Merchant Scientists

How commercialization is changing research in Canada

How commercialization is changing research in Canada
Photograph by Tim Davis
Greenberg Van Doren Gallery Bad Bulbs (Illilluminations), 2005.

Jean Gariépy stands just to the right of the screen and points to different-coloured globs that look like bunches of grapes or pieces of coral. He is wearing a dark T-shirt and jeans, and with his longish hair and glasses he could be an artist showing slides of his work. But he is a professor at the University of Toronto’s departments of medical biophysics and pharmaceutical sciences, and the coloured globs are bacterial toxins.

It is early July 2005, and Gariépy, fifty, is in the thirtieth-floor boardroom of Genesys Capital Partners, a Toronto-based venture capital company. He wants Genesys to invest in his company, Molecular Templates Inc., which is trying to harness the natural cell-killing abilities of bacterial toxins to create an anti-cancer agent. Early results have been encouraging. mti’s technology, a rapid platform for testing candidate toxins, is a big selling point. But it needs money to take the next step, to move into clinical trials on animals. After the pitch, two of Genesys’s founders, Kelly Holman and Damian Lamb, pepper Gariépy and then mti executive director Randal Chase with technical questions. Witnessing it all are six representatives from local university and teaching hospital technology-transfer offices.

Twenty years ago, that scene would have been unimaginable. Back then, with the exception of the fields of chemistry and engineering, relations between academia and industry were frowned upon, and tech transfer officers a rarity. Support for Canadian science was also at a low ebb, and bright young scientists were leaving the country in droves. All of that changed in the late 1990s when Canada began to reinvest in university research. The reinvestment was substantial—by 2006, Canada ranked second among oecd countries for the ratio of higher-education research and development to gdp. But it came with strings: the granting policies of major federal or federally created bodies began to require that researchers obtain co-funding from industry. One expert federal advisory committee went so far as to recommend that innovation be enshrined as a core mission of universities—in addition to teaching, research, and community service. While the Association of Universities and Colleges of Canada rejected that suggestion, it made an agreement with the federal government that members would triple commercialization performance by 2010, with a target for income from commercialization of $70.2 million.

The doctrine of innovation had taken hold—“innovation” narrowly defined as the route to commercializable products and services. Innovation would allow Canada to “compete in the knowledge-based global economy,” and universities were seen as a key source of the discovery and invention that would pave the way.

The turnabout is most evident in the life sciences, mainly thanks to the revolution in genetics. The ability to identify and then transfer specific genetic traits from one organism to another, together with the awarding of patents on genes, cell lines, and the processes and technologies used to alter them, has enormous commercial potential. Health research has become a key plank in Canada’s industrial policy, and now accounts for nearly 25 percent of all R&D expenditures in Canada, up from just 14.3 percent in 1989.

Fields such as engineering can bring products to market much faster than health-related sciences, where the regulatory process of proving safety and efficacy for drugs and devices is lengthy and onerous. But there is something reminiscent of the search for the Holy Grail about the global quest to be the first to grow custom-made organs or find the magic bullet for cancer, heart disease, or obesity. Potential profits are huge, and there is international competition for supremacy in research and for fostering domestic biotechnology companies. Every country wants a Silicon Valley. Every country appears to believe that the biological revolution will be as transformative as the Industrial Revolution.

The process of commercialization at Canadian universities has been formalized at a “very fast pace,” and success is hard to measure, according to Martin Cloutier, a professor in the school of management at the Université du Québec à Montréal. Cloutier argues that it’s easy to count the increased number of patents and licensing agreements at universities, and the spinoff companies, but much harder to evaluate the impact in terms of businesses and jobs created.

The shift in the perceived role of universities has taken place almost entirely in the absence of efforts to engage or inform ordinary Canadians. Indeed, major programs that further the commercialization agenda have been introduced without even parliamentary oversight. Yet the change is not without cost and risk. Perhaps most obvious is the tension between the academic norm of openness and commercial imperatives of confidentiality and secrecy, with the attendant risk being that university-produced, publicly funded knowledge becomes privatized. At least as important is the possibility that the university research agenda is being skewed away from discovery and public interest toward areas likely to appeal to industry. And when the fruits of publicly funded research are commercialized, how does the public benefit, and how is it protected?

The innovation/commercialization doctrine has fostered the growth of a particular breed of researcher. Vancouver academic Janet Atkinson-Grosjean coined the term “merchant scientist” to describe well-regarded scientists who “move confidently” between academia and business. Merchant scientists are evangelists, excited by the science and eager to see their discoveries trans-formed into products—exemplars for the federal government’s push to commercialize research and “compete in the knowledge-based economy.”

When Bob Hancock began teaching microbiology at the University of British Columbia almost thirty years ago, it was understood that “if you interacted with business, you were sullying science.” But in his role as founding scientific director of the Canadian Bacterial Diseases Network—one of the first of the government-created Networks of Centres of Excellence, which aimed to promote commercialization—he felt obliged to set an example and, in the early 1990s, co-founded Micrologix Biotech, a company built around his and the network’s research. Micrologix sought to prove the effectiveness of a particular peptide for sterilizing catheter insertion sites to prevent infections. The company, later renamed Migenix, eventually licensed the peptides to another company to develop.

In the course of establishing his first company, Hancock discovered that there are some “not tremendously honest people in business” who are quite happy to do well at a company’s expense. “Scientists by and large are not motivated by money,” he says, “and it is very hard for the neophyte to detect the difference between honest and dishonest.” But the experience didn’t discourage him. Hancock is fuelled by his conviction that he is working on one of the most pressing issues in medicine today. “We are in an era of great threat. Infections are still the second-leading cause of death in the world. We had the antibiotic era, but the bugs are fighting back.”

With the support of ubc’s University-Industry Liaison Office, he went on to co-found Inimex Pharmaceuticals, which aims to treat infections by boosting natural immunity. Its lead candidate targets a broad spectrum of life-threatening hospital infections, many caused by antibiotic-resistant bacteria. The company raised $12 million in seed and angel financing and next year plans to proceed toward clinical trials. Like the most prominent of the merchant scientists, Hancock has also excelled at his academic work. Last year, he received the Killam Prize for health sciences, and in 2006 was named Canada’s Health Researcher of the Year by the Canadian Institutes of Health Research. Between thirty and forty researchers work in his lab at any given time.

While Hancock, now fifty-nine, came from Australia to Canada in the 1970s and stayed, the subsequent decades were relatively lean for Canadian science. Then, in 1997 and 2000, two major initiatives were launched—both funded from government surpluses and outside of parliamentary control but under the responsibility of Industry Canada, and both with fixed terms.

First, the Canada Foundation for Innovation was introduced to help fund new equipment for research scientists. The cfi contributes up to 40 percent of the cost of a piece of equipment, with the balance to be raised by the university or institute from other public or private sources. The program received an initial $3.65 billion in federal funding and has thus far committed a total of $3.8 billion (accrued interest accounts for the higher payout).

Then, in an effort to jump-start Canadian genomic research, Genome Canada was born. To date, it has funnelled more than $700 million into research, with the expectation that projects would be wrapped up over a five- to ten-year period. But Genome Canada requires researchers to raise matching funds from other “partners,” either private or other government sources—a real sticking point. One letter to Science in 2005, signed by forty Canadian scientists, followed by an online petition signed by almost 1,400 scientists, decried the requirement: “In particular,” states the letter, “co-funding is often biased against fundamental research that is far from commercialization and so at odds with the short-term goals of industrial partners.”

Indeed, the partnership model works only for a few scientists, acknowledges Dr. Michael Hayden, a professor of medical genetics at ubc whose research has led him to spin off three companies. Hayden didn’t sign the letter but notes that even he, with his entrepreneurial bent, finds the search for partners a time-consuming strain. “The partnership funding mechanisms have created a lot of stress,” he says, “and, I think, diminished creativity because of that.”

The cfi, Genome Canada, and to a lesser extent the Networks of Centres of Excellence all fall under the auspices of Industry Canada, as does the Canada Research Chair program, introduced in 2000 with $300 million per year to be used for salary support, to attract and retain the best researchers in many fields at universities. Industry Canada is also the architect of the Canadian Biotechnology Strategy, and while agricultural biotechnology has received the most public and critical attention, about 70 percent of all biotech companies in Canada are in the human health sector. Indeed, of the key agencies that fund health-related university research, only the Canadian Institutes for Health Research falls under the responsibility of Health Canada. The cihr provided $800 million in research funding in 2006–07 and, unlike some of the newer funding bodies, distributes most of its money after peer review. But it, too, sees part of its mandate as being to “encourage innovation, facilitate the commercialization of health research and promote economic development.”

The wall of windows in Hancock’s spacious office on the second floor of the Lower Mall Research Station faces three brand new high-rise student residences. Across the hall, denizens of the lab have an unobstructed view of the greenery that forms a belt around the scenic campus. In dealing with business, Hancock explains, “probably the single most important thing” is to have clear conflict of interest guidelines. ubc allows him to spend one day a week on external activities. He must declare any time over and above that, as well as outside compensation beyond a certain level. He must also withdraw from decision-making if there is a potential conflict. “I take this really seriously,” he stresses. As more and more researchers are lured into a search for marketable products and services, conflicts of interest inevitably arise.

The much-publicized case in the mid-1990s of Dr. Nancy Olivieri and Apotex Pharmaceuticals highlighted the tension between commercial confidentiality and academic openness. Olivieri was conducting a clinical trial of an Apotex drug and was obligated under contract not to release information about the trial without the agreement of the company. But she developed concerns about the drug and informed trial participants, even though the company refused to consent to this disclosure. Her research was cancelled, and she was threatened with a lawsuit. Some prominent academics rallied to support her, and the principles of research and clinical ethics and academic freedom. The case became a cause célèbre.

In its wake, Canadian universities scrambled to tighten up their policies and procedures. Contracts are now carefully scrutinized, and at the University of Toronto a keystone policy (based on the notion that “dissemination of knowledge is one of the primary functions of the university”) is the right for researchers to publish the results of research in a timely fashion, says Jennifer MacInnis, director of intellectual property and contracts. Still, companies that fund research regularly try to push the boundaries—inserting clauses that effectively aim to block academics from publishing research results, for example. Because there is no common stance among universities about acceptable terms for industry-academic relationships, industry does try to play off institutions against each other. “You know, so-and-so agreed to this, why don’t you? ” MacInnis says. “But because of our size, it is difficult for a company to bully U of T.”

As important as they are, tough contracts protecting academic freedom and full disclosure of industry links and funding cannot address what some see as a fundamental problem. Disclosure and transparency are not a solution to bias. The commercialization agenda can skew the research agenda.

David Wolfe, co-director of the Centre for International Studies at the University of Toronto, says that universities have, to a large extent, let federal government programs define research programs, and sometimes priorities. The result reinforces a trend toward more targeted and applied research, and there is a growing sense that this and other developments are jeopardizing the long-term status of basic, curiosity-driven research.

That recognition has been articulated by a number of eminent scientists. Dr. Fraser Mustard, one of the architects of the Networks of Centres of Excellence, dismissed as wrong-headed the government’s expectation that after fourteen years the networks should be self-sufficient. “Whoever set up this policy of commercialization, basically what you have is a crew of characters doing public policy who don’t understand the subject. What you end up doing is pulling all your money away from the fundamental research,” argued Mustard, who also founded the Canadian Institutes for Advanced Research.

University of Toronto chemistry professor and Nobel Prize winner John Polanyi wrote in the November–December 2004 issue of the Innovation Canada newsletter: “When we tie discovery research too closely to development, we force our university scientists to run while hobbled in a three-legged race, one leg tied too nearly to industry. This is a mistake we are now making.” And to Ursula Franklin, physicist and University of Toronto professor emerita, the emphasis on commercialization amounts to “depleting the groundwater” of basic discovery science “with endless irrigation projects.” Furthermore, she maintains that much excellent science is now being marginalized because of the emphasis on funding research likely to be of interest to industry.

Many scientists are worried that all basic research is jeopardized. With its reinvestment in research infrastructure and personnel, Canada has managed to cultivate and lure back world-class scientists and create an impressive research climate. Still, there is concern that operating funds to finance the research are lagging behind, putting the enterprise at risk. The competition for cihr research funding is now so stiff that the agency is able to fund only about one in five projects applied for, leaving many excellent researchers and projects unfunded. In November 2006, eleven distinguished Canadian scientists, including Polanyi, wrote to Prime Minister Harper out of concern “that without substantial new investments” in basic research, particularly in the convergence of life sciences and physical sciences, Canada faces the prospect of “a steady erosion of our international competitiveness.”

Almost all of the major reinvestment in research took place while the Liberals were in Ottawa. The Conservatives, while not demonstrating enthusiastic support for all scientific fields since they took power in 2006 (think climate change, for example), have expressed interest in health-related research and have provided increases for cfi, cihr, Genome Canada, and the Canada Research Chair program. And commercialization appears to be central to their planning: a private sector committee was given a key role in selecting recipients for the government’s main new funding initiative, the Centres of Excellence for Commercialization and Research.

Publicly funded university research is often the source of discoveries that lead to new patentable drugs or equipment. This raises a couple of issues. Much ink has been spilled in government-sponsored reports on how to increase Canadian investment in promising biotechnology companies and to keep them, and jobs, in Canada. But not much has changed on the ground. “You don’t want to be a Luddite, but you have to wonder about the fact that we fund this research, which starts to get developed here but is eventually bought by a foreign company. Then we have to buy the drug or whatever at a high cost for our health care system,” said the head of a cancer organization (who didn’t want to be identified).

Some have proposed the idea of a return on investment to the public in exchange for the taxpayer-funded research that is the basis for a marketed health product, but the idea hasn’t gained much traction. Others argue the necessity of taking a step back to consider how the products of research benefit individual Canadians. “So much investment has gone into producing new products, and almost none has gone into evaluation of the products, and it’s totally, totally out of balance,” says Patricia Baird, a medical geneticist and the chair of the 1993 Royal Commission on Reproductive Technologies. Canada lacks, for example, any organized system for tracking patients’ experiences with prescription drugs after they are marketed here—a huge gap that was underscored by the 2004 Vioxx scandal. And health technology assessment cannot compete with intensive commercial marketing of products.

Jean Gariépy’s office, on the seventh floor of Princess Margaret Hospital in downtown Toronto, is small and windowless. There are stacks of paper on every surface; it is grant-writing season, he explains, as he clears a spot for his visitor to sit. His lab is just down the hall from his office, and Molecular Templates Inc. is also on the seventh floor of the hospital, where it pays rent on a small laboratory.

It has been more than two years since he made his pitch to Genesys, but neither it nor any other venture capital company has significantly added to the relatively modest $2.5-million investment that launched the company, which has survived through bridge financing. There have been more promising results in animals, but Gariépy says the investment climate in Canada, never good for startups such as his, has deteriorated. Yet he is not discouraged and is now looking offshore for investors.

Gariépy started mti because, he says, “I hate to have an idea and it stays in a journal that is read by not enough people.” Meanwhile, he is resigned to the fact that eventually his company will have to merge or, if a first phase of clinical trials goes well, be purchased by a larger, foreign-owned company. “That is the logical exit for most small Canadian companies, even for larger ones,” he explains. Rocking back and forth in his office chair as he talks, Gariépy says his interest in creating a company is unusual in his department of medical biophysics, which has about 125 faculty but only “three or perhaps four” with entrepreneurial interests. “Most just want to do the science.”

Ann Silversides
Tim Davis

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