Well, there’s your problem…

Why can’t we create innovative companies? What happens to all that basic research funding, proof-of-principle financing, and industrial research support?

It doesn’t work, says the government. We aren’t getting the return we expect on our investment, they say. And it’s the fault of business, which doesn’t appreciate our collective largesse in funding innovative activities, we’re told.

We write op-eds, we blog about it, and we announce important blue-ribbon panel reviews of the whole shebang.

We will figure out why business is failing to create innovative Canadian companies. Maybe it’s because our tax incentives are back-end loaded. Maybe the balance between seed-stage and early-stage public financing of companies isn’t quite right. Maybe (probably!) our Canadian CEOs are simply fat-cats content to cash their cheques and stock options while we remain forever proverbial hewers and drawers of wood and water, respectively.

But maybe not. Maybe we do create innovative companies. I know a lot of people who do, at least. And they struggle to find a market for their innovative products and services. Fair enough, that’s the free market, nothing the government can do about that.

Except when it can. And then doesn’t.

Let me introduce you to an indisputable Canadian innovation success story. Medicago is a Canadian company that produces vaccines in tobacco plants instead of using traditional egg-production techniques. This allows a much more rapid development and deployment of seasonal and pandemic vaccines. Their proprietary technology, currently in phase I and II clinical trials, was developed in Canada thanks in part to government funding – they’ve reportedly had an ongoing relationship with NRC since 2001, received almost $300,000 from NRC-IRAP two years ago (.pdf here) and another $300,000 from CIHR this year.  They’ve been awarded numerous Canadian business and technology awards. They have translated these investments and successes into millions of dollars in private sector investment and a public listing on the TSX. Not bad for a company based out of Quebec City.

So what’s wrong with this obvious success story?

Medicago made the news this week because the US Department of Defense is investing $21-million to build a 90,000 sq ft state-of-the art production facility in North Carolina. The facility will be able to produce 120-million pandemic vaccine doses annually or 40-million seasonal vaccine doses annually. In a news release, the US government recognizes the company’s ability to bolster domestic vaccine supply, respond more rapidly than traditional methods, and bring “hundreds of good paying jobs” to the region.

The 90,000 sq ft facility in North Carolina will dwarf the current estimated 15,000 sq ft dedicated to production in Quebec City, and will inevitably shift the company’s focus south.

The Canadian government’s response?

According to CBC news, Health Canada remains committed to egg-based vaccines:

“To date, there is no conclusive data to suggest that one vaccine production technique is safer or more effective than the other,” Health Canada said in a statement. “Further research and development will expand our knowledge around the use of this new technology.”

What?

Are you kidding?

This is the problem.

Sorry: though delivery and administration of vaccines is a provincial responsibility, Health Canada was responsible for coordinating the response to the H1N1 pandemic and funded 60% of its cost. It is very nearly the ONLY CANADIAN CUSTOMER for this company. And they’re not really interested? They’re content to let the company head south, because “more research is needed”?

This is exactly what I was talking about in my last post. The Canadian government is conservative – not just politically, but in its support of innovation. We have invested hundreds of thousands of dollars in this company over almost a decade, but we refuse to buy their products?

And we wonder why these companies head south?

We did a good job of supporting innovation here – up to the point where we had to step up and consume the products of our investment. And then?

Sorry, not interested.

Supporting innovation is more than throwing money at researchers. It’s a change in the way of thinking. The government should be ashamed that they’re letting this company leave due to a lack of business. You certainly can’t blame Medicago. Good for them.

The government should take notice and work to implement a procurement innovation policy that requires support for domestic innovative companies. Or else we’ll keep watching our best companies born here, grow up, and then leave.