Dr. Alan Bernstein, president of the Canadian Institutes of Health Research (CIHR), has set an ambitious goal to turn Canada's $20 billion annual healthcare spending into a research-driven enterprise to capture both health and economic benefits. Under Bernstein's leadership, the CIHR has increased funding for healthcare research significantly, focusing on areas like health services research and population health that have the potential to improve healthcare delivery and identify preventative strategies. The CIHR also aims to commercialize research discoveries in Canada in order to fund new research, reward scientists, and retain top talent in the country. Several examples are provided of research institutions and startups that have successfully commercialized healthcare technologies and therapies with support from the CIHR.

1. h e a l t h c a r e w o r k o u t :
STRONG RESEARCH, ROBUST OPPORTUNITIES
Produced by the Lockwood Media Group

3. As president of the Canadian Institutes of Health Research (CIHR),
Dr. Alan Bernstein sets the strategic course that determines the
future look of healthcare in Canada, accommodating a mind-
bogglingnetworkofdiscoveries,researchprioritiesandpolicymandates.
After all, his organization doled out $576 million in grants last year
— headed toward $1 billion by 2007.
Refreshingly, however, his vision is full of enthusiasm and
optimism and remarkably free of politicization. A world-renowned
geneticist in his own right, Bernstein can envision healthcare research
improving not just the health but also the economic well-being of
Canadians.
“We have seen a revolution in health research over the last 15
years, mostly driven by genomics and proteomics,” says Bernstein.
He describes many watershed discoveries and developments: the
ability to diagnose illness at a molecular level, the advent of designer
drugs and individualized disease treatments, health informatics that
track populations to find valuable disease risk and prevention factors,
Web-based telemedicine that permits remote diagnosis and surgery,
and nanotechnologies that could lead to internal camera capabilities.
The problem, as Bernstein sees it, is not that we lack knowl-
edge but that we are not using it adequately. “There’s a growing gap
between what we know and what we do,” he says. “How to bridge
that gap is a very important role for the CIHR.”
Bernstein has set a goal for the CIHR that is bold and simply
stated: to turn the $20 billion that Canada spends on healthcare each
year into research-driven enterprise, thereby capturing both health
and economic benefits.
That ambition lurks behind everything about the CIHR
since its formation in 2000 from the former Medical Research
Council, which was a granting body for lab research. Built around
13 virtual institutes, the CIHR has done nothing less than try to
change the way researchers work, with its institutes as hubs that
interconnect disciplines, human systems, diseases and vulnerable
groups. Their role as catalysts and interdisciplinary forums can be
seen in names such as the Institute for Nutrition, Metabolism and
Diabetes; the Institute for Gender and Health; or the Institute for
Neurosciences, Mental Health and Addiction.
The institutes issue two main types of grants — for traditional
proposed research, for which they conduct peer reviews, and in
response to applications spurred by its own requests for applications,
or RFAs.
How the institutes develop the RFAs speaks volumes about
the new environment for research in Canada. RFAs ask researchers
to investigate areas of particular need. The Institute for Neuroscience,
for instance, recently held two workshops that brought together
biologists, surgeons, chemists, ethicists, engineers and other researchers
to discuss opportunities in nanosciences. They identified several,
resulting in the issuance of RFAs. Funding is now available for
research in these areas. “It reflects our knowledge translation man-
date,” says Bernstein. “About 25% of our money is now spent out of
requests for applications.”
Breaking down the many silos of health research has been
a crusade for Bernstein. The institutes’ first job, he says, is to set
priorities in their far-flung constituencies. Take the Institute for
Cancer Research, which encompasses molecular biology, palliative
care, radiotherapy, medical ethics and other disciplines as well as
many patient groups, the National Cancer Institute and the provincial
charities. Determining which research could be most helpful needs
widespread input, and all stakeholders get a voice through the
institute’s advisory board and various conferences and reviews.
The CIHR Vision:
A Plan for Healthcare
“The debate on healthcare in this country is always
about who pays. But we lose sight of how we can
extract maximum benefits from the healthcare
industry. The healthcare system is not just an
expense but a valuable industry to invest in
and exploit for economic purposes.”
— DR. ALAN BERNSTEIN

4. Bernstein is also quick to point out the CIHR’s attempt to
balance medical research away from a sole focus on the great
advances of biomedical research, which has still received the largest
dollar increase in funding under the CIHR. But health services
research (43-fold) and population health (18-fold) have experienced
the largest proportional increases because of their immense potential
to identify preventative strategies and alternative delivery models.
“As a country,” says Bernstein, “we’ve badly underfunded research
on healthcare delivery and its environment.”
The federal government has backed the CIHR’s ambitious
mandate with a budget that has risen steadily. The CIHR now
funds 9,160 researchers in universities, teaching hospitals, research
centres and government laboratories. The average value of grants
has risen more than 30% in four years to $106,000.
The expectation is that the investment will begin to pay off
as discoveries are commercialized. The benefits come in many
forms, says Dr. Alastair Cribb, professor of clinical pharmacology,
anatomy and physiology at the University of Prince Edward Island
and a member of the CIHR’s governing council.
“The commercialization of new products in Canada means
those products are first available to Canadians,” he says. “New
products don’t necessarily bring down the cost of healthcare, at least
not immediately, but they improve the effectiveness of healthcare.
And finally, they help with the economic picture, especially in the
regions where they are developed. When products are successful,
the institutions that own the patents reinvest their profits in new
research.”
The promise of commercialization has led the CIHR to
channel more of its budget toward proof-of-principle or POP grants,
which are designed to further incubate and
develop discoveries before researchers attempt
to raise funding in the private sector. The
POP Phase I initiative now pledges up to
$150,000 for one year, and the POP Phase II
up to $250,000. Both phases have contributed
$13 million to fund commercialization research
over the last three years.
To take it even further, a new program
called POP Partnered, started last year, offers
to match venture capitalists dollar-for-dollar
for investments in former POP-backed research.
On average, however, venture capitalists have
put up $2 for every $1 invested by the POP
Phase II partners. Bernstein is encouraged
enough to consider channelling another $2
million to $4 million into it next year.
“The debate on healthcare in this country
is always about who pays,” says Bernstein.
“But we lose sight of how we can extract
maximum benefits from the healthcare industry.
The healthcare system is not just an expense
but a valuable industry to invest in and exploit
for economic purposes.”
CIHR funding on the rise
1999/2000 2003/2004
Grants and awards $275 million $576 million
Number of grants/awards 4,831 7,549
Average operating grant value $80,000 $106,000
Bernstein has set a goal for the CIHR that is bold and simply stated:
to turn the $20 billion that Canada spends on healthcare each year
into research-driven enterprise, thereby capturing both health and
economic benefits.
Healthcare Workout:
Strong Research,
Robust Opportunities

5. At Robarts Research Institute’s imaging research laboratories in
London, Ont., scientist Ting-Yim Lee developed imaging software
that assists in the measurement of blood flow to help radiologists
diagnose diseased tissue. Robarts holds the patent for the technology,
but it shares the licensing revenue stream with the scientist and
affiliated institutions.
Another Robarts spin-off, XLR Imaging Inc., capitalizes on
Robarts scientist Ravi Menon’s work with “high-field MRI”. After
receiving a CIHR proof-of-principle grant in 2003, researchers were
able to develop an MR spectroscopy coil that measures different
neurotransmitting chemicals in brain tissue. Robarts and the scientific
founders share ownership of XLR, which has already received orders.
While fundamental discovery remains the primary purpose
at Robarts, these arrangements represent a new attitude among
both institutions and researchers toward their breakthroughs and
inventions. Pure science is still a highly regarded and prestigious
area for study, but commercialization has risen considerably in status,
because it is an opportunity to fund new research, reward scientists
for their ingenuity and retain the best and brightest scientific minds
for Canada.
“Young scientists today recognize that part of their lives’ work
is to help capture some of the value of that work,” says Michael
Crowley, vice-president of business development at Robarts. “I think
it’s an important part of the strategy for keeping young, bright scientists
at home and the CIHR has recognized that through the proof-of-
principle grants and other funding vehicles for commercialization
work.”
That strategy is definitely in play in London. In the past five
years, Robarts, the Lawson Health Research Institute and the University
of Western Ontario have collectively filed more than 200 patents that
have earned $10 million in licensing fees while creating 10 companies
that have attracted at least $40 million in private investment.
The CIHR has made commercialization a mainstay of its
five-year plan as it transforms itself from granting agency to a model
international health research agency. It has set its sights on several
key targets, especially new drug and device development as well as
technology transfer through clinical trials and industrial fellowships.
“The CIHR is now taking an aggressive stance,” says Dr. Cy
Frank, scientific director of the CIHR’s Institute of Musculoskeletal
Health and Arthritis. “Within the next four to five years, the CIHR
will be seen to be leading the commercialization effort in Canada.”
The institutes are doing what they can to help. Frank’s institute
created a program called New Discoveries High-Risk Grants to
fund early-stage concepts “with a potential for major impact”
throughcommercializableapplications.Successfulapplicantsarealready
working on genetic markers of diseases, new anti-arthritic agents,
regeneration of tissues, bone replacement materials, gene therapy
delivery systems and stimulating agents for repairing joints.
Institutes have also taken a much broader approach to peer
review of research. Review committees are composed not just of
scientists but also venture capitalists and technology transfer experts
from universities. Advisory boards are also broadly based. The
Institute of Musculoskeletal Health, for instance is closely affiliated
with the Canadian Arthritis Network and the Canadian Arthritis
Society, and through these organizations has acquired connections
to pharmaceutical companies that are interested in drug discoveries
concerning arthritis. “These connections didn’t exist before,” says Frank.
The benefits of commercializing health-related discoveries
may not be fully appreciated by many observers, says Peter Coyte,
professor of health economics at the University of Toronto. While
new drugs and procedures, for example, are often quite expensive,
they reduce expenditures in other areas. If they speed recovery, for
example, they reduce reliance on pain relievers, hospital admissions,
doctors’ visits and other healthcare services.
But they also address hidden costs in the system and in society.
He cites figures showing the indirect costs of such conditions as
cardiovascular disease, cancer, arthritis and rheumatism are actually
two to five times the direct costs of drugs, physicians and hospitals.
“You have to consider private expenditures as well as people’s
ability to work and caregivers’ time,” he notes. “When governments
invest in medical research, and the products of research extend into
the healthcare system and throughout society, the benefits alleviate
many of those indirect costs, as well as alleviating many of the costs
of treatment that are borne by the public purse.”
A misconception persists that medical and health research is
blue-sky and unlikely to have an impact in our lifetime. “This is
true for a lot of research work,” says Frank, “but there’s a lot more
activity that’s on the ground. New devices, diagnostics and treatment
therapies are being used in hospitals and clinics across the country
every day.”
“I think it’s an important part of the strategy for keeping young,
bright scientists at home and the CIHR has recognized that through
the proof-of-principle grants and other funding vehicles for
commercialization work.” — MICHAEL CROWLEY
Healthcare Convergence:
Research and Opportunity

6. Turning research success into clinical treatments is a difficult, time-
consuming endeavour. As these examples demonstrate, commercial-
ization must combine significant investment and patience with the
best and brightest research and business talent.
Gemin X Biotechnologies: The Long, High Road
A severe scarcity of funding for medical research in the mid-1990s
drove biochemistry professors Philip Branton and Gordon Shore of
McGill University to an unusual strategy.
“Our idea,” says Branton, “was to commercialize some of
what we were doing to get more money into our labs.”
Little did these brilliant researchers know how long the road
to commercialization could be. They took the first steps with
University Medical Discoveries Inc. (UMDI), a venture fund that
provided $500,000 in seed money in September 1997. Other early-stage
Canadian investors then joined in a $4.5-million round of financing.
In January 1998, Gemin X opened its labs in Montreal.
Gemin X is developing a cancer-fighting therapy around a
cellular defence mechanism known as apoptosis. Normally, when
cells begin to divide out of control, apoptosis kicks in as a genetic
“suicide mechanism” that kills the cell. Cancer cells shut off apoptosis.
Gemin X scientists discovered a compound that blocks a key
apoptosis inhibitor, a genetic protein called Bcl-2. In animal studies,
it proved “phenomenally effective” on five different tumour models
with minimal side effects, says Branton. It is now entering human
clinical studies in the U.S. and Canada.
Finding experienced managers is always difficult for small
biotechnology companies. Branton, now scientific director of the
CIHR’s Institute of Cancer Research, was the original CEO. But
UMDI’s partnership with healthcare giant MDS Inc. turned up
Dan Giampuzzi, an entrepreneur-in-residence at MDS Capital Corp.
Giampuzzi soon became president and CEO.
To attack the chronic underfunding that plagues biotech
startups, Giampuzzi cut costs but he also broadened the
investor base outside Canada, attracting $32.5 million in two
rounds of financing with Swiss, Japanese and U.S. investors
toexpandthechemistrylabandbuynuclearmagneticresonance
machines. “It takes $500 million to develop a drug, and you
won’t find that money in Canada for one company.”
With 55 employees and clinical testing still ahead,
Giampuzzi is now raising money again — about US$30 million.
“We will have spent $100 million and still be two or three
years away from profitability,” says Giampuzzi. “But we’re
one of the lucky ones. Most companies in Canada can’t attract
foreign investment. It’s a validation of us that we are competitive
on a world scale.”
Viron Therapeutics Inc.: In A Class By Itself
New drugs are difficult enough to develop, but when VT-111
entered Phase 1 safety trials in 2003, it marked the launch of
an entirely new class of drugs that use viral proteins to control
inflammation.
The foundation for VT-111 was set at the University of
Alberta in 1991 by virologist Dr. Grant McFadden and clinical
interventional cardiologist Dr. Alexandra Lucas, scientists
with long-standing CIHR funding. They recognized that
viruses shut down certain immune system responses in order to
survive in their hosts. Ultimately, they were able to isolate and
patent a virally secreted protein that inhibits inflammation.
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7. That kernel of intellectual property formed the basis
of Viron Therapeutics Inc., a London, Ont., company
harnessing viral proteins to make anti-inflammatory
drugs.
“It’s exciting because there is a lot of recent
literature in the scientific and lay press that makes the
link between inflammatory processes and conditions such
as heart disease, Alzheimer’s, cancer and asthma, and
the ability of viral proteins to control inflammation,”
says Viron CEO Neil Warma. “Our scientists knew about
this in the early 1990s. We believe we have a 10-year
head start.”
After moving to Robarts Research Institute in
London in 1996, McFadden and Lucas began the process
of creating a drug — and a company to make it. Viron
launched in 1997 after raising between $2 million and
$4 million from several investors including Novartis
VentureFundofSwitzerland.By2000,thesameinvestors
had added another $10 million. A third round of
financing that includes new investors is expected to
bring in $10 million or more this fall.
Viron is now a 17-employee drug development
company with a 5,000-sq.-ft. facility. VT-111 is entering
Phase 2 testing for use in patients with heart disease, and
Warma hopes Phase 2 testing in transplant applications
will begin next year. Still, full-term commercialization
will require further financing. Phase 3 testing on large-
scale populations, for instance, often runs about $25
million. Viron also has five other compounds in pre-
clinical development and continues to look for more.
Meanwhile, McFadden and Lucas “are still the
backbone of the company,” he says. McFadden, head
of the biotherapeutics research group at Robarts and
the Canadian research chair in molecular virology, is
the company’s chief scientific officer and Lucas is the
chief clinical officer. “We want those compounds coming
down the pipeline,” says Warma. “If the clinical results
continue to support what we found in animal studies,
we will really begin to unlock the potential of this new
class of drugs.”
Healthcare Workout:
Strong Research,
Robust Opportunities
Gemin X is developing a cancer-fighting therapy
around a cellular defence mechanism known as
apoptosis. Normally, when cells begin to divide out
of control, apoptosis kicks in as a genetic “suicide
mechanism” that kills the cell.
They recognized that viruses shut down certain immune
system responses in order to survive in their hosts. Ultimately,
they were able to isolate and patent a virally secreted
protein that inhibits inflammation. That kernel of
intellectual property formed the basis of Viron Therapeutics
Inc., a London, Ont., company harnessing viral proteins
to make anti-inflammatory drugs.