Executive Summary

Introduction

Western Economic Diversification Canada (WD) is a federal agency responsible for diversifying the economy of Western Canada. Under the Western Economic Diversification Act, 1988, WD is mandated to "promote the development and diversification of the economy of Western Canada and to advance the interests of Western Canada in national economic policy, program and project development and implementation."

WD delivers financial assistance around three inter-related strategic priorities: entrepreneurship and innovation, sustainable communities, and policy, advocacy and coordination. It is through the entrepreneurship and innovation priority that WD works to strengthen Western Canada's innovation system and to increase the capacity of Western Canada's knowledge-based economy.

Study purpose

This study reports on the qualitative and quantitative impact of investments made in life sciences by WD during the six-year period from April 1, 2000 to March 31, 2006. During that period, WD approved 359 projects in Western Canada's life sciences cluster, for total funding commitments of approximately $161 million.

Of the 359 projects, 154 projects valued at $131 million (81 percent of total investments) were the subject of this study. Excluded from the study were 205 projects that were granted funding under the Conference Sponsorship Program (CSP), Canada Foundation for Innovation Support Program (CFI-SP), and First Jobs in Sciences & Technology (FJST).

Study approach

In brief, the study involved the components in the following chart:

WD's investment in Western Canada's life sciences cluster

Range of WD support

WD has made investments in a broad cross-section of life sciences activities that includes research and development in health technologies, technology platforms in genomics research, and resource-based applications. Shown in Table 2.1 are the percentages by dollar value of WD investments made by research focus.

Table 2.1 WD investment by research focus

 

WD investments leveraged other funds

WD's investments have resulted in organizations being able to raise additional, leveraged funds from other public and private sources. The total project budget of the 154 projects reviewed during the study was $474.9 million, of which WD provided $130.8 million (or about 28%). As a result, every dollar invested by WD was matched by another $2.63 that was contributed by other sources.

Table 2.2 Total project funds – 154 projects

Total Project Cost	WD Investment	Balance of Project Costs
$474.9	$130.8	$344.1
100%	28%	72%

Interviews with project recipients and key informants

For the study sample of 49 projects, interviews were conducted with representatives of the organizations receiving WD funding.  Throughout this report these individuals are referred to as "project recipients". In total, we carried out interviews with 41 project recipients, with some project recipients representing multiple projects.

To provide a broader context of the life sciences cluster, additional interviews with industry professionals who were not currently receiving WD funding were also carried out. Throughout this report these individuals are referred to as "key informants" In total, we carried out interviews with 27 key informants.

Project recipients and key informants view of WD's role in Western Canada's life sciences cluster

Interviewed project recipients and key informants provided the following perspectives on WD's role in Western Canada's life sciences cluster.

• WD's role in providing funding support was considered to be especially important in the development of the cluster. Project recipients saw WD as a vital source of funding for their projects. Many project recipients also indicated that if it had not been for WD, their project would have been cancelled, delayed or significantly reduced in scope. WD's funding enabled project recipients to leverage significant levels of additional funding from other organizations.
• WD was recognized for its role in promoting the life sciences cluster within Western Canada's research and academic institutions. WD was less well known by the life sciences business community, a result which was attributed to WD's inability to provide funding assistance to for-profit organizations. WD was also not as well known by the general public, which may be unfamiliar with the work WD is doing to develop the cluster.
• Project recipients and key informants stated that another important role for WD is to serve as facilitator and catalyst between the federal and provincial governments and other funders thereby ensuring coordination and integration of resources. This role was seen to be especially important when infrastructure projects include multiple-partners with varying interests in projects. Both project recipients and key informants saw WD as providing a key linkage between the federal and provincial governments.
• Project recipients and key informants stated that WD's investment was an important contribution to the growth of the life sciences cluster because it contributed to creating research infrastructure. Research institutions that have expanded their research facilities and equipment due to WD's funding have enhanced their ability to leverage additional funding and attract highly qualified people.
• Project recipients suggested WD priorities could be improved by changing the short-term focus common to political systems to a longer-term view which is needed to see research through to commercial results. They also felt that WD worked well with its provincial counterparts on project initiatives.
  
  More importantly, WD has built relationships with members of the local life sciences cluster in each province, enabling greater collaboration and communication throughout the cluster.
• WD was seen as being the voice of Western Canada's life sciences cluster at the federal government level and nationally among other cluster players. Project recipients suggested that Western Canada's voice was not loud enough and that giving Western Canada a voice provides smaller organizations with the leverage needed to compete with larger ones.

Project recipients and key informants view of WD's effectiveness at achieving the six innovation objectives

Under its entrepreneurship and innovation priority, WD has implemented six innovation objectives. These objectives support the goal of enhancing Western Canada's economic performance through strengthened regional innovation systems.

Interviews with project recipients and key informants provided the following perspectives on WD's effectiveness in developing Western Canada's life sciences cluster.

1. Enhancing knowledge infrastructure and capacity. WD has been effective at facilitating infrastructure development. Having the right facilities and equipment in place has led to additional funding and the attraction of highly qualified people.  For example, in Saskatchewan, WD contributed funding for the construction of seven light source beams at the Canadian Light Source facility at the University of Saskatchewan.
2. Increasing technology and research. WD has been effective at being able to provide support that leveraged existing investments in technology platforms which then provided access to scientists and others. For example, funding projects have enabled the transfer of technology from the centres of expertise in universities into the hands of clinicians in hospitals who work directly with patients.
3. Accelerating technology commercialization and adoption. Even with its limited budget and mandate, WD has been effective in contributing to translating research knowledge into economic and social benefits. Several projects that will accelerate the process of moving research into commercialization include, the St. Boniface Hospital Research Centre in Winnipeg and the Centre for Drug Research and Development (CDRD) in Vancouver. Other examples are the expansion of the Vancouver-based BC Cancer Agency's technology transfer and commercialization capabilities and the Saskatoon-based POS Pilot Plant Corporation facility.
4. Improving linkages among innovation system players. WD has been effective at building collaboration and creating networks through the development of regional partnerships and the creation of sector linkages and synergies. Through the Canada West Health Innovation Council (CWHIC) network, WD was able to support the development of several well-managed networks that brought together innovation system players across Western Canada. Other linkages included the support of Genome offices across Western Canada. The presence of these offices locally has enabled linkages across the provinces, thereby expanding the research base.
5. Increasing access to highly skilled personnel in innovative clusters. WD has been able to support several training initiatives in the life sciences. In addition, because of WD funding, project recipients were able to hire highly qualified people to work on their projects. Attraction of highly skilled people to the region is expected to be a spin-off benefit from cluster development.
6. Building innovation capacity of communities. WD funding has supported the expansion of the life sciences cluster in Western Canada into diverse industry areas. Support provided to industry-related research is expected to create future economic benefits in biofuels, value-added forestry, viticulture management, aquaculture, and agri-foods. Often, these industries are located near smaller, rural communities which benefit from having increased research capacity.

Economic impact assessment

Based on our analysis, the estimated economic impacts of WD's $130.8 million in investments in the life sciences cluster are $189.0 million in total output, $88.9 million in GDP, and 1,654 full time equivalent (FTE) jobs.  These results are summarized in Table 2.3.

Table 2.3 Estimated economic impact of WD's investments in life sciences

Economic impact estimates		Direct	Indirect	Total
	Output (Spending) (millions)	$130.8	$58.2	$189.0
	GDP (millions)	$55.1	$33.8	$88.9
	Employment (FTEs)	1,143	511	1,654

The estimated total output of $189.0 million consists of $130.8 million in direct impact (the value of WD's investments) and indirect impacts of $58.2 million.  Expressed as a ratio, each dollar of WD investment can be said to have generated a total of $1.45 in output.

The increase in GDP is estimated at $88.9 million.  This consists of $55.1 million in direct, and $33.8 million in indirect impacts. Expressed as a ratio, each dollar of WD investment can be said to have resulted in $0.68 in increased GDP.

The estimated 1,654 FTE jobs consist of direct employment of 1,143 FTE and indirect employment of 511 FTE jobs. Expressed as a ratio, each million dollars of WD investment can be said to have generated 13.9 FTE jobs.

WD's investments also generated additional economic benefits that include such activities as long term public health benefits resulting from improved medical therapies, creation of spin-off companies, and attraction of scientists to research facilities. Additional discussion of economic benefits can be found in the economic impact section of the report.

Priority areas for future investments

Project recipients and key informants were asked to rank what they considered to be the top three priority areas for WD investment in the life sciences cluster. Table 2.4 summarizes the top choices for each group.

Table 2.4 The top three priority areas for WD investment in the life sciences cluster by key informants and project recipients.

	Key Informants Rank	Project Recipients Rank
Applied R&D leading to commercialization	1	1
Creation of physical infrastructure for research (buildings and equipment)		2
Enhance technology commercialization and adoption	2
Increase linkages among innovation system players	2
Invest in skills and knowledge development		3

Both groups suggested that the first priority for future investment should be additional support for applied R&D leading to commercialization.

The second ranked choice for project recipients was the creation of physical assets (buildings and equipment). Investment in physical assets would also include support for ongoing operations for existing facilities and refurbishment of older sites. Project recipients indicated that the third priority should be investment in skills and knowledge development. Suggestions as to the specific type of skills and knowledge development needed included the areas of technology licensing, marketing and company formation.

Key informants suggested that investments in technology commercialization and adoption should be the second ranked priority. Tied for second ranking was the need to increase linkages among innovation system players.

Recommendations from project recipients and key informants

Project recipients and key informants had the following recommendations regarding future WD investments:

1. WD should take more risks with the types of projects chosen for investment.
2. WD should increase the capacity of the funding program through the allocation of larger amounts for projects, the creation of a life sciences fund for seed capital, and the funding of projects proposed by both for-profit and not-for-profit organizations.
3. WD should work with appropriate stakeholders to identify and invest in projects that increase the supply of highly qualified people in skills related to proof of principle and commercialization activities, including sales and marketing, legal, licensing and other company formation skills.
4. WD should get the good news story out about Western Canada's life science industry through various marketing initiatives, including allocating a percentage of individual projects as marketing dollars.
5. WD should clarify its mandate and objectives with potential project recipients, the life sciences community, and the broader public.
6. WD should lead and advocate for the life sciences cluster at the federal level and partner with other federal agencies to deliver coordinated support for the cluster nationally.
7. WD should advocate for improvements to Canada's immigration process to make it easier to recruit highly qualified people from other countries either for permanent employment positions or as visiting scientists.
8. WD should follow existing projects and provide investment and support throughout the project life cycle using a strategy similar to what venture capitalists are doing with industry. In particular, WD should invest in later-stage activities where there is a chance for commercial success.
9. WD should assess the effectiveness of dispersing investments across a broad spectrum of life science areas, and determine whether a focused approach on specific areas would ensure greater success.
10. WD should develop innovative technology transfer models that perform a similar function to the Centre for Drug Research and Development (CDRD).

Conclusions

Public support for research and development is based on the principle that increased investment will lead to employment growth and greater economic activity.  WD has focused its investments in knowledge and research infrastructure at the initial stages of the innovation life cycle. Our economic impact analysis indicates that these investments have contributed towards GDP and employment and produced broader economic benefits. Greater economic impacts will be obtained when additional investments are made to further the innovation life cycle. The requirements for diverse job skill sets will increase as well as other value-added activities such as company formation.

WD is actively providing investment support to life sciences research and development. As such the organization is providing a critical catalytic role linking together projects and parties to achieve beneficial discoveries across the life sciences spectrum.