Access to networks of early adopters and funds are top concerns

Executives from Ontario’s healthcare sector say they could benefit from a network of early adopter institutions and a capital fund that invests directly in health science companies preparing to commercialize their products and market them globally as they scale their businesses in Canada. The recommendations are among several presented by the Ontario Bioscience Innovation Organization (OBIO) in a new report entitled Use It or Lose It: Industry Solutions to Ontario’s Commercialization Gap.

The report says an early adopter network and capital fund, augmented by a consolidation of government funding programs, simplified procurement processes and globally competitive tax policies, would go far towards assisting the sector in confronting financial, infrastructure, ecosystem and talent barriers facing companies, 80% of which have “have less than 12 months of financial runway”.

Of the firms within the province’s health science industry, more than 50% have products in the preclinical or clinical stage of development. One in five are also advancing with projected sales or expanding their markets. However, they still face challenges.

Backed by an online survey of 135 executives from Ontario’s healthcare industry, the report found that 97% say a network of early adopters would prompt them to stay in the province and continue to grow. According to OBIO, such a network would include teaching hospitals, community hospitals, long-term care and community care experts.

Gail Garland, president and CEO of OBIO, tells RE$EARCH MONEY that while organizing this network is “underway,” there are a host of organizational issues that remain to be tackled. These include common contracting and consent frameworks across hospitals, intellectual property ownership and assignment, advanced trial design and funding, data collection, storage and analysis, trial administration, health economics, regulatory affairs, purchasing, reimbursement, OHIP codes, and patient management. She adds that it will take far more than forging a memorandum of understanding (MOU) among network players.

“A simple MOU or multiple MOUs across a number of hospitals cannot address risk to the company or the institution. We need a group to come together and build a common networked system so that companies can “one stop shop” and develop their technologies at home in Ontario,” says Garland.

The report notes that less than a third of companies that have piloted their technologies had them adopted by the trial institutions. Among the barriers to adopting their technologies are the lack of clear procurement paths, no funding codes or programs for new devices and trial delays or lack of commitment by the hospital and trial participants. The report notes “frustration” within the industry as they confront other barriers to adoption, including bureaucracy and lack of political will.

The health executives surveyed say they need this network of early adopters as a showcase for their innovations. Over half of respondents said “it is important or critical to have an Ontario hospital use their technology to generate data and improve the product, and to showcase it to investors and other markets.”

Some 96% of survey respondents said they would stay in Ontario if this network of adopter hospitals and a receptive ecosystem were present.

The report also notes that the province needs anchor companies or large companies that can work with smaller and mid-sized companies. Without these anchor firms, innovators may find it very difficult to stay and grow in the province, says Garland. She adds that homegrown companies will either die or be purchased “for a fraction of what their technology is worth. In both cases there is a lot of intellectual property that will be lost or accrue to the benefit of another jurisdiction”.

Access to capital

Access to this network and an infrastructure to pilot new drugs and technologies is another recommendation in the report. Establishing a healthcare innovation capital fund, however, is the top recommendation with 95% of respondents saying this is the main barrier to successfully scaling up.

The report notes that the provincial government needs to consolidate some of its funding programs as some are not applicable to early-stage companies in health sciences. For example, some programs require co-matching or require partnerships with institutions. Furthermore, some program criteria are so onerous that some industry executives say it’s simply not worth the effort.

Garland says the new Ontario Life Sciences Venture Capital Fund announced early this year represents an important step in the right direction of providing access to funds. However, “the creation of a dedicated fund (versus a general VC fund where healthcare competes with ICT and there is no healthcare specialist) is something OBIO has been lobbying for over many years and we are pleased to see this initiative taking shape,” she says. “The fund is in very early stages and they are only at the point of looking for managers and additional capital. It will be some time before the first investment gets made and it is impossible to predict when that will be.”

The report’s online survey was conducted in 2017 before the life sciences VC fund was announced.

Garland adds that not many Ontario companies can access VC funds because fund managers usually ask for proof of principle data, which requires funds to generate. There are also a limited number of angel investors looking to invest in health science companies except those involved in health IT.

“Ontario is at risk of missing out on opportunities to better serve patients and healthcare providers by participating in leading edge technology development and medical breakthroughs,” she says. “We risk missing out on economic benefits that come from attracting global clinical research projects and from developing and marketing technologies that the province invests in within academia and early stage companies.”

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