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

As president of the Canadian Institutes of Health Research (CIHR),Dr. Alan Bernstein sets the strategic course that determines thefuture look of healthcare in Canada, accommodating a mind-boggling network of discoveries, research priorities and policy mandates.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 andoptimism and remarkably free of politicization. A world-renownedgeneticist in his own right, Bernstein can envision healthcare researchimproving not just the health but also the economic well-being ofCanadians.

“We have seen a revolution in health research over the last 15years, mostly driven by genomics and proteomics,” says Bernstein.He describes many watershed discoveries and developments: theability to diagnose illness at a molecular level, the advent of designerdrugs and individualized disease treatments, health informatics thattrack 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 gapbetween what we know and what we do,” he says. “How to bridgethat gap is a very important role for the CIHR.”

Bernstein has set a goal for the CIHR that is bold and simplystated: to turn the $20 billion that Canada spends on healthcare eachyear into research-driven enterprise, thereby capturing both healthand economic benefits.

That ambition lurks behind everything about the CIHRsince its formation in 2000 from the former Medical ResearchCouncil, which was a granting body for lab research. Built around13 virtual institutes, the CIHR has done nothing less than try tochange the way researchers work, with its institutes as hubs thatinterconnect disciplines, human systems, diseases and vulnerablegroups. Their role as catalysts and interdisciplinary forums can beseen in names such as the Institute for Nutrition, Metabolism andDiabetes; the Institute for Gender and Health; or the Institute forNeurosciences, Mental Health and Addiction.

The institutes issue two main types of grants — for traditionalproposed research, for which they conduct peer reviews, and inresponse to applications spurred by its own requests for applications,or RFAs.

How the institutes develop the RFAs speaks volumes aboutthe 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 togetherbiologists, surgeons, chemists, ethicists, engineers and other researchersto discuss opportunities in nanosciences. They identified several,resulting in the issuance of RFAs. Funding is now available forresearch in these areas. “It reflects our knowledge translation man-date,” says Bernstein. “About 25% of our money is now spent out ofrequests 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 forCancer Research, which encompasses molecular biology, palliativecare, radiotherapy, medical ethics and other disciplines as well asmany patient groups, the National Cancer Institute and the provincialcharities. Determining which research could be most helpful needswidespread 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

Bernstein is also quick to point out the CIHR’s attempt tobalance medical research away from a sole focus on the greatadvances of biomedical research, which has still received the largestdollar increase in funding under the CIHR. But health servicesresearch (43-fold) and population health (18-fold) have experiencedthe largest proportional increases because of their immense potentialto identify preventative strategies and alternative delivery models.“As a country,” says Bernstein, “we’ve badly underfunded researchon healthcare delivery and its environment.”

The federal government has backed the CIHR’s ambitiousmandate with a budget that has risen steadily. The CIHR now

funds 9,160 researchers in universities, teaching hospitals, researchcentres and government laboratories. The average value of grantshas risen more than 30% in four years to $106,000.

The expectation is that the investment will begin to pay offas discoveries are commercialized. The benefits come in manyforms, says Dr. Alastair Cribb, professor of clinical pharmacology,anatomy and physiology at the University of Prince Edward Islandand a member of the CIHR’s governing council.

“The commercialization of new products in Canada meansthose products are first available to Canadians,” he says. “Newproducts don’t necessarily bring down the cost of healthcare, at leastnot immediately, but they improve the effectiveness of healthcare.And finally, they help with the economic picture, especially in theregions where they are developed. When products are successful,the institutions that own the patents reinvest their profits in newresearch.”

The promise of commercialization has led the CIHR tochannel more of its budget toward proof-of-principle or POP grants,

which are designed to further incubate anddevelop discoveries before researchers attemptto raise funding in the private sector. ThePOP Phase I initiative now pledges up to$150,000 for one year, and the POP Phase IIup to $250,000. Both phases have contributed$13 million to fund commercialization researchover the last three years.

To take it even further, a new programcalled POP Partnered, started last year, offersto match venture capitalists dollar-for-dollarfor investments in former POP-backed research.On average, however, venture capitalists haveput up $2 for every $1 invested by the POPPhase II partners. Bernstein is encouragedenough to consider channelling another $2million to $4 million into it next year.

“The debate on healthcare in this countryis 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 expensebut a valuable industry to invest in and exploitfor economic purposes.”

CIHR funding on the rise1999/2000 2003/2004

Grants and awards $275 million $576 millionNumber of grants/awards 4,831 7,549Average 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

At Robarts Research Institute’s imaging research laboratories inLondon, Ont., scientist Ting-Yim Lee developed imaging softwarethat assists in the measurement of blood flow to help radiologistsdiagnose diseased tissue. Robarts holds the patent for the technology,but it shares the licensing revenue stream with the scientist andaffiliated institutions.

Another Robarts spin-off, XLR Imaging Inc., capitalizes onRobarts scientist Ravi Menon’s work with “high-field MRI”. Afterreceiving a CIHR proof-of-principle grant in 2003, researchers wereable to develop an MR spectroscopy coil that measures differentneurotransmitting chemicals in brain tissue. Robarts and the scientificfounders share ownership of XLR, which has already received orders.

While fundamental discovery remains the primary purposeat Robarts, these arrangements represent a new attitude amongboth institutions and researchers toward their breakthroughs andinventions. Pure science is still a highly regarded and prestigiousarea for study, but commercialization has risen considerably in status,because it is an opportunity to fund new research, reward scientistsfor their ingenuity and retain the best and brightest scientific mindsfor Canada.

“Young scientists today recognize that part of their lives’ workis to help capture some of the value of that work,” says MichaelCrowley, vice-president of business development at Robarts. “I thinkit’s an important part of the strategy for keeping young, bright scientistsat home and the CIHR has recognized that through the proof-of-principle grants and other funding vehicles for commercia lizationwork.”

That strategy is definitely in play in London. In the past fiveyears, Robarts, the Lawson Health Research Institute and the Universityof Western Ontario have collectively filed more than 200 patents thathave earned $10 million in licensing fees while creating 10 companiesthat have attracted at least $40 million in private investment.

The CIHR has made commercialization a mainstay of itsfive-year plan as it transforms itself from granting agency to a modelinternational health research agency. It has set its sights on severalkey targets, especially new drug and device development as well astechnology transfer through clinical trials and industrial fellowships.

“The CIHR is now taking an aggressive stance,” says Dr. CyFrank, scientific director of the CIHR’s Institute of MusculoskeletalHealth and Arthritis. “Within the next four to five years, the CIHRwill be seen to be leading the commercialization effort in Canada.”

The institutes are doing what they can to help. Frank’s institutecreated a program called New Discoveries High-Risk Grants to

fund early-stage concepts “with a potential for major impact”through commercializable applications. Successful applicants are alreadyworking on genetic markers of diseases, new anti-arthritic agents,regeneration of tissues, bone replacement materials, gene therapydelivery systems and stimulating agents for repairing joints.

Institutes have also taken a much broader approach to peerreview of research. Review committees are composed not just of scientists but also venture capitalists and technology transfer expertsfrom universities. Advisory boards are also broadly based. TheInstitute of Musculoskeletal Health, for instance is closely affiliatedwith the Canadian Arthritis Network and the Canadian ArthritisSociety, and through these organizations has acquired connectionsto pharmaceutical companies that are interested in drug discoveriesconcerning arthritis. “These connections didn’t exist before,” says Frank.

The benefits of commercializing health-related discoveriesmay not be fully appreciated by many observers, says Peter Coyte,professor of health economics at the University of Toronto. Whilenew drugs and procedures, for example, are often quite expensive,they reduce expenditures in other areas. If they speed recovery, forexample, 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 actuallytwo to five times the direct costs of drugs, physicians and hospitals.

“You have to consider private expenditures as well as people’sability to work and caregivers’ time,” he notes. “When governmentsinvest in medical research, and the products of research extend intothe healthcare system and throughout society, the benefits alleviatemany of those indirect costs, as well as alleviating many of the costsof treatment that are borne by the public purse.”

A misconception persists that medical and health research isblue-sky and unlikely to have an impact in our lifetime. “This istrue for a lot of research work,” says Frank, “but there’s a lot moreactivity that’s on the ground. New devices, diagnostics and treatmenttherapies are being used in hospitals and clinics across the countryevery 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

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 thebest and brightest research and business talent.

Gemin X Biotechnologies: The Long, High RoadA severe scarcity of funding for medical research in the mid-1990sdrove biochemistry professors Philip Branton and Gordon Shore ofMcGill University to an unusual strategy.

“Our idea,” says Branton, “was to commercialize some ofwhat we were doing to get more money into our labs.”

Little did these brilliant researchers know how long the roadto commercialization could be. They took the first steps withUniversity Medical Discoveries Inc. (UMDI), a venture fund thatprovided $500,000 in seed money in September 1997. Other early-stageCanadian 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, whencells 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 keyapoptosis inhibitor, a genetic protein called Bcl-2. In animal studies,it proved “phenomenally effective” on five different tumour modelswith minimal side effects, says Branton. It is now entering humanclinical studies in the U.S. and Canada.

Finding experienced managers is always difficult for smallbiotechnology companies. Branton, now scientific director of theCIHR’s Institute of Cancer Research, was the original CEO. ButUMDI’s partnership with healthcare giant MDS Inc. turned upDan Giampuzzi, an entrepreneur-in-residence at MDS Capital Corp.Giampuzzi soon became president and CEO.

To attack the chronic underfunding that plagues biotechstartups, Giampuzzi cut costs but he also broadened theinvestor base outside Canada, attracting $32.5 million in tworounds of financing with Swiss, Japanese and U.S. investorsto expand the chemistry lab and buy nuclear magnetic resonancemachines. “It takes $500 million to develop a drug, and youwon’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 threeyears away from profitability,” says Giampuzzi. “But we’reone of the lucky ones. Most companies in Canada can’t attractforeign investment. It’s a validation of us that we are competitiveon a world scale.”

Viron Therapeutics Inc.: In A Class By ItselfNew drugs are difficult enough to develop, but when VT-111entered Phase 1 safety trials in 2003, it marked the launch ofan entirely new class of drugs that use viral proteins to controlinflammation.

The foundation for VT-111 was set at the University ofAlberta in 1991 by virologist Dr. Grant McFadden and clinicalinterventional cardiologist Dr. Alexandra Lucas, scientistswith long-standing CIHR funding. They recognized thatviruses shut down certain immune system responses in order tosurvive in their hosts. Ultimately, they were able to isolate andpatent a virally secreted protein that inhibits inflammation.

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That kernel of intellectual property formed the basisof Viron Therapeutics Inc., a London, Ont., companyharnessing viral proteins to make anti-inflammatorydrugs.

“It’s exciting because there is a lot of recent literature in the scientific and lay press that makes thelink between inflammatory processes and conditions suchas heart disease, Alzheimer’s, cancer and asthma, andthe ability of viral proteins to control inflammation,”says Viron CEO Neil Warma. “Our scientists knew aboutthis in the early 1990s. We believe we have a 10-yearhead start.”

After moving to Robarts Research Institute inLondon in 1996, McFadden and Lucas began the processof creating a drug — and a company to make it. Vironlaunched in 1997 after raising between $2 million and$4 million from several investors including NovartisVenture Fund of Switzerland. By 2000, the same investorshad added another $10 million. A third round offinancing that includes new investors is expected tobring in $10 million or more this fall.

Viron is now a 17-employee drug developmentcompany with a 5,000-sq.-ft. facility. VT-111 is enteringPhase 2 testing for use in patients with heart disease, and

Warma hopes Phase 2 testing in transplant applicationswill begin next year. Still, full-term commercializationwill require further financing. Phase 3 testing on large-scale populations, for instance, often runs about $25million. Viron also has five other compounds in pre-clinical development and continues to look for more.

Meanwhile, McFadden and Lucas “are still thebackbone of the company,” he says. McFadden, headof the biotherapeutics research group at Robarts andthe Canadian research chair in molecular virology, isthe company’s chief scientific officer and Lucas is thechief clinical officer. “We want those compounds comingdown the pipeline,” says Warma. “If the clinical resultscontinue to support what we found in animal studies,we will really begin to unlock the potential of this newclass 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.