John L. Wallace of Antibe Therapeutics highlights how Canadian innovation stands to put the country at the forefront of the next wave of global biopharmaceutical R&D.

BlueRock Therapeutics, a promising North American start-up with a new Parkinson’s disease drug, was recently sold to Germany’s Bayer at a $1 billion valuation. Bayer also acquired BlueRock’s innovative approach to drug discovery. The latter is a move with industry-wide implications.

To critics in Canada, where BlueRock has a major research arm, it provided further evidence that local ventures are too quick to sell innovations. On the contrary, I believe this sale shows how savvy Canadian entrepreneurs profit from the current pharmaceutical landscape. Our researchers are embracing “Discovery 3.0.”

Meanwhile, Big Pharma is doing less in-house drug R&D. Industry players are looking beyond their campuses to partner with start-ups and gain access to new research. That’s good for Canada, which has always had expertise, but little access to capital necessary to triumph in the pharmaceutical industry.

Now, companies with significant Canadian ventures, like BlueRock, are looking at billion-dollar payouts. Bigger checks mean bigger bets for life-science start-ups. So they’re doing better science faster, and less expensively, with the help of data, software and lean development. Start-up labs are more focused and even virtual, leaning on specialists from around the globe.

With all this diversification, R&D is delivering better ideas and better efficiency. Large pharmaceutical companies spend more reliably and focus on their strengths: clinical trials, distribution and sales. The earliest research now gravitates toward professional risk-takers: entrepreneurs and their backers.

Before, Big Pharma owned every aspect when they developed drug platforms from scratch. They made enormous, risky investments in hope of recouping them on perhaps a single viable drug – but the high failure rate meant that drug’s cost effectively ranged from several hundred million to billions of dollars.

Today, research begins with start-ups and publicly-funded researchers who pursue big ideas more efficiently than big labs ever could. They don’t approach discovery with one large pharmaceutical’s company’s interests in mind; they’re trying to solve real-world problems with cutting-edge software, artificial intelligence, data and biologics. Many new treatments and models are being developed and nurtured at incubators like Montreal’s NeoMed Institute and Toronto’s JLABS.

By the time an established pharmaceutical company gets involved, the work may be far enough along to show proof of concept – worthy of the kind of investment that leads to commercialization.

Take Highland Therapeutics, a Toronto start-up that developed a delayed-release ADHD drug taken in the evening instead of morning. The technology was developed with University of Texas researchers and an unusual patchwork of private funding. Highland then raised $200 million in a private offering for commercialization to deliver its treatment, Jornay PM, to market this summer.

Then there’s Triphase Accelerator, founded by the Ontario Institute for Cancer Research and MaRS Discovery District, which recently optioned its pre-clinical treatment for leukemia and lymphoma, TRPH-395, to U.S.-based Celgene Corp. Celgene’s initial $40 million investment will help bring TRPH-395 through clinical proof of concept, but the deal could yield nearly $1 billion in full commercialization.

Canadian companies aren’t just selling pharmaceuticals, they’re selling ideas. It’s an approach that works particularly well in a city full of start-ups, talent and public research institutions like Toronto. The new R&D model creates value by marrying Big Pharma’s capital and distribution capability with entrepreneurial energy and efficiency – and Canada is leading the way.