Study estimates value of Canadian biotechnology will reach 4% of GDP by 2030

Commissioned by Genome Canada

A major new report on the production and use of biotechnology in Canada estimates the sector will continue its rapid growth over the next 18 years to a value of $144 billion, accounting for 4% of Canada's nominal GDP by 2030. Commissioned by Genome Canada and prepared by the Centre for the Study of Living Standards (CSLS), the report forecasts an annual growth rate of 9.4% between 2005 and 2030.

Authored by CSLS economist Ricardo de Avillez, Measuring the Contribution of Modern Biotechnology to the Canadian Economy is the first significant effort in recent years to assess the size and scale of biotechnology in the Canadian economy and utilize existing data to project its growth over the long term.

The last similar effort was by Statistics Canada. It produced the biannual Biotechnology Use and Development Survey from 1999 to 2005 but it was terminated due to lack of funding. The report states that the survey's termination represents "a massive blow to the efforts of researchers in measuring and understanding the impact of biotech in the Canadian economy, and poses a significant problem in the construction of more recent estimates".

Genome Canada commissioned the study to help with its future planning, which resulted in the release this week of a new strategic plan (the plan will be featured in the next issue of RE$EARCH MONEY). Genomics research is expected to have a profound impact on the development of the biotechnology sector. A greater understanding of its growth is considered key to the development of industrial sectors where biotechnology has the most impact: medicine and healthcare, agriculture and related activities and industry.

The study includes analysis of actual data available for Canada between 1999 and 2005. During that period, the number of firms increased nearly 50% from 358 to 532 with medical biotech firms accounting for 58.3% of the total, followed by agricultural firms (20.1%) and industrial companies (20.1%). The report notes than nearly 75% of all firms employed 50 people or less and nearly 79% were located in Ontario, Quebec and British Columbia.

The value of biotech activities in the same six-year period also showed impressive gains, posting a 10.7% annual growth rate from $8.3 billion to $15.3 billion, nearly twice the rate of growth of the economy as a whole. The only sector experiencing more rapid expansion was the oil and gas extraction industries which posted 20.5% annual growth. Biotech generated 1.2% of GDP. Biotech users accounted for $11.8 billion or 77% of the growth, while biotech producers provided the other 23%.

Biotech R&D spending by business also experienced a rapid expansion, posting a 12.7% annual growth rate and more than doubling from $831 million to $1.7 billion, with 87.2% spent by firms in the areas of healthcare and medicine. While that amount was dwarfed by US expenditures, Canada ranked second globally, well ahead of Germany, the UK and South Korea.

According to more recent StatsCan data, federal departments and agencies funded $937 million worth of biotech R&D in 2008, up from $319 million in 1998. The main performer of federally supported biotech R&D was the higher education sector, accounting for 58.7% in 2008, compared to a 49% share in 1998. Federal R&D performance dropped significantly during that 10-year period, declining from a 44.7% share in 1998 to 29% in 2008.

Given the scarcity of reliable data, several assumptions were made when the CSLS projected future growth in the value of biotech and its share of GDP. A complicating factor is the wide variability in biotech usage among firms. In many cases biotech "plays a supporting role and accounts for only a small part of the total value added while in others it is a core technology".

The report notes that its GDP projection of 4% is 1.2% higher than a similar projection for OECD countries. While much of the difference can be attributed to different industry compositions and methodological differences, the two projections share the same assumption that industrial biotech "accounts for the lion's share of biotech GDP in both estimates".

The report is available on both the CSLS and Genome Canada websites.

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