BB&T Senior

Canadians are known for their tendency to be quiet and reserved to the point where it s sometimes easy to forget our northern neighbors are still up there. But while we egocentric Americans (sorry, but we do tend to be a bit egocentric here in the states) have been losing our foothold as the global leader in medical innovation largely due to regulatory uncertainties that have scared off investors Canada has been quietly positioning itself to step up to the innovation plate.

Ontario, in particular, has spent the last five years moving itself from backwater to leadership on the med-tech commercialization front, according to John Soloninka, president/CEO of Healthcare Consultants Exchange (HTX; Toronto), an organization created to support Ontario-based companies to develop, produce and commercialize innovative advanced health technologies.

Biomedical Business & Technology participated in an international medical device media tour of Ontario, organized by the Ontario Ministry of Economic Development and Innovation (MEDI). In addition to BB&T, the tour included journalists from Japan, China, London, Germany, France, and India.

Soloninka told the group that Ontario is home to 1,100 med-tech companies and the province is the third largest medical research cluster in North America. As such, med-tech has become a priority for Ontario, but it hasn t always been that way. Because of our relatively small healthcare market, we have not been as strong, historically, in innovation, Soloninka said. He added that efforts have been made in the last five years for Canada, specifically Ontario, to take on a leadership role in medical innovation.

We recognize that med-tech is one of the best sectors in the world for economic development, Soloninka said.

He noted several reasons Ontario cares about the med-tech sector, including shorter innovation cycles compared to the pharmaceutical industry and high merger and acquisition activities. Clearly, med-tech companies have very good returns, he said, adding that the companies in this sector tend to be sold when they are much more bite-size than bohemian.

Med-tech in particular doesn t hit it out of the park as often, but also doesn t lose as often, Soloninka said.

Secrets to med-tech success

So, what s their secret? Ontario offers all the key ingredients for attracting life sciences companies: the right people, the right cost, and a healthy research environment.

Setting the right wheels in motion to position the Canadian province, and the country as a whole, as a medical innovation leader has involved somewhat of a learning curve, however.

Canada historically funded too many small deals, Soloninka said. We were building piers rather than bridges.

As in most countries, there is a big funding gap in the medical device sector, particularly with pre-commercialization funding. HTX has been called upon, Soloninka noted, to bridge that gap. The organization s primary mission is to accelerate the med-tech sector in Ontario, he said.

As part of creating that healthy research environment, Soloninka said that Ontario took some steps in 2009 to put a $400 million government venture capital backed funding program in place.

Companies that received HTX funding in 2010-2011 include Baylis Medical (Toronto), XLR Imaging (London, Ontario), Tornado Medical Systems (Toronto), GE Healthcare s Pathology Imaging Centre of Excellence (PICE; Toronto), Xagenic (Toronto), SciSense (London, Ontario), MedWorxx (Toronto), and RoweBots (Kitchener, Ontario), among others.

The Canadian province also has seen its share of med-tech deals being made in the past year or so. In August 2010, for example, Hologic (Bedford, Massachusetts) bought Toronto-based Sentinelle Medical for $85 million, plus a two-year contingent earn out.

It has been a very positive environment [for M&As], Soloninka said.

The people ingredient

Sentinelle is one of the biggest success stories in Ontario in the life sciences space, Ian Heynen, VP & GM of Hologic MRI Solutions (also known as the company s Sentinelle division), told the media group during the tour.

Sentinelle was a startup that spun out of Sunnybrook Research Institute (Toronto), a hospital-based research institute. I like to say we were a master thesis that went really well, Heynen said.

The fact that Ontario has more than 100,000 researchers in its talent pool is one of the key ingredients that makes the province an attractive place for med-tech companies to do business. According to the Ontario Centres of Excellence (OCE; Toronto), a not-for-profit program that co-invests in med-tech companies in the province, Ontario attracts top scientists from around the world with generous funding programs, top-notch lab facilities and the opportunity to work on leading-edge projects in a collaborative environment.

One of the prized jewels - certainly the technology was important - but our team here and our ability to continue to innovate was what attracted Hologic, Heynen said.

Creating an attractive environment

Canada offers a generous R&D tax incentive program. The after-tax cost of $100 R&D expenditure can be reduced to roughly $56 or even less than $37 for small businesses, according to the OCE.

To top it off, Ontario lures med-tech companies with additional tax incentives such as its Ontario Research and Development Tax Credit, the Ontario Innovation Tax Credit, and the Ontario Business-Research Institute tax credit.

Finally, Ontario encourages business and economic growth by creating the right environment for innovation, the OCE notes.

We have unprecedented, cross-ministry collaboration, Soloninka said.

Furthermore, the OCE has put programs in place to drive collaboration between Ontario s academic institutions and industry to bring prospective partners together to turn ideas into income.

We re all about creating jobs, OCE President/CEO Tom Corr told the media group during the tour. The organization s mission, he said, is ultimately job creation and exports from Ontario-based companies. At the end of the day you can almost look at us as an economic development organization . . . our focus is on jobs and exports.

OCE employs about 30 business development people around the province and their job, Corr said, is to connect the dots between academia and industry.

Ontario has partnered with the private sector to invest nearly $3 billion over an eight-year period to support research and commercialization at its universities, hospitals and research institutes.

While OCE provides very, very, early-stage financing to help startup life sciences companies, the organization expects the industry partner to kick in at least half the money, usually more. OCE is responsible for the Industry Academic Collaboration Program (IACP) which launched in Ontario in 2010-2011 and consists of three components, collaborative commercialization, talent, and technology transfer partnerships. OCE is an arm of the provincial government because that is where the bulk of its funding comes from, but the organization has its own board.

The IACP program links students in engineering, science and technology programs to technology-based companies to work on real-world projects, bridging the gap from the classroom to the workplace. The program provides salary sharing for Ontario companies that hire new graduates for R&D positions.

Corr said that about 75% of the students who participate in the IACP program get offers to stay on with the company at the end of the project.

Why Canada?

The fact that GE chose to establish its first global Pathology Imaging Centre of Excellence in Toronto is a prime example that Ontario is doing something right.

GE had a choice. They could have put it anywhere, Soloninka said. The same sentiment was also expressed by Peter Robertson, VP and GM of GE Healthcare Canada and Luigi Gentile, executive director of GE s PICE.

GE and it s digital pathology joint venture, Omnyx (Pittsburgh), will invest $7.75 million along with a $2.25 million grant from the Health Technology Commercialization Program created by Ontario s HTX and funded by the Ontario Ministry of Research and Innovation. Planned collaborative R&D partnerships are expected to bring an additional $7.2 million, for a total investment of $17.2 million over the next three years.

Why Canada? It s GE we could have put it on the moon if we tried, Gentile said. GE chose Toronto as the home for its new pathology center for several reasons, he noted, including: the high quality of pathology that happens in Canada; the experience and early adoption that the country has had in digital pathology; a great pool of experts in both molecular and digital anatomical pathology; and the fact that the large geographic area of Canada creates an opportunity to develop a model in Canada that is very exportable to countries like Brazil, Russia, India, and China.

The Canadian healthcare system, in particular, has a lot of synergies internationally and when you start looking at these international healthcare models things that are developed in Canada are applicable to those other international systems, Gentile said.

The Ontario government has also brought together all the partners of industry, government, and clinicians to one central location in Toronto s MaRS Discovery District, Gentile added. This is one of the leading biotechnology hubs globally where you have fantastic access to some of the leading healthcare hospitals in Canada. We re directly adjacent to the provincial parliament and legislature, we re directly adjacent to the University of Toronto, and this is a hub where government, industry, clinicians, scientists, everyone can come together and we can collaborate, he told MDD during the tour. So all of those factors really provided the necessary ingredients that allowed us to establish this as a home for the center, which is very much a global center.

Thunder Bay home to new imaging research institute

While the well-populated Greater Toronto Area (population about 5 million) is home to many of Canada s most innovative medical device companies and research institutions, a much smaller city that calls itself superior by nature due to its location along the northwest shore of Lake Superior is home to one of Canada s newest research institutes that has experienced significant growth in its three years.

BB&T visited the new Thunder Bay Regional Research Institute (TBRRI) as part of an international media tour organized by the Ontario Ministry of Economic Development and Innovation. The TBRRI has doubled the number of career scientists from six in 2008 to 12 in 2010 (now 13) and now has 44,000 square feet of pre-clinical research and prototype discovery space in ICR Discoveries, as well as 13,000 square feet of translational research space at Thunder Bay Regional Health Sciences Center (TBRHSC). It is the region s only medical imaging research institute.

As with most of Ontario s medical device companies and research centers, collaboration seems to play a key role in the TBRRI story. The center has multiple academic and corporate partners and has already launched two spin-off medical imaging companies: Tornado Medical Systems, an early stage medical imaging research company in Thunder Bay and XLV Diagnostics, an early stage mammography imaging operation which will commercialize an X-ray Light Valve system invented by John Rowlands, MD.

The center also has secured $9.4 million in provincial, federal, and municipal government funding to purchase a Cyclotron imaging system and to produce radio pharmaceutical isotopes to guard against future medical isotope shortages.

Michael Wood, VP of research at TBRRI, told the group that knowing that the center was getting a Cyclotron was one of the reasons he moved his family to Thunder Bay from Vancouver to take a position at the new research institute.

All of the 13 scientists like me came here with the idea that they will be, at some point, involved in a discovery and clinical trial . . . so that their science extends beyond the medical journals, Wood said.

Surprise: There s more to Canada than hockey, eh?

Canada is known for a lot of things namely, the country s love for hockey and its fiercely cold winters but until recently, being a hub for medical technology was not on the list.

Government officials in Canada, particularly in the east-central province of Ontario, are dedicating a lot of resources to support the region s med-tech industry. BB&T got a first-hand look at some of the technology being developed in Ontario during during the tour

Here is a glance at some of the up-and-coming companies and technologies featured during the tour.

Hologic MRI Solutions (formerly Sentinelle)

Who they are: Sentinelle Medical (Toronto) was a startup that spun out of Sunnybrook Research Institute (also Toronto) in 2004. Hologic (Bedford, Massachusetts) bought Sentinelle in August 2010 for $85 million, plus a two-year contingent earn out.

What they make: The company offers imaging, interventional and analysis solutions for breast MRI and for the pelvic region including the prostate and surrounding tissues in the pelvis.

Hologic s Variable Coil Geometry feature allows for the diagnostic coils and biopsy grid positioning to conform to each patient. According to the company, this can improve quality, decrease scan time, increase patient accommodation and improve access to lesions for biopsy. This technology can be combined with the Hologic ATEC minimally-invasive breast biopsy device for MRI and Hologic Aegis software for image analysis and interventional planning. Hologic also offers a prostate plug-in for prostate MR images to its Aegis software platform.

Why Canada: Access to equipment and local research institutions.

Relative to the U.S. it s actually a little bit easier to do some of the R&D work here in Canada in this collaborative environment than in the U.S., said Ian Heynen, VP & GM of Hologic. There aren t as many prohibitions against being able to sell equipment and intermingle those with research collaborations. In fact, there are some programs in the province of Ontario that try to bring together industry and researchers collaboratively and actually nurture and foster that relationship. That s a real key for us because it allowed us to get into the clinical environment in a meaningful way.

One such program is the Ontario Centers of Excellence (OCE; Toronto), a not-for-profit that co-invests in med-tech companies and works to foster relationships between academia and industry.

Toronto s a great place to be, for us, there s lots of really good talent here. For everything from development, from patent and IP, through to divestiture and acquisition, we found all the talent we needed here, Heynen said.

Tornado Medical Systems

Who they are: An early-stage medical imaging and spectroscopy company with 35 employees, including 12 PhD level engineers.

What they make: Tornado has two products on the market, the ClearView Digital Receiver for NMR/MRI and the HyperFlux 532 Raman Spectrometer, an OEM product designed to achieve very high resolution without sacrificing light throughput, said CEO Stefan Larson, PhD.

Tornado is also developing the tumor Margin Assessment Machine (MAM) for use during breast conservation surgery. The goal of breast conservation surgery is to remove the tumor with a continuous intact layer of healthy tissue all around it in order to be fairly certain no part of the cancer was left behind. The issue is that assessing that margin . . . is virtually impossible to do during the operation, Larson said. Most breast surgeons we talk to use the phrase we re really flying blind . He noted that 20% to 40% of the patients who undergo this type of surgery end up being called back for a second operation because the surgeon didn t get all of the cancer the first time.

Tornado s MAM uses a high resolution imaging technology to rapidly and accurately map the boundary between healthy and cancerous tissue, Larson explained.

Why Canada: Strong collaborations with local academic institutions and government support. Healthcare Consultants Exchange (HTX; Toronto), an organization that supports Ontario-based companies, provided $750,000 in financing to Tornado to support the commercialization of the Margin Assessment Machine. HTX s funding was part of a $3.7 million project which also included funding support from the Northern Ontario Heritage Fund and in-kind contributions from the Thunder Bay Regional Research Institute for development, testing, and clinical studies of the device.

Baylis Medical

Who they are: Baylis began as a Canadian importer and distributor of medical products for neurology. The company has grown into a developer, manufacturer, and distributor of high-technology products used in cardiology, pain management, and radiology products. The company s corporate headquarters is in Montreal, Quebec but its R&D and manufacturing takes place in Toronto.

What they make: The company makes a variety of products that utilize radio frequency technology to deliver therapeutic effect. Among them, the NRG RF Transeptal needle is designed to access the left heart safely, quickly, and predictably. The device can cross an aneurismal septum in a controlled manner, can effectively cross a fibrotic septum, and removes the danger of skiving and scraping, and is compatible with standard sheaths and dilators, according to Baylis.

The company also makes pain management products, including the TransDiscal system which uses a bipolar approach in conjunction with internally water-controlled RF probes to coagulate while decompressing disc material in order to treat symptomatic patients with discogenic pain and contained herniated discs.

Why Canada: We have access to 50% of the worldwide market within a three-hour flight of here, said Kris Shah, VP and technical division manager at Baylis. He named such U.S. geographies as Chicago, New York, Boston, Denver, Atlanta, Minneapolis that are all within a three-hour flight of Toronto. Other geographical benefits he noted are: the opportunity to partner with academic hospitals; access to a highly educated skilled work force as a result of immigration as well as its proximity to several engineering universities in the region; a country of origin advantage intended to expedite regulatory clearance in certain participating countries; and the R&D tax advantages offered by both the country and the province of Ontario.

GE s Pathology Imaging Center of Excellence

Who they are: Earlier this year GE established its first global Pathology Imaging Center of Excellence (PICE) in Toronto. The center is expected to create best practices and develop digital technologies to address critical issues including access to pathologists regardless of where a patient or specialist is located, confidence in pathology services, improved turnaround times and greater collaboration among specialists.

What they do: Our goal is to be seen as the global clearing house of information around the development, deployment, and thought leadership for digital pathology and to take these digital tools from the research world where they currently reside, to the reality of patient care, said Luigi Gentile, executive director of the new center.

GE pointed out that pathology is done today in virtually the same way as it was done 125 years ago - using glass slides and a microscope. It s a system with many inefficiencies that requires pathologists to spend a good chunk of their time going through slides and matching them up with the right patient s paperwork, looking for missing slides, and chasing down other clinical information as opposed to having everything all in one place digitally.

Why Canada: Gentile listed several reasons GE chose to establish its first global pathology center in Canada: the country s high quality of pathology; the experience and early that the country has had in digital pathology; a great pool of experts in both molecular and digital anatomical pathology; and the fact that the large geographic area of Canada creates an opportunity to develop a model in Canada that can be applied to other geographical areas all over the world.