NEOMED plans Montreal expansion; proves new pharma R&D model works

Montreal’s NEOMED Institute needs more space to accommodate growing demand for its facilities and services. Discussions are underway with an unnamed third party equity investor to finance the expansion of its Laval facility with a decision expected within weeks.

NEOMED’s growth proves it is possible to come up with a business model that can retain top talent in a region when big pharma employers decide to move out. Lab closures in Montreal a few years ago by companies like AstraZeneca and Merck reflect a global trend that has seen major consolidation within the pharma industry and a growing reliance on outsourcing, particularly for costly research and manufacturing activities.

The retrenchment of the pharmaceutical industry over the past 15 years had prompted policy responses of varying success around the world as large firms closed their in-house laboratories and cut loose thousands of skilled researchers and technicians. NEOMED’s model is considered one of the most successful, achieving a high retention rate of talent in the region and a positive cash flow after just five years of operation.

“It’s been successful beyond our expectations,” says Donald Olds, NEOMED’s recently appointed CEO. “We have more than 300 people on staff and we can no longer house all of the companies here. There are now 100 people who work outside of our two facilities … We’re looking at expansion. We have the demand and anchor tenants have been soft circled.”

NEOMED is also actively pursuing a wider strategy, seeking opportunities to deploy its model in other jurisdictions with highly clustered biomedical expertise, companies and research institutions.

“If other companies close their facilities in other cities, we are positioned to see something successful done. It’s part of our pan-Canadian strategy,” says Olds. “And if our Montreal expansion is successful, we may open our own facility here.”

NEOMED’s labs were established in the wake of key pharma plant closures in the Montreal region — AstraZeneca’s pain research centre in Laval and Merck Canada’s MerckFrosst for Centre Therapeutic Research in Technoparc Montréal. Olds says AstraZeneca purchased extra land when it originally decided to open its Montreal R&D centre which will now be used for the expansion.

The former AstraZeneca site focuses on biologics and vaccine development while the former Merck site is dedicated to small molecule drug discovery and development. After receiving $28 million in initial funds from the Quebec government and $12 million from the Centres of Excellence for Commercialization and Research (CECR) program, NEOMED now relies on revenue generated through licensing and contract revenues from providing expertise for start-up start-ups and research services for big pharma.

“No new federal or provincial funding is being sought at this time,” says Olds. “We’ll deal with existing assets and make them sustainable. Our licensing revenue will fuel the operation … We are a calculated risk with an amazing opportunity. Big pharma left behind amazingly skilled professionals and we gave these people a platform to leverage their skills and vision.”

Olds says that in his 30 years working in Montreal, he’s never seen the economy so vibrant or the optimism of the life sciences community so high. He expects the recently released Quebec Life Sciences Strategy will enhance the ecosystem even further with its objectives of attracting $4 billion in new private investment by 2022 and moving the province’s life sciences hub cluster from 10^th to 5^th in North America.

“NEOMED fits into that ecosystem. An expansion will enable more companies to start up and more to come into the region,” says Olds. “enGene grew from two to 50 people and raised lots of money ($27 million) and we enabled that. Everyone who came to NEOMED were SMEs (small- and medium-sized enterprises) and some have gone from S to M.”

Another company that will take advantage of NEOMED’s services and facilities is Repare Therapeutics which is located across the street from NEOMED’s facility. Repare recently closed a US$68-million Series A financing co-led by MPM Capital and Versant Ventures — the most active foreign venture capital firm in the biopharmaceutical space and a key investor in the $300-million Toronto-based start-up, BlueRock Therapeutics.

Unique Model

According to a scholarly paper in Science Translational Medicine — How to handle an industry in disruption: Intervene or laissez-faire? — the NEOMED model is one of the most successful globally. By building on Montreal’s “rich cluster of leading academic and biomedical institutions along with pioneering homegrown companies”, NEOMED and CQDM (which focuses on precompetitive research) have significantly lessened the negative impact of company downsizings and plant closures, retaining a high percentage of the skilled talent that worked for big pharma and remaining “on the vanguard of innovation”.

“Both (NEOMED and CQDN) have reconfigured drug R&D by enabling networks that promote collaboration and cross-pollination among academics, biotech entrepreneurs, big Pharma, and other stakeholders. And it seems to be working,” states author Bernard Munos, founder of the InnoThink Center for Research in Biomedical Innovation consultancy.

“It was fortunate that the lost jobs were located close to (Montreal’s) universities and medical facilities. But it also took vision and leadership to recognize that research was changing and to create institutions that facilitated biomedical research’s transition to the new, networked model. The result is a biomedical cluster that is well positioned relative to its competition.”

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