Toronto’s Prescription for Growth: Unlocking Life Sciences Potential with Gordon McCauley

In this episode of Toronto Talks, Giles Gherson sits down with Gordon McCauley, President and CEO of AdMare BioInnovations, to explore what it will take to turn the Toronto Region into a global life sciences powerhouse. From talent gaps and capital constraints to scaling barriers and regulatory inefficiencies, they get candid about the roadblocks—and how to overcome them.

This conversation coincides with the release of the Board's new report, The Winning Formula: A Playbook for Ontario’s Life Sciences Sector, which offers practical solutions for building anchor firms, attracting global capital, and driving biotech breakthroughs right here at home.

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From the Toronto Region Board of Trade, this is Toronto Talks. Toronto, let's talk life sciences. Now more than ever, it is strikingly clear that a strong and sustainable domestic life sciences sector is indispensable. We said, you know, we can build and pull all of these together and really build an important company of scale that could develop novel therapies that could really have meaningful changes for, you know, hard to treat cancers. A strong and I would say very competitive life sciences sector in Canada with cutting edge biomanufacturing capabilities to ensure that we would have the success that the next discovery, that the world will be looking at Canada for the next discovery. The Toronto region has the potential to lead the world in life sciences. But potential alone isn't enough. Capital is fragmented, top talent is leaving, and too many of our innovative breakthroughs end up scaling elsewhere. That's why the Toronto Region Board of Trade has released the winning formula, a series of bold new playbooks with solutions for unlocking the potential of Ontario's life sciences sector. In this episode, Gordon McCauley, CEO of Admari Bioinnovations, joins our president and CEO Giles Gerson to explore how Ontario can breathe new life into this sector. Here's their conversation. Well, Gordon, great to have you. We have this growing life sciences sector. As you know, you're part of it. And I think the mission of the board is to really do everything we can to support the growth of the sector. And so there you are, Admire. And I think probably for our listeners, it would be helpful to get a bit of a flavor of who Admire is. Or, you know, what are your focus? What's the focus of the organization of the company? And what do you excel in? Sure. So, I mean, first of all, our business, we say we're Canada's company creation engine in life sciences. We basically do three things. We build companies, we build ecosystems, and we build talent. So what does that mean? On the company front... Sounds like a full scope. Well, generally, it's not a terribly sophisticated strategy. You'll see when I lay it all out. I mean, in building companies, we basically do two things. We're a very active direct investor into companies. I think we're the largest seed investor in life sciences in Canada. And we're also a very active company creator. So getting together with scientists and entrepreneurs and building the idea and identifying the pieces that they need. The team has an exceptional track record in that fund. They've been involved in 37 companies that have attracted $2.5 billion of real risk capital. They're worth about $5 billion today. So they've just got a great track. Here's the strategy though. You're going to build those companies. You need somewhere for those companies to start out and grow. And it's a real challenge in this space, finding the specialized lab space for emerging companies. So we have two soon to be three facilities, a couple hundred thousand square feet in Montreal and built in the techno park that's home to a bunch of emerging companies and it's built for those kinds of companies. We have 40,000 square feet on the campus of the University of British Columbia, the same kind of thing. And we're in the process of building a new facility in Vancouver, another 35,000 square feet. So really focused on those emerging companies. And then, okay, you want to start those companies. You want to give them somewhere to grow. You also have to find the talent to drive those companies. So we have this thing called the Admari Academy, where the primary program is what we call the Executive Institute. It's been a spectacular success. We're really proud of. We just literally last night had the graduation for the seventh annual cohort of 20 people. They're mid-career folks. Their CEO has identified them as somebody they believe will have. These are smaller and medium-sized companies? All ranges. All ranges. That's what's really cool about it. So multinationals, emerging companies, research institutes, advocacy kinds of organizations. It's really the broad ecosystem sets to really build the leadership capacity within the space. So that's what we do, and we're pretty excited about it, and I'm pretty proud of the work that my colleagues do. Well, it sounds really tremendous. And I guess, you know, as we think about the, and we talked about the potential and opportunity for life sciences in the GTA, I mean, you've mentioned some of the spots where I think there's some real effort to shore things up. We have some gaps, obviously. We've got huge talent, but not enough. Tremendous talent, not enough. We have you're operating here. A number of the VCs are operating here. Aversive to a secure, I think it still is. Maybe not in the same level as it was before COVID. But there's still an issue around capital. access to capital, access to the patient capital that life sciences startups and scale-ups need in order to get through clinical trials and so forth. I mean, it's a slog. And, you know, if you're an investor, a tech company, a software company seems like an easier bet, right? The important word there is seems like. Seems like. Because the data don't bear that story. So that's interesting because there is a sort of feeling that for sure, you know, that that's really... So let's, you've got to start, the first place is with the science. Everything in this industry starts with the science. And Canada has an extraordinary research enterprise, half of which is essentially in the greater Toronto area. And when you look at any objective measure of research output, Canada punches well above its weight. So it's widely recognized as extraordinary science that happens. And ironically in some ways, because, you know, I think we're very efficient at our science, are, you know, because we don't spend anywhere near what other countries spend and we get tremendous science out of it. I was at a U of T discussion the other day, a life sciences discussion, and everything pointed out that NIH, National Institute for Health in the US, which is now cutting back enormously, source of some interest because scientists are making inquiries about coming north, but they have a $43 billion budget now to be cut to $28 billion. So huge cuts. And so the question is, how many of these people can we attract? And someone pointed out, well, you know, 10% of $43 billion would be $4.3 billion. We spent about $1.3 billion. Yeah, that's exactly right. So we're actually, you know, we're really underfunding in many ways compared to, say, the U.S. in a kind of per capita way or even in a relative way. And so then how do we, you know, so how do we then attract these great scientists north with the budgets that we have? So let me let's pivot down there for a second, because I think I think crises do two things. They show you your weaknesses and they show you your opportunity. Right. And if you have the courage to address the weaknesses, you can then go after the opportunities. And one of the weaknesses is exactly the one you pointed out. We've been underfunding research as a public. A couple of decades. For about a generation. Yeah, for sure. Yeah. And so I think we have to absolutely double down there before we can be serious about attracting others. We absolutely should. So yes, we are very good in producing science. We do it very well. We do it very efficiently. We're just starting to see a sustainable life sciences industry, domestic industry, emerge from that. And this is where the data are interesting to me, particularly relative to other sectors. If you look at BDC's report on venture performance, and this is obviously a venture capital intensive industry, life sciences outperforms every other sector. over a 10-year period. If you look at the amount of venture capital that goes in, it's about 22%, and yet it's responsible for about 44% of the... So they're bigger wins. They are bigger wins, absolutely. And just in recent years, there have been multiple, multi-billion dollar exits in this space. So it is, and it is very capital efficient, as you say, and BDC actually has a measure that I won't even try and explain, but it actually makes sense. of capital efficiency, demonstrating that we are quite capital efficient. So the challenge is, how do you step back globally and put that in context and say, globally, there is more capital available for life sciences today than ever? But then explain something to me, though. So you look at the talent. We've just talked about that. Abundant talent. Maybe not as much as we like to have. We've got a fair bit. And good talent. Then you've got, and the scientific research is, as you say, globally significant. Then you've got the capital and it's available, we're hearing. Why are we feeling like a farm team? You know, we're not really developing any great new, as Vancouver has, say biotech companies out of the Toronto space. So there is a challenge in capital. And the challenge in capital is really in venture capital. We do not have a robust enough venture capital industry in this country in life sciences. There really are four funds. They're high quality funds, but they are dwarfed by local capital, or by global capital, excuse me. But those funds presumably are doing quite well. As you said, the numbers should speak for themselves in terms of a attractive place. But here's where the challenge is. When you look at where capital comes from at different stages in this space. So in the earlier stages where we invest, the riskier stages, most of that capital is domestic. And then as you get to scaling and the real commercialization effort, most of that capital is global. And guess what? Most of the returns from exits go global. So what that means is we're effectively exporting the economic value creation to other companies. The IP and all of us. It's just craziness. Well, and presumably, the point also is when they exit, they're often sold off. The enterprises are sold off to a farmer company or what have you, the space somewhere else. And again, they might become at best a division of an international farmer company. And historically in this industry, that's a good thing. Because historically what happens is that capital tends to get recycled back into the space. But when you are exporting your economic wins, the value creation, to international funds, capital gets recycled in other countries and other... Which is a growing mid-size and large, you know, the next generation of large biotech companies. We're not growing them here. You'll recall last year we were talking about anchor companies. Yeah. And we published a report on the need to build anchor companies. That is absolutely critical. And it's clear you can look... One of the reasons I think that there is probably a little more sustainability in Montreal and Vancouver than the Toronto ecosystem is that's where the anchor companies were, the ones that did exist in Canada, the biochem pharma or the QLTs in those two places respectively. And that never really developed here. And so it's not a surprise then. You sort of see the spin-offs of those kind of recapitulating themselves through the markets. A bit like we had Blackberry here in a different space in the hardware space even, in the tech space. It threw off all kinds of companies in the Toronto and Waterloo areas. But we never had that, as you say, with life science. And it's critical. And for me, the point that I kept making to people a year ago on this subject was not every investment is going to be an anchor company. That's not the point. The point is you need to think like an anchor company. You need to think about what is globally relevant in the work that I'm doing, And how do I start at the marketplace need and work my way back to where I am now? Because the anchor companies are the flywheel in the system. That's a many ways. If you don't have one, then if you're a government and you've got all kinds of choices about where you're going to invest in order to catalyze economic development, the question will have to be asked at some point, is this the place to invest? were doing a gift to the world. We're supporting the development of new therapies in startups that were maybe, as you said, Canadian funding, venture funding in the early stages, and then they get international funding, and then they get sold off. And we often don't get the benefit of that, really. So it would seem a kind of, you know, I call this the Christmas tree farm economy. We grow these little Christmas trees, and then they get harvested by other people, and then we grow another whole pile of Christmas trees. And ultimately, though, we're not really getting the ROI as a society for the investment we're putting in. Yeah, I would argue the kind of question that you're concerned about public policymakers asking is exactly the wrong question. It is not, should I be investing in this space, but rather, what do I need to do in order to make sure that those investments we already make in publicly funded research, even though it's not enough, we invest significant amounts of capital in publicly funded research that is quite often the feedstock to this industry. How do I make sure that we scale those companies here and give them an opportunity to? And one of the ways that you can do that is think about how you encourage institutional investors to participate in more venture capital firms. Well, that's a great point. When you look at the venture capital firms in Canada, at best, and I think I'm being generous, the data are not perfect, to be fair. About 10% of their limited partners are domestic limited partners. There are really only two institutions in Canada that invest in life sciences, both of them in Quebec. And they're really important investors who generated really good returns from this space. So we've got to find a way to demonstrate to institutional investors that they should be helping build this venture capital industry because we know it will generate. Now, we in Ontario, when I was in the Ontario government, we created the Ontario Capital Growth Corporation, which then became Venture Ontario. And what that does is create, is a fund of funds. And we worked hard to develop a life sciences fund. I think we have two now. And they're US, both of them are US-based, I believe. But they're investing in our sector. But again, we've probably been at this for over a decade and a bit. And we've developed a lot of startups and to some degree scale-ups. But we haven't really seen, as we say, any anchor companies come out of that. I would argue with respect, you kind of ended up doing it the wrong way. Okay. Because you did a rational thing, which is to say, there's no venture capital firm necessarily to invest in here of the scale. So I'm going to invest in a global fund and ask them to invest some of their capital back to Ontario. That rationally makes sense, except that it just- We put capital in too. Yeah, for sure. For sure. But what that really does is propagate the problem, right? Because those returns get generated globally and get then reinvested somewhere else around the world. I think the challenge is how do you build the venture capital industry with the expertise? Because if you go to the institutional investors today and say, "Why aren't you investing in this space?" There are a variety of answers you get. I would observe respectfully that most of those answers are policy decisions about how large a check they want to write or how big a participant they want to be in a specific fund, which have-- Or their risk profile. Well, except that they're investing in global life science funds. Yeah, because they tend to think they're bigger and more solid and have better-- possibly better outcomes. That's right. But if you think about, okay, how do we build the specialist funds that we need in this country? Because we're nowhere near even the 10 to 1 ratio that we're all familiar with with the US market. we're more like 1%. It's embarrassingly small. So you need to build that specialist venture capital group to really exploit the opportunity that we have here and build it here and see those returns be reinvested here. Another irony, not only are we very strong in life sciences talent and life sciences research, and we do have some venture funding as you say, but the irony is on the the financing side is that Toronto is an asset management hub globally, huge asset management pools. And so it's ironic that we can't muster the capital, even a small portion of it, to invest in our life sciences sector. Looking at what other countries are doing, I want to ask you a bit about this. The UK has this thing called the Mansion House Compact. And speeches over the centuries, but in this case it was to allow pension funds to invest or encourage them to invest. I think it was 5%? Something like that. To find their discretionary capital into life sciences in the UK. Now, is that something we should be doing? You know the pension funds are very cherry of being told what to do. Yeah, and let's start from the perspective of as as people by definition aging who at some point might want to rely on on a on a pension none of us should want um public policy makers telling pension funds where to invest yeah full stop uh however uh there are a lot of reasons why we should be encouraging them like that type of compact to participate in this space so the first is we know the numbers are good we know the returns are there. We have, secondly, domestic examples that demonstrate that. The Fonds in Quebec just celebrated its 35th year as a life sciences investor. Wow, that's impressive. And their returns are extraordinary, and they are an essential investor in the Quebec ecosystem. They only invest in Quebec or do they invest in- They invest all over, but primarily they expect some investment within Quebec, and there are others obviously not a CISMO Quebec, it affects local investment. But the point is over the course of that period of time they've generated really impressive returns from the space. And we're living in a moment of extraordinary disruption. And in particular disruption that is telling us we really oughtn't be thinking about north-south connections, we ought to be thinking about east-west connections. Right. And so how can we encourage our pension funds to say okay, We can no longer really rely on that kind of US-based capital. How do we encourage the growth of this industry here? And if you think about it, it's really not dissimilar from being cures of wooden drawers of water in a very modern economy. And yet we have all of the essential parts here to grow a modern industry here with effective long-term commitment from institutional investors. is not that we don't have all the pieces in many ways. What we don't have though, I guess, is the, we haven't made it as attractive as it could be to grow companies here. And I think one of the things that we're kind of interested in as we watch Prime Minister Mark Carney take his government forward, and the kinds of things he's been saying about the need to transform our economy, very much what we at the Board of Trade have been saying for some time now, a whole look at productivity and competitiveness, and the ability to get private capital, to mobilize private capital for productive capacity. And if you look at the life sciences sector, then the question is to you, what are the two or three things that governments should do to remove some of the barriers from growth here, or to put it a different way, to make us the place where you have to come if you wanna grow a life sciences business?- So I think there are three really straightforward things that can be done. First of all, like most industries, I suspect that there is a symbiotic relationship throughout the ecosystem. Emerging companies need globally relevant pharmaceutical companies to be doing well here and prospering here. So if you're looking in Canada, the way that we reimburse for reimbursed drugs is nutty. We have basically 13 different regimes across the country. It's not technically a non-tariff barrier, but it certainly... Where's your idea? Yeah, it's a barrier to commerce. So let's deal with that and deal with that quickly. I think that would have a dramatic impact with global pharma and with commercializing companies, absolutely. The second thing that we should be doing is, and it was in the government's platform, to look at helping see venture capital investment with, I think they're talking about a billion dollar venture capital initiative meant to match other capital. So it's not government investing. It's really trying to catalyze other investors in this space. And then the third thing is really just encourage the growth and prosperity of those companies by helping other investors participate like the institutional investors we've been talking about. On the regulatory side though, because one of the... Sorry, that's a fourth thing. Thank you for that. I think it's important. It's actually incredibly important. It should have been number two. Thank you. The reality is, again, the FDA right now is under assault. It's nuttiness in my estimation, but it's happening. There it is. So Health Canada has always had good linkages globally with the EMEA in Europe and Australia, which do creative things, and in Japan as well. I think we need to accelerate that really quickly. Why wouldn't we just decide we're going to have the most agile regulatory system possible? Can we have a lie on those? I mean, again, one of the things that you always think when you're thinking about, you know, the approval of medications here is you've got the FDA in the U.S. You've got the Europeans. You've got the Australians. You've got the Japanese. They've got fully fledged assessment and evaluation organizations. And we've got ours. And you sort of ask yourself, is there a lot of repetition here, it seems? Is there no way to kind of adopt international standards and say, look, if the US or Japan or Europe has said this new innovative medicine is, you know, good to go, that we adopt that? For sure. So I think there are two things you do there. And the answer to your question is absolutely. We should just be asking companies that bring something forward for approval. Is there a reason? demonstrate that there is not a reason that this market would be different because of some population reasons than the other places where you have approval. And there are a limited number of indications where that... We can think of MS, for example, as a place where there's more in Canada than elsewhere. But then you'd be narrowing your... But do it almost like a negative option almost. That was different straight to me that it's not... Yes, unless. And then the second thing that I understand regulators aren't talking about is to say globally, why don't we just get efficient and say,"Okay, we're going to concentrate in antibodies, and our regulatory expertise will be antibodies." So the global regulators will agree that if the Canadian group says this antibody is fine, it's good for all of us. And another country might concentrate on vaccines, and another might concentrate on small molecules, whatever. Different specialization would be an efficient use of everybody's regulatory environment, because that's the issue, right? When the Canadian scale-up could send its... would have clinical trials, but basically it could be evaluated by the specialty country. Exactly. And then everybody says yes. So then you get actually much greater exposure to different markets. Well, you get two things out of it. You get more speed, which I think is important because if you look at the time to approval in Canada, we're about middle of the pack, I think. It's not bragging about. At least at the end of the pack. But when you look at time to reimbursement, we're at the end of the list. So when you about it, I think what the industry talks about is time to patient, getting a new product into a patient, we're basically last in the world. And that's nuttiness, especially when we have the level of scientific innovation that we do. So those two things I think would have a dramatic impact very quickly. Well, because I do think that we tend to underestimate the barriers to productivity, to innovation, to competitiveness, to business growth, through our regulatory approach, which I tend to think in Canada, we, I mean, this is for years of observation, but nothing, you know, nothing, I can't be categorical about it, but it does seem that we look at regulation to deliver zero risk as opposed to manage risk. That's exactly right. And, you know, there's no zero risk. That doesn't exist. So you end up tightening your regs, tightening your regs, tightening your regs. Other where there is going to be some risk, then they have a lighter load. You know, the regulations are less onerous and they're faster to administer. And we get stuck in these endless fucking doom loop because you're just constantly going through regulatory approvals and so on. And it's one thing for the two of us to sit here and talk about it in business terms or economic value. There's a health factor. There's another to talk about it as individuals. And everybody has someone in their life who has been the benefit of extraordinary advances, primarily in pharmaceuticals and other drug tech or medical technologies. And it's almost immoral in a sense. To hold it back. To hold it back. So obviously it's got to be safe and you have to be highly confident, but in a risk managed way as you described. So we've tried these different things. We do have a pretty good ecosystem, I think, when you look at all the pieces. And it's just a weird thing that we can't seem to get it all clicking, you know, in a way that this delivery of the results that we're looking for. Look, at this moment in time, again, in a crisis, there are weaknesses that we ought to be conscious of, but there are extraordinary opportunities. And one of the things when you look at anchor companies around the world, in life sciences anyway, there is one common feature over the course of 40 some odd years that this industry has existed. and that is inspirational leadership. Somebody decided they wanted to do it. And you think of any anchor company in this industry, either the ones that did exist in Canada or the ones that existed globally, and you often associate them with a person. So I think it is our responsibility to pull those things together and find those inspirational leaders and encourage them to continue to build here because there is just no reason not to. In fact, there is every reason to do it and to do it better. Yeah. Thank you for this. To read our Life Sciences Playbook, visit our website. It's easy to remember, bot.com. That's all for this episode. Thanks for listening to Toronto Talks. If you like what you hear, spread the word and subscribe. And don't forget to keep talking Toronto. 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