Data collected during Statistics Canada’s last major industrial R&D survey show that firms spend $460 million on biotechnology R&D in 1998, an increase of 4.3% from the previous year and the smallest increase in the past five years. The amount includes both core and non-core biotech firms but does not account for companies with in-house R&D expenditures of less than $1 million. Data collection of smaller R&D performers below the $1 million threshold was dropped from the industrial R&D survey in 1996 to reduce administration burden, excluding a group that accounted for 12% of biotech R&D outlays in 1995, the last year they were included.

Administrative data supplied by Canada Customs and Revenue Agency (CCRA) have been used since 1996 to capture smaller performers, but they do not provide the necessary information. StatsCan officials acknowledge that the absence of small performers from the survey represents a significant gap in the overall picture of biotech R&D spending and they are currently negotiating with CCRA to add more questions to the form it uses to generate data for smaller R&D performers.

Notwithstanding their absence from the latest survey, the new data show that in 1998, Canada has 46 core biotechnology firms that spent an average of $9 million per firm or 90% of total biotech R&D spending. Health-related biotechnology R&D spending (mostly biotherapeutics) accounts for 64.3% of the total ($295.7 million), an increase of 128.7% from 1993 levels. Running a distant second is the services sector ($105.0 million/22.8%), followed by agrifood (36.6 million/8.0%).

Of the firms reporting biotech R&D, 66.7% was performed by Canadian-controlled firms, while US firms accounted for 14.1% of spending,and all other foreign firms comprised the remainder (19.1%).

The data also show that the share of biotech R&D being performed by larger firms is increasing. In 1993, firms with revenue of more than $25 million performed $75 million of R&D, compared to $72 million by firms with revenue of less than $5 million. By 1998, the larger firms spent $227 million, while the smaller firms accounted for $127 million. A similar trajectory is evident when measuring R&D outlays by number of personnel.

Biotech R&D spending by source of funds offers an illuminating picture of private sector dominance of the sector, particularly private sector sources outside of Canada. Between 1993 and 1998, foreign sources rose from 11.9% to 21.8% of the total, while domestic sources fell from 83.7% to 75.5%. During the same period, government sources dropped from 4.3% to just 2.7%, but the data does not include federal funding in the form of R&D tax credits and incentives.

The rise in foreign sources reflects the increasing incidence of partnerships and strategic alliances between small Canadian biotech firms and large foreign multinationals, especially in the health sector. Unfortunately, the data does not distinguish between biotech and non-biotech activities.

Full-time staff performing biotechnology R&D has fluctuated significantly during the five-year period covered by the survey. In 1993, there were 4,323 staff —including 2,146 professionals — rising to a peak of 6,291 in 1995 when there were 2,947 professionals. In 1996, the total number dropped again to 5,965 and rose in 1997to 6,251 before dropping 11.9% in 1998 to 5,506. For the latter year, there were 3,021 professionals accounting for 54.9% of the total.

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