVID-19 specifically, is that even if you have really strong researchers and really strong early stage biotech with promising innovation who are racing to try to develop a vaccine, you need the manufacturers to make the batches for the clinical trials. You need assistance to develop those products and bring them forward. You need the manufacturers to get the production at scale and to help with storage and distribution.

Manufacturing in this space is integrated with R&D, and I think that's a point I wanted to highlight. It's not separate, it's a little bit like if you make wine, you don't design the wine somewhere and then manufacture it somewhere else. Biomanufacturing, when we talk about it, it's a complex process of development and the production of the product, and so when we're talking about Canada's ability to biomanufacture, we're really talking about that entire process. Without biomanufacturing, Canada was very restricted in its ability to respond to this emergency as I think Canadians had hoped and expected we would be able to. Our team has built eight facilities like these around the world in Asia and Europe and the United States so we do understand what the complexities involved and we're working very very hard right now to build a state-of-the-art, high capacity, flexible biomanufacturing facility for Quebec or for Canada, but in Quebec.

Raj Saxena:

Thank you, Nawel. And maybe that's a good segue for you Jim. Everyone is talking about vaccines these days, but sometimes we ignore the importance of small molecules. You've been in the industry for a very long time. You understand this industry. What can you tell us about the role of generic pharmaceutical industry in Canada?

Jim Keon:

Thanks Raj and thank you for inviting me today. So, we are fortunate we have a number of manufacturers of generic medicines in Canada. They are so-called small molecules, chemical-based molecules, traditional medicines. We have several thousands of people involved in the manufacturing process. Our companies do not make vaccines. They are focused on small molecules. There is a broad range of the types of medicines they make in Canada. We have the typical solid oral dose forms, such as pills and tablets, we have non-solid products -injectables, creams, ointments - a full range of the types of medicines that Canadians would take. 

As you mentioned, we fill close to three quarters of all prescriptions in Canada with a generic medicine. The value of generic medicines is the headroom, so-called headroom. They provide equivalent healthcare to patients for 25% or less the cost. Some of the large selling molecules are selling at 10% of the originator price. So, the headroom, the savings, you can treat 5, 6, 10 patients for the price of what you previously had to with the originator product.

So the value of the generic medicines really are for mature products, bringing savings, bringing competition, bringing capacity to the healthcare system so that money can be then put to uses whether it's to fund increasingly expensive new medicines or for vaccines or whatever.

So, the ecosystem is intended new molecules; new medicines have patent protection, after patents expire, generic medicines should come on the market, should provide a value and savings and good care for Canadians. The quality of the products is known. Health Canada proves them as being equivalent. The system in Canada is that manufacturer gets its product approved by Health Canada. There were negotiations at the provincial level, there's an organization called the Pan-Canadian Pharmaceutical Alliance. We have an agreement with them as an industry, establishing pricing, and then provincial formularies and others will then approve the product and make it available for reimbursement.

When a patient goes and sees a doctor, if they have high blood pressure, they could be prescribed a medication. The patient takes that to the pharmacist and if that medication has a generic alternative, and most of the blood pressure medication will have generic alternatives, patient is then given the generic in almost all cases.

Most programs in Canada have what's called a low-cost alternative system so the plan will pay for the low-cost alternative medication. As I mentioned, we're lucky in Canada, we're fortunate, we have strong manufacturers here. Canada's a small country but even large countries, you can't make all the medications here.

We do rely on a very complex and vast global supply chain, bringing products to Canada, bringing inputs to Canada, and then as I said, we manufacture a good portion of them here but we will never be completely self-sufficient and that's certainly not an objective, I don't think a government should aspire to.

We will and we do encourage governments to talk to our industry, talk to our companies about trying to develop stronger manufacturing capacity, stronger development capacity in Canada, in particular for necessary medicines, critical medicines. So that's a brief overview of our role in the healthcare system.

Raj Saxena:

Absolutely Jim, thank you. Very fascinating. So, Beni, I would like to turn it over to you to ask two questions. One is around the Vaccine Task Force. You are serving as a member of the Canadian Vaccine Task Force. What can you tell us about its mandate and your role? That's number one question, and the second question will be on the investor, but I'll wait for your answer for the first question. I'll ask then the second question. Over to you.

Benjamin Rovinski:

Thank you, Raj, and thank you to the whole EY team panel. Let me start first of all by making a couple of disclosures here. It's important for me to say that whatever I say about the role of the Vaccine Task Force has already been publicly disclosed. My views and comments, panel discussion reflect really only my personal views and those of the Government of Canada COVID-19 Vaccine Task Force. So, having said that, let me walk you through the main mandate of this Task Force which has played a significant role in our response to the pandemic.

Initially with support from Innovation Science and Economic Development Canada, best known ISED, the role of the COVID-19 Vaccine Task Force has been to provide scientific and technical advice to open up Canada on COVID-19 vaccines. Primarily the Task Force provides this advice to ministers to support the Government of Canada's activities in terms of procurement vaccines. The Task Force has also been involved in reviewing applications from several companies that are seeking financial support to the Strategic Innovation Fund. And I want to make sure that I emphasize that the Vaccine Task Force does not play a role in the administration of vaccines, nor in identifying priority groups or providing guidance, for example, to the provinces on vaccine rollout.

In addition, to all these activities, a subset of members from the Vaccine Task Force, including myself, have been involved as active members, as some of you know because some of you have participated in this consultations, in a biomanufacturing subcommittee that has identified gaps that require immediate attention. We also have looked at some of the safe applications from companies seeking funds to build or expand their manufacturing capacity. And in terms of what I just alluded to, that some of you have participated also in some of the activities related to consultations that were launched in conjunction with ISID, Health Canada and Public Health Agency of Canada to go through a roundtable set of discussions with the objective of exploring how to enhance and leverage Canada's biomanufacturing life sciences ecosystem to improve pandemic and health emergency preparedness response.

Our group sought to gather informed feedback on how best to strengthen biomanufacturing and related innovation activities in our ecosystem. And some of you experience in these discussions, we explore what should be the mandate and mission of a potential biomanufacturing facility or facilities, what sort of methods should be used for integrating any new capacity to the existing academia, life sciences landscape, and ecosystem, and also what should be the most appropriate business models and governance structures for such an initiative. The findings from this public consultations have been shared with ministers Champagne and Hajdu, and I think this was a very rewarding set of discussions where we learned a lot and hopefully some of this advice will be taken by the appropriate authorities and represent what I hope personally would be a new year, our biomanufacturing preparedness for the next pandemic.

Raj Saxena:

That's great, thank you. Just a follow up question on that one from an investor, you are also an investor from a VC community. You probably have seen the evolution of the Canadian life science sector companies over the years. What's the impact on the sector, how the companies have bettered the pandemic from a capital funding perspective?

Benjamin Rovinski:

Let me answer that in two parts. First of all, as all of you have seen, the pandemic obviously has resulted in major challenges globally for all startups in the life sciences industry and whatever we have experienced in Canada is not any different from what we've seen in other countries. Some people would say yes, but there is less capital really in Canada for our startup companies and therefore the situation will be more acute in Canada versus places like the U.S. What I can tell you overall, and I can walk you through some examples is that for the most part, our startup companies and biotech ecosystem in general in Canada, has actually done really well for the past year and a half, and what I mean by that is that first of all there was access to a lot of capital that the Canadian government, in conjunction with or through several different institutions, provided to a lot of biotech companies. A lot of these funding programs were targeting a lot of the capital challenges and needs of the life sciences ecosystem. And quite frankly, they were implemented, accelerated quite rapidly in the first phases of the pandemic, like for example, the Canadian government, as you know, have pledged over a billion dollars, has gone or will be mostly disbursed sometime this year...

I think in terms of access to capital in general, there's been a good response, particularly from the government, but also from other groups like BDC Capital. Some of you might know that BDC stepped in early during the pandemic to provide in the form of convertible debenture capital to early stage companies and it was interesting because that mechanism was structured in a way that companies that have were already been supported by venture capital have received matching capital from BDC in the form of this convertible debenture, so that also helped.

Obviously not every single company received that kind of support so many companies unfortunately suffered from that, but I would say that overall the sector has done quite well. And, you know, it goes without saying that there's been through the SIF grants very large amounts of capital available to companies like Abcelera, Medicago, Variation Technologies, Precision Nanosystems and others that have received substantial capital, particularly to complete the vaccine trials but also to optimize their biomanufacturing footprint.

I would say that overall, I'm pretty happy with the way that the sector has responded. Obviously, there's been a lot of sacrifices from our own portfolio companies, as well as other companies, but we haven't really seen a large number of companies go bankrupt or unable to perform any work whatsoever.

Raj Saxena:

Great, thank you Beni. Now we have a new poll. How many countries are involved in the supply chain to get generic medicines to Canadians? Please pick your answer and I'll move on to the next topic.

Next topic is on policy. If you start with the government policy, federal and provincial, industrial policy or drug approval and pricing related work, we see differences. Nawel, let me start with you. You have gone through a site selection process recently and interacted with various government, government agencies across different provinces. What was your experience going through this process and the difference that you saw from one province to another?

Nawel Rojkjaer:

Thanks, Raj. So, we looked at many jurisdictions in Canada thinking about where to build the facility and we certainly had a list of criteria that we were using to guide that decision-making, but I'll speak specifically about our experience with Quebec, which is where we've concentrated now and found a site.

Our experience with Quebec has been incredibly positive. The province has a long history with pharmaceutical companies, both their initial investment and also their departure and in the early 2000's. They also have a lot of experience with biotech and they have for many years developed expertise within their government ranks, and that has enabled them to pursue industrial policies, to facilitate exactly the type of project that SmokePond is pursuing. And by that, I mean specifically looking at measures that would help support domestic capacity and investment, not just attract foreign investment in this space.

That industrial policy has been critical for us to consider novel approaches to advance a project of this scope, coordination with the funding community, introduction to ecosystem partners like the engineers or universities, as well as potential collaborators. From our perspective, the success of this project, depends on our ability to train, attract, and retain Canadian talent, and foreign talent. Collaborations with Universities and Cegeps to ensure that there's a pipeline of local talent is absolutely critical. And what we found is that the institutions in the province are highly motivated on this front-end and organized.

Our experience was not necessarily replicated in the other provinces in terms of that focus and that around their industrial policy in this space but at a national level, as Beni mentioned, the Canadian government recently concluded a consultation process to develop a federal strategy on biomanufacturing and we provided submissions to that consultation and we looked at a number of actions that we think the government should pursue, but first and foremost I think our position is that Canada has to prioritize growing our domestic competence and capacity.

You asked about pricing and drug pricing. I think that's kind of a red herring when it relates to the investment into the biomanufacturing space. Investments into biomanufacturing in other jurisdictions and other countries have manifestly had nothing to do with those countries’ domestic pricing policies.

What has happened though is that because Canada is I think overly reliant on a handful of companies supplying these medicines, they have disproportionate negotiating power over the pricing controls, and it's hard to negotiate when you don't have any other options, and you don't have much competition. I don't think it's about that and we can get a little bit into what those factors are that do support investments in biomanufacturing but one of the key standouts is the jurisdictions that have focused, organized industrial policy to support investment into this space and have a deep understanding about what are those barriers to entry to get these facilities built and that competence in place, those are the jurisdictions that are getting traction.

Raj Saxena:

So, Nowel, do we think about building a national competencies or ecosystem?

Nawel Rojkjaer:

It's hard to build a national competence over a geographic area as large as Canada. Biomanufacturing is a complex industry. It's also a long tailed industry, relies on a lot of vendors and support and engineers and the suppliers of the equipment and the buffers and the solutions and the talent, the collaborators, the logistics, involved in, you know, as everybody started learning around coaching distribution of some of these types of products. So, when you're a country like Canada that has a very early biomanufacturing capacity, if any, our position is that to get capacity quickly, we need to invest into a hub where we can kind of build that confidence quickly that grows over time. That would be the hope I think for any industry and for anybody in that industry, but the stage that we're in now is different.

Raj Saxena:

So, Jim, similar to Noel's comments I'm sure you've experienced the variability and provincial health care programs...and the pricing set by different provinces. What's your experience been with this process and where do you see an opportunity for a national drug related policy?

Jim Keon:

I think the comments Nawel was making about pricing were more directed at the price of brand products in Canada, which there's been quite a controversy over the last couple of years about potential changes to the agency that controls their prices, the patent medicine review board, and the implementation of that has been delayed. But that has been attracting a lot of attention.

On the generic side, as I mentioned, we are supplying about three quarters of the medicines, even higher to some of the public drug programs where utilization in the public drug programs is actually higher than in the private insurance-based, reimbursed programs. There are two separate markets we deal with. One is the general retail market and the other would be the hospital market and in the hospital market you see essentially tender systems. The hospitals generally have banded together and purchased medicines under, they're called group purchasing organizations. There are two or three large ones in Canada and separate one for Quebec. They negotiate and put out a tender and then that price and those terms will then be available to the provincial hospitals and those products are provided through that system.

That represents probably no more though than 10%, 12% of the total spend on prescription medicines. The other area of the retail sector, those are the big chain pharmacies and the independence that we all know, they are governed by pricing established by provinces. In the past we had quite a disruptive market. Each province had its own pricing system and moved at different times and in different ways. We operate as companies, generic companies are operating on a national system, so it was not a good system in Canada.

We did something innovative, I would say, probably now seven, eight years ago. We had our first agreement with the provinces and I mentioned earlier this Pan-Canadian Pharmaceutical Alliance, which is really a grouping of the provinces, was established by the provinces, Provincial Ministers of Health, et cetera along with the territories and a couple of the federal plans. We have a broad-based generic drug pricing agreement with them. There's a tiered pricing framework which essentially mirrors what would happen in a competitive marketplace. So, if it's a small niche market, difficult to enter, and there might only be one generic manufacturer, you can charge a higher price than if it's a very popular medicine with many many suppliers. I mentioned earlier, some of the prices go down as low as 10%.

So, it’s a bit of a Christmas tree, the pricing, and it’s complex but a simple model in many ways based on the number of competitors. And those prices apply, the manufacturer has to agree to provide those prices both to the public payers, so that would be, you know, if we take Ontario patients covered by the Ontario Drug Benefit plan, seniors in Ontario have their medications reimbursed through the government plan. That would be the price for them. It would also be the price for the private market. So, insurers who reimburse pricing for their employees, have the same price.

You asked about, should there be a national system. In a sense for the generic medications, we have a national system. We have negotiated with all of the provinces under the umbrella of the PCPA. The pricing applies to both public and private patients, patients covered by both public and private plans. Now, I should just highlight, our agreement there doesn't cover Quebec. Quebec guards its own healthcare system, a provision of healthcare. So, we have a separate agreement with Quebec as an industry - many of the same elements but it is signed with, negotiated with, separately with Quebec. Both of those agreements will be coming up for renewal in another year or two. We're keen as an industry to continue. From our perspective, we don't want to rip them up. We'd like to build on them and prove them.

And so, in terms of a national drug policy, your second part of that question, I think we're already there in many ways. We have a national drug reimbursement and pricing system. Federal government and most recent budget talked about national PharmaCare and three initiatives. One is building a Canadian drug agency. Second was they're looking to build a national formulary - basic medicines that all Canadians should have access to. And the third was recognition of the very expensive nature of some rare drug medications to treat rare drug diseases in Canadians and providing funding for that.

Our view is we're ready to support a program, we're ready to provide our medicines. We would and have and will continue to recommend that the pricing model that we've already negotiated on a Pan-Canadian basis would be the model that should govern pricing for any kind of national plan.

The only other thing I didn't mention earlier, and I'll mention this and then I'll stop, is our industry is located in Ontario and in Quebec. I would say about three quarters of our employment is in Ontario and about 25% in Quebec, generally, in the greater Toronto area and the greater Montreal areas. We work very closely with both the Ontario and Quebec governments and I know many of our companies have been involved in discussions with them during COVID-19 about potential for expansions, et cetera, during the pandemic and beyond. So those are ongoing. I'll stop there.

Raj Saxena:

This is great, Jim. I'm just looking at the polling question. I think the majority, half the people picked eight plus, so that's actually true. We don't realize how many countries are involved into this supply chain process to get the medicines to Canadians.

Jim Keon:

That's very true. If you look at the range of inputs that are required, the files packaging, the medicinal inputs, et cetera, as with many products, a very complex system.

Raj Saxena:

Next topic is more around supply chain and I was just thinking to continue with you, Jim for the next question. We all heard stories about the supply chain problems especially during the early stages of the pandemic, all the way through even before and after. It could be PPE, vaccines, succession medicines – and then in the number of times we heard this topic of nationalism. What can we do to maintain a secure domestic supply chain, especially from a generics perspective? It's so important for Canadians.

Jim Keon:

You're absolutely right, it is a complex supply chain, products and inputs coming from all around the world. We rely heavily on Indian production, both for the active pharmaceutical ingredient, as well as final dosage medicines, but not only India, there's starting materials that come from China. There are also active pharmaceutical ingredients made in Southern Europe, in the United States, final dose products come from the United States, from Europe… We do have resiliency in the system and that products are coming from many different sources. And depending on the company, there may be more weight given to certain geographical sectors than others.

Obviously COVID-19 created unprecedented challenges and uncertainty for the global pharmaceutical industry and our generic pharmaceutical industry was not spared. We also saw in our case some border closures. There was last year the Indian government at one point put export restrictions on 12 or 13 significant medications. They removed them fairly quickly. India has well-earned reputation as being a pharmacy to much of the world and that really depends on consistency, sustainability, and security of its medicine. There was pressure put on India, they quickly took that off, but even in European countries, we saw export restrictions on medications. I know, and maybe the others will speak to it, some of the vaccine nationalism that we've seen this year, but we saw some of that last year.

So, there is, you know, a lot of talk about onshoring, reshoring bringing back industry to Canada. How can we bring redundancy, resiliency to the supply chain? Our members, they were faced with increased demands for critical drugs in the hospital sector, they were changing clinical practices, canceled or rescheduled surgeries - all of them in the hospital sector that they had to respond to and Canadians companies have had to change their production schedules. They've had to retool their sites, identify alternate sources of medicines and raw materials. Transportation was a major problem too. About 70% of the imported medicines and APIs actually come by ocean freight, marine freight and that was a difficult challenge. There were delays, restrictions at ports, et cetera, so companies were looking then to increase perhaps the air freight that they used. A lot of passenger flights were canceled or delayed. And again, we're dealing with situation now where there are no passenger flights coming from India so companies can't use the cargo bay of a passenger plane the same extent that they normally would.

You can contract and get cargo flights, et cetera, requires adaptability whereas the company to be able to pivot and it does increase cost. What can we do? Well, I mentioned trying to bring more production to Canada. That's something that we strongly support, and you know, our individual companies are talking to the provincial governments in Ontario and Quebec in particular and also to the federal government as well, I should mention.

We also have encouraged the national system to build up critical drug reserves, that took some time but now the federal government in coordination with the provinces has moved ahead and has identified a dozen medicines that are COVID-19 related treating COVID-19 patients. You know, the patients that are on the ventilators, often sedatives and muscle relaxants and these types of medicines, which are primarily genericized medicines now. So that's another area that we've encouraged the government to do, I think from a safety and supply security perspective. So those are just some of the ideas. As I mentioned though, I think overall we are stressing with the government that we will never bring all of the necessary medication and all of the necessary manufacturing back to Canada. Canadian government, and we've encouraged this too, has been involved in discussions around giving better criteria to international trade, and when restrictions can be put on, exports in national emergencies, et cetera. We'd like to see much more thought and effort put into developing kind of those criteria so that going forward, we don't have to worry that we're not going to get our supply of medicines that we've contracted for.

Raj Saxena:

This is a great Jim, thank you! Nawel, you've seen it all. You've seen in Europe, in other parts of the world, you've seen now in Canada. What's your experience? Any comments here?

Nawel Rojkjaer:

Jim has a good perspective on the small molecules, and I think I'll speak more from the biologic medicine side. Canada depends 100% on importing all of its biologic medicines and these are drugs that make up like 50% of our healthcare spend. So, it's one thing to say, you know, we can't onshore everything and that it's impractical to strive for that but it's another thing to have this level of vulnerability in our supply chain for these medicines. These are medicines that generally treat chronic conditions. So, these are patients that rely on the secure supply of these medicines over time. They're difficult to pivot away from. So, if you have a problem with the facility, you can't just make it somewhere else. There's been so much consolidation in this industry. So, we have a lot of eggs in very few baskets. From my perspective, the way we see it is domestic production of drugs is as much a national security question as domestic telecom capacity. We wouldn't accept to rely a hundred percent on foreign telecom companies, why do we accept to rely a hundred percent on imported Biologic medicines?

On top of that, this is a huge value industry. This is the third largest valued industry in the world, it's getting close to a trillion dollars and Canada simply doesn't participate in it. So, we're being left behind on a major medical revolution and changing that is going to require industrial policy I think as robust as what we do to support and grow our domestic agricultural industry or natural resources industry. What we saw in COVID-19, or I think we'll see it in any public health emergency, is that governments around the world sought to put the health of their own citizens first. Even our friends and neighbors had to do that.

We saw that manufacturers have faced very, very strong pressures or obligations to supply the countries where they were located first. I think that that's really shone a spotlight on what that means for a G7 country like Canada who doesn't have that type of production facility.

Securing our medical sovereignty and I mean that, I like that term medical sovereignty it's intentional, it means we have choices. It means that we can adopt and respond and take care of citizens in our country and we also can play a role internationally. And that takes time for us to understand where and why we are vulnerable and then take methodical steps to address those vulnerabilities. The government under COVID-19 put significant money into rapidly building up PPE production. In Canada, we built like mass production facilities and hopefully by next year, you know, wearing masks everywhere is not going to be necessary any longer. That's what we're all hoping for. So, the question then becomes what you do with that capacity between the health emergencies, but real preparedness in biomanufacturing doesn't operate like that. There's no rapid fix so you can't throw up a facility and then bring it down again, but what we can do is to invest in infrastructure and support companies trying to be part of and grow that ecosystem and train people, and then use those facilities to make medicines for Canadians and for export. So, when a pandemic hits again, and it will, because I think we all recognize it will, we will have and should have operational GMP biomanufacturing facilities in our country with trained operators that we can leverage.

Raj Saxena:

Right. Absolutely. And GMP is good manufacturing practice, right?

Nawel Rojkjaer:

Yeah, exactly.

Raj Saxena:

Thank you both. Beni, from a start-up company standpoint, you interact with them all the time for a number of different reasons, what can you tell us about the impact of COVID-19 or other pandemic supply chain issues on the start-up companies or the ecosystem?

Benjamin Rovinski:

Just some brief comments about major impact for a lot of our own startup companies and I'm sure this applies to most startup companies in Canada. So, from a supply chain perspective, all these companies have experienced several challenges associated with shortages primarily in lab supplies, such as culture, transport media, pipettes, pipette tips, PCR reagents, and other essential reagents. In fact, I was just thinking when I used to do research myself, I never really paid attention to this little pipette tips and to say, wow, they're so important, without pipette tips, you cannot do any research at all. And when you think about it, a researcher on the average goes through the lab bench through at least a dozen to maybe 50 pipette tips a day. So, if you multiply that by the thousands of researchers, particularly those within the big pharma labs, you get an idea how disruptive it is not to have, for example pipette tips.

In addition, many of our start-up companies contract out a lot of their R&D work to the third parties and those third parties themselves have experienced severe shortages as well as working hour disruptions. So that has had a major impact also on the advance of some of the platform programs for some of our companies. Even clinical studies have also experienced major delays and disruptions for our startup companies. And not only due to patient recruitment issues but also to a shortage of diagnostic, blood chemistry reagents, and also the production of material, GMP material as you just mentioned for clinical studies has also been impacted. The last thing that I like to mention here is that another disruption that has been experienced by few of our companies was due to the fact that some of their basic research was being conducted in academic labs. And these labs had to stop most of their activities, not only due to supply chain, but also physical closures in response to measures that universities put in place for the health and safety of their own workers. So, I would say that this is probably one of the most critical challenges that our startup companies had to face, even more serious than access to capital.

Raj Saxena:

A follow up question on this one Beni, from a Vaccine Task Force perspective, anything that you would like to share with the audience on the discussions happening around the Vaccine Task Force and the impact supply chain? What can we do?

Benjamin Rovinski:

I'll share with you a couple of things that are in public domain with respect to the impact of this supply chain disruptions that we just talked about at length on the activities of our, not just our Vaccine Task Force, but also the Therapeutics Task Force and some of the other government agencies that were involved in negotiating advance purchase agreements, whether it's for vaccines or therapeutics or supplies for diagnostic companies. What I can tell you is that a lot of effort went into ensuring that they would have access to stuff that you don't think about, but several millions of, for example syringes that one forecast we're going to be required to distribute vaccines. At that point in time, we didn't even know when a vaccine was going to be approved. We really didn't anticipate that the mRNA vaccines for example, were going to be approved first, and that they were going to be ready to be distributed by December of last year. But you have to think ahead of time and there were some pretty good discussions and there was, you can imagine the amount of pressure to negotiate millions of syringes, because we were competing with European countries, with the U.S. and as Nawel said, at one point in time, we don't have the kind of leverage that some of those countries or the European union had. But fortunately we were able to negotiate enough material, at least for the initial distribution of vaccines, and I think right now from the best of my knowledge is that in terms of syringes, we don't have this type of challenges that we had at that point in time. But that's just one example.

Some of you mentioned refrigeration. That was also a major challenge. Once we knew that the mRNA vaccines were going to be distributed, there was a major concern about whether we had enough sufficient refrigeration units. Did we have enough dry ice, for example? The logistics about transporting and securing dry ice. I wasn't even aware of how complicated those were. So, I think overall, we've done a good job, but you know, when we start thinking about the next pandemic, these are things that you cannot leave to the last minute. You have to have that constant supply chain of stuff, like dry ice and all of these things.

Raj Saxena:

That's really good, Beni. Similar follow up discussions is around more investments, right? I mean, it's especially the investments going into this sector. If you think about Canadians, we have so many early stage biotech, medtech, startup companies, different concentration. Also Beni, just to kind of follow up on this one, your venture capital role and what you've seen over the years, what funding strategies VCs are adopting these days to support the sector, especially now with the pandemic?

Benjamin Rovinski:

In terms of specifically a VC investing to support the fight against this or future pandemics, what you need to appreciate is that in general, VCs mostly invest according to investment strategies that are unique to each venture group. They typically also follow funding strategies that have historically allowed them to generate decent returns for their limited partners. And this is why it is not so easy for VCs, venture capitalists, to suddenly, stray away from well-known investment strategies to respond to a healthcare crisis such as the COVID-19 pandemic. But having said that, many investors were opportunistic. They have deployed lots of capital into either new companies or some of their existing portfolio companies that were developing, for example, rapid testing devices or anti-viral therapeutics or other kinds of therapeutics, like anti-inflammatories, as well as a vaccine platforms targeting SARS-CoV-2. In fact, a lot of capital went into this and in particular, those that are based on mRNA platforms. One of my observations has been that the approval of the mRNA vaccines have really led to a significant increase of interest and capital deployment from VCs into all kinds of platform technologies based on mRNA. Also, quite interestingly at one point during the pandemic, I would say that well over half, if not two thirds of life sciences companies seeking new funding, actually, either partially or totally devoted to R&D programs targeting COVID-19, even though in some cases, quite frankly it really didn't make sense for what they were doing to do so. But perhaps if I can share one example that's quite interesting here of when you asked me about, how VCs are thinking about this or future pandemics. One really interesting business model, which is intriguing investments, at least I think they're quite intriguing, from a VC group in the midst of the pandemic, which was the creation of a fund specifically led by a group called Arch Venture partners in Seattle. This is Bob Nelsen who started a start-up company with over a quarter of a billion dollars, it's called Resilience, and they just wanted to support and transform biopharmaceutical manufacturing in general. Some of you have heard of it because they actually purchased a large CRO company here in Toronto. And for a few years it has been well established that one of the major challenges for example gene and cell therapy companies, is the lack of biomanufacturing capacity. So, with COVID-19 exposing critical vulnerabilities in medical supply chains, what has happened now is that there are quite a few groups now, largely writing very large checks to support this kind of business model where basically what they're doing is supporting the CDMO sector which is the contract development and manufacturing sector. And with respect to Canadian VCs, most of us don't manage the large funds, like for example, Arch Ventures, where we can actually afford to write these large checks that are necessary to support this type of ventures. But having said that what most of us, I think are going to concentrate on, as I said before, will be on particularly mRNA based strategies, as well as platforms that one can leverage to support the improvement of biomanufacturing capacity, as well as development of new vaccines or antiviral therapeutics. I think that's where most of the capital from VCs is going to go towards in terms of supporting specifically pandemic preparedness.

Raj Saxena:

That's great, thank you! So, the polling question answer, I see majority of the people said 32%. The correct answer is 22%. So, 22% of the biotech, medtech contributes to the Canadian economy, so pretty close.

My next topic is going to be around how do we attract manufacturers? One question I have to all the panellists is how do we attract larger manufacturer? Despite the fact that Canada is a small market for the potential investee or companies. Nawel, let's start with you because you've involved with this, you've seen it.

Nawel Rojkjaer:

I think the first thing we have to realize is that Canada is not the only country that's either shoring up on biomanufacturing or racing to understand and then course correct on their lack of capacity. A few months ago, we saw the leaders of Denmark and Austria, they traveled to Israel as part of a mission to understand Israel’s strategy to secure its own population, and then they announced last month that they would form an alliance for joint research and development into biologics and a joint investment into a vaccine production.

Brazil is building a million square foot biomanufacturing facility for its own domestic production. Singapore has seen announcements just in the last few months for massive biomanufacturing investments from Sanofi, from BioNTech and others. And they were already a major hub.

South Korea has been spending billions of dollars a year, every year for a long time, to support biopharma, indirect funding and tax credits, and that has resulted in huge expansions in capacity for their Korean companies, Samsung and Celltrion in particular.

In other parts of the world, you know, China, India, the state plays a very active role in directing those projects and they provide land and capital and training programs for employees and they repatriate their citizen experts and make connections to research institutes.

Even the Gulf states, dependent as they've been on oil for a long time, are in a race pivoting to biotech, and they've created massive tax-free zones and provide capital so to build facilities.

So, Canada is in a global competition. That's what's happening outside of our borders and we're in a competition for those investments and for the talent needed to run those investments. I don't think we can sit on our hands and hope to kind of attract a big pharma company that someone is going to just come and build this facility here. It hasn't happened because we don't have a policy to grow this industry.

Medical sovereignty in my world means that we need to look at what we can do to support our own industry, our own competency. I don't necessarily see that as just how do we attract foreign investors? I think this is about where are the Canadian biopharma companies and I think that's what government should be looking at. Where are they and how do we get there and how do we grow them? And Canada has so many advantages, so I think that's the other point we have to understand is we're a very stable country. We're economically strong. We have a highly educated population, we have very strong research institutions. In this space specifically, we also have a very high-quality culture, and that matters when you're talking about making really complex medicines and we have a mature regulatory system with Health Canada.

Maybe one of the most important points that really matter in this space now is, we're quite critically, geographically, the neighbors to the biggest market in the world in this space, so we have the ingredients to do this ourselves. I think we just need to pull together a plan to make this attractive through growth from the bottom up and when that happens, when you've grown those companies and you have all of those pieces, that we've been talking about, you've built out all the necessary supply chain around your domestic industries, and you have your research institutions connected, you have your biotech innovation connected to that manufacturing - then you grow into a hub and when you are a hub, you have that magnetic effect of attracting those types of investments. It doesn't just come from, let's just do another tax credit and then maybe a company will come here. It's just simply not enough when you're talking about this type of industry.

And I just wanted to add one point to what Beni made previously around the CDMO business and the role that plays, because that's really tied to this manufacturing piece and a lot of people don't realize that. Those biotech companies, like we talked about, they have to develop their products forward and they often rely almost exclusively rely on CDMO companies to do that. But those CDMO companies, they have waiting times now that are two years running. You can't get a spot in those facilities to make your batches. WuXi, one of the biggest CDMO companies in the world, they recently announced that they have $6 billion in backlog demand to get into their facility on development. So, you know, that has a big impact on Canadian biotech. If we can't bring those products through development, then we can't get that innovation. It doesn't go anywhere… We're really good at innovating and we have great research, but we don't hold on to the value of that innovation.

Most biotech companies in Canada, their success story is that they either get acquired by a foreign multinational, usually a large vertically integrated firm, or they license or sell off their intellectual property. Maybe they go public and that's great for them, but you know, a lot of that innovation is funded by Canadian tax dollars and it leaves Canada. And there's been studies that show that Canada doesn't hold on to that innovation and that intellectual property exits the country. So, when we're talking about what is that investment that we need to attract, I think it's this full picture. What do we do to hold on to the investments that we make and hold on to that value? What do we do to fill out that development supply chain so that we can hold on to that value and play a role in growing ourselves that way.

Raj Saxena:

Thank you, Nawel. And Jim, on the generic side, we hear these comments all the time around the size of the Canadian market. And then how do we attract more manufacturing locally? Anything you would like to share around this topic?

Jim Keon:

I think the first thing I would say is, you cannot support a truly multinational company in Canada with just access to the Canadian market. So, we need access to the United States and, we've got a free trade agreement with United States. We need access to selling our products in Europe, and we have agreement there and in Asia and elsewhere. And so, the Canadian government has been very active there. A generic industry takes a strong interest in all those things. We want global supply chains, as I mentioned, we want Canada to be a preferred site. I would agree a hundred percent with what Nawel said, we're in competition for products, investment, talent and one of the things that is important for us too, we have a world-class regulatory system, absolutely Health Canada is, but it cannot have Canadian specific requirements unless they're absolutely necessary.

We've been a strong advocate for regulatory convergence for Health Canada working closely with the major regulatory agencies in the world, European medicines agencies, food and drug agency, trying to get international standards, the World Health Organization, et cetera. So, regulatory convergence is an important issue.

The other thing I would say for generic manufacturing, clearly you can make a business of it. We've had decades of strong Canadian companies manufacturing a big majority of their products that they sell in Canada and abroad in Canada. There is a case to be made in all of the factors Nawel mentioned - high quality labor force, good regulatory standards, they are important. The one thing we found however, it's been true I guess over the last year, it is difficult sometimes for the generic pharmaceutical industry to get attention. And we understand the need for vaccines to slow down the pandemic or to get us out of the pandemic, but all of the other medications that people are taking, their blood pressure, for their migraine headaches, for their depression, their diabetes, whether they're sick in the hospital, the pain management, the oncology, those are critical medicines. We cannot take them for granted.

We are very proud of the fact that during the pandemic we haven't had major drug shortages...One of the things you rarely hear about is a concern over are we going to have the medications to treat patients because our industry has been able to do that, but I mentioned earlier, there are a number of stresses and strains and weaknesses that were identified.

So, I think more than anything, we would like to see governments highlight the value and importance and sit down and work with our industry on a strategy for keeping and growing the domestic industry and ensuring strong international supply. I think, it is there to some extent, but in large measure, it's often not because of a coherent or priority government objective and policy. So, that's really where I think we'd like to focus in the coming year.

Raj Saxena:

Thank you. Can we have a next polling question please?

So, this is a polling question around the total sales generated by Canadian drug manufacturers in 2019. So, while people are answering that question we're going to move on to the next topic. It's around ESG. Touching on the role of ESG and how we invest in companies, what can we do to better address this and attract the best and the brightest that there's a number of discussions on this topic now. Nawel, what's your experience on this topic? You've spent time in Europe, you have interacted with people around the world. What can we do to address this issue?

Nawel Rojkjaer:

From our perspective, companies that operating with meaningful and robust ESG policies is and should be the new baseline. And it's certainly a very important factor in attracting the best and brightest talent, particularly in the kind of environment we're talking about today in life sciences. So, how is a future-ready company operating today without some eye on sustainability or, how do you not have social responsibility and proper governance? These are absolutely instrumental to the well-being of employees and the communities in which they operate.

One of the most direct experience I had or gave me a direct perspective on the impact of forceful ESG policy happened in Iceland. In 2018, Iceland introduced the first policy in the world that required companies and institutions with more than 25 employees to prove that they pay men and women equally for a job with equal value … Companies had to comply by using a job evaluation tool called equal wage management standard, and if companies show that they do pay equally for the same job, they receive certification. So, they got a runway of a couple of years but as of 2020, if you don't have that certification you start incurring daily fines as a company. And this was a very measured, direct way of targeting gender pay inequity and forcing compliance on the employer side. And you know, people were very, very proud of this law in Iceland and employees were very proud of what this meant and what this showed in terms of the value that the country and the companies were placing on gender equity.

That law was passed in collaboration with the companies. It wasn't just, you know, from the top down, they worked together to ensure that it was something that the companies would be able to comply with and how would they do this and what kind of tool would be created. So, I think within our own company, and I think for Canada and life sciences, we're not just designing future ready facilities. We need to be designing future ready enterprises and there's a great opportunity here because we're designing from the ground up and so, we see it as more valuable and more impactful to be able to incorporate those ESG policies from day one, rather than try to apply them as a remedial measure down the road.

Raj Saxena:

Hopefully we can have similar policy in Canada as well at some point.

Nawel Rojkjaer:

Yeah, I think so...

Raj Saxena:

Yeah, absolutely. So, Beni, I guess the question for you, when you evaluate potential companies for investments, how do you take into account the topic of ESG?

Benjamin Rovinski:

Very seriously is the answer but let me expand on that. We have been very proactive quite frankly, over the last 7 to 10 years in implementing ESG policies, not just for our investee companies, but for ourselves too. Most of our limited partners have also adopted strong ESG policies that extend to all of the general partners that they support today. So, I think overall, is definitely very encouraging to see that hired VC and I would say the entire financial industry is moving seriously in that direction. In order to really implement a consistent robust ESG policy to guide our investment activities, we have generated at Lumira very comprehensive model questionnaire that we update on a regular basis as ESG policies and guidelines obviously evolve quite quickly. This questionnaire is used to guide our due diligence process when we start evaluating companies as potential new investments...

So, I have to say that implementing best ESG practices for venture capital investing in general, presents itself with a lot of challenges. So, they have to do with factors such as limited resources, lack of ESG expertise, rapidly evolving business models, high growth rates, oppressive and rapid hiring that's required, limited governance and compliance processes for this companies, a lot of investor pressure, as well as increased vulnerability to all the negative reputational impacts that you might suffer.

So I would say that as such, the risks are highly diverse but also company specific and therefore our goal with this model questionnaire is not so much to identify every single ESG issue for every company that we wish to invest in, but rather to identify where their major ESG gaps reside and determine how we can best assist them, addressing those ESG deficiencies.

So, if I may just add that examples of this points that we address in our questionnaire include environmental, public health, safety, social issues, issues related to employees, their operations. We probe very seriously for, applicable, national state, local labor laws in the countries in which a lot of our companies operate, or when they sub-contract a lot of their work because all of them do that. And we also ask about whether the company has a strong diversity and inclusion policy in place and whether it provides competitive wages and benefits.

And the last thing is that since they use all these contractors, we want to make sure that they don't utilize contractors or third-party manufacturers that rely on child or a forced labor thing to any discriminatory policies.

So, I would say we're very strict about that, in fact this morning prior to this at our partners meeting we were just talking about how comprehensive this questionnaire is, and probably how difficult it is for some of the CEOs of the companies in which we invest to actually spend time answering this. But I think this is important and entrepreneurs now recognize that adhering to good ESG policies as a social responsibility is something that, investors like ourselves, are very serious about. So, I think that's a pretty positive evolution of the implementation of ESG policies in startup ecosystem.

Raj Saxena:

Thanks Beni. So, we only got eight minutes left and we’re receiving a number of questions. So, this question is for you Jim. Jim mentioned the Canadian government shouldn't focus on manufacturing solely and no government should do so. Why is that the case relying on a global supply chain? Is it more beneficial?

Jim Keon:

I did not mean to say that we shouldn't focus on manufacturing. In fact, I think we absolutely should and I think I was expressing how proud we are of the fact that we’ve had strong domestic manufacturing for medicines, generic medicines for several decades. What I think I was trying to say is that we provide hundreds and thousands of different formulations of medicines, prescription medicines in Canada…but to develop all of those medicines here is simply not realistic and I think it would lead to a great deal of inefficiency. We'd have to somehow or other subsidize those and charge higher prices and you know, stop imports, et cetera.

So, we do want manufacturing here, I think absolutely, but the nature of our industry is a global industry. It will be going forward, that is the reality. That's true for Canada. It's true for the United States. It's true for Europe. It's true for just every country in the world. No one will be completely self-sufficient, that was the point I was making. That's true for small molecule medicines. Nawel mentioned about biologics, we're taking a greater share of the post patent biologics, the biosimilar biologics are becoming critically important. Nawel is right, we don't manufacture those in Canada yet, hopefully down the road, we will. So right now we need to have policies and government support in Canada elsewhere that keep the international supply chain functioning well so we can provide these medicines for Canadians.

Raj Saxena:

Thank you! And on the poll, the answer is correct. Number two, that's 30 billion.

So, the next question...In order to nurture and attract investments in the life sciences companies into Canada, which takes years or decades, is there an active plan to remove most of the regulations that are hindering growth of the market? Too much red tape and too many rules, regulations and misplaced policies that are blunt and it only served to inhibit investments by entrepreneurs in such a small market. That's an open question for all three of you, would you like to start Nawel?

Nawel Rojkjaer:

I'm not sure if I understood it. Which regulations we would seek to remove? I'll interpreted the question as best I can, but when it comes to biopharmaceuticals medicines, et cetera, there are in fact a lot of regulations, but we like that because that's what keeps these medicines safe. And I don't think there's anybody in this industry that's advocating to have fewer quality standards. It's the opposite. I think exactly what Jim was saying too, when you have a high-quality standard and you're known for your health Canada approval and it means something there's a value in a brand to that. So, we want to keep those types of regulations and controls. But what I was talking about in terms of the investment into this space has to do with the organization around the funding community, what's required, how do you design funding that is long-term strategic, that builds out infrastructure, that looks at things like making sure we get talent here.  That that's tax policy, that's immigration policy, that's coordination amongst our higher learning institutions.

So, I'm not sure that it's a question of removing regulations and just to this question, I think you talked about attracting it despite Canada being a small population, but you know, countries like Ireland and Singapore and Switzerland, these are not known for having low regulation and big populations, this is the opposite. These are highly regulated, highly functional jurisdictions with very small populations. We're focusing on the wrong factors that lead to these investment decisions and when we have that discussion on those points, I think we really lose an opportunity to figure out what Canada specifically can do to set up self up as a strong base. No, we don't need to have all the manufacturing, but we should have a lot. We're a great country well positioned for exports. We should be making medicines here and providing them both for Canadians and for the rest of the world.

Jim Keon:

Just a quick word. I agree with what Nawel said. We want a high quality, high standard regulator in Canada. We would challenge and do challenge Health Canada to have regulations as much as possible that are consistent with those in Europe and in the United States. When we talk about exports, the generic manufacturers in Canada export to over a hundred countries. They are seen as quality products and having a Health Canada stamp of approval has proven over the years to be a tremendous asset. So, we do want to be seen as a high-quality regulator. What we need to do though is to ensure that we have consistency as much as possible with other high standard regulators.

Raj Saxena:

Absolutely. So, we’ve got a minute left. As closing remarks, one thing I must say is thank you all! I really appreciate your time and insight and hopefully everyone, the audience, received a good perspective on the sector.

Thank you everyone, have a great day and speak soon. Bye for now.