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Canadian tech companies that pivoted to making ventilators drawing global interest

A worker assembles a CAE Air1 ventilator at the CAE plant in Montreal in June 2020. Ottawa has ordered 10,000 devices from the Canadian tech firm.
A worker assembles a CAE Air1 ventilator at the CAE plant in Montreal in June 2020. Ottawa has ordered 10,000 devices from the Canadian tech firm. The Canadian Press/Paul Chiasson
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When the federal government put out a late-March call for made-in-Canada medical equipment to help fight the COVID-19 pandemic, CAE became a ventilator company in eight weeks. 

Though the Montreal-based firm, best known for its flight simulators, initially said the expansion was temporary, it now plans to continue this new line of business—even though that means competing with the international medical-technology giants that dominate the ventilator market.

It’s an unexpected outcome for one of the highest-profile Canadian tech companies to respond to Ottawa’s plea for manufacturing help. But while many of the domestic firms now busy fulfilling orders for thousands of the life-saving machines have also begun fielding inquiries from foreign governments, not all see the same long-term opportunity. 

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Talking Point

As Canadian technology companies prepare to deliver thousands of ventilators to meet Ottawa’s call for domestically-made equipment to respond to the COVID-19 pandemic, they’re getting inquiries from other countries looking to buy units. While Montreal-based CAE plans to keep making the devices, other suppliers like Victoria’s StarFish Medical don’t see long-term opportunity in the market.

CAE is making 10,000 of the just over 40,000 ventilators Ottawa currently has on order. Most of the machines the federal government is buying are from Canadian companies or consortia, and are due to be delivered “between May 2020 and early 2021,” said Michèle LaRose, a spokesperson for Public Services and Procurement Canada (PSPC). The department is “taking an aggressive approach to buying,” including “ordering ahead in bulk on behalf of provinces and territories.” (Ontario, for one, is sourcing another 10,040 directly.) PSPC declined to provide details of the unit cost or any ongoing contracts with suppliers, citing commercial confidentiality.

More than 500 CAE employees from 45 departments had worked on its ventilator by the time it received Health Canada certification in mid-June, said Pascal Grenier, the company’s vice-president of global operations, technologies and innovation. “For example, the mathematic model of controlling [an] autopilot is very similar to the one [for] controlling a valve to set the right amount of oxygen,” he said.

The company already had a small health-care division. Its ventilator is a “fully brand-new design,” and 70 per cent of the components for the core unit are made in Canada, according to Grenier. Parts like the tubing that connects the device and patient proved harder to source domestically. Some of the engineering and technology staff are now assembling devices, as CAE ramps up to 750 units a week to fulfill Ottawa’s order. They’re also working on a second version of the device, which Grenier predicted will be “quite competitive on the international market.” 

In April, CAE executive Marc St-Hilaire told the Financial Post that ventilators would “definitely not” be a long-term business for the company. That’s changed. “Definitely, in terms of [the] ventilator, our intent is to stay in this market,” Grenier told The Logic last week. Doctors and specialists who provided feedback on CAE’s device during its development rated its features and capabilities on par with other manufacturers, he said. “We believe we’ve got an innovative product that is capable of competing with … the medtech giants.” 

The company’s civil aviation business made $601.9 million in revenue from January to March, almost flat year over year. It attributed “significantly lower than usual training utilization,” particularly in the quarter’s final month, to the pandemic. “There is less demand at the moment in [the] aviation sector,” said Grenier, so the company doesn’t need to hire cover for staff now involved with the ventilator effort; many already work on medical and flight projects at the same time.

Grenier said CAE is discussing its ventilators with governments in South America, eastern Europe and Asia, although he declined to identify specific countries. 

Other firms getting such calls aren’t planning to keep making the devices post-pandemic. StarFish Medical, a Victoria-based device design and contract manufacturing firm, has also received international interest in its machine, according to CEO Scott Phillips. 

Ottawa has ordered 7,500 of the company’s ventilators, which are based on a model created by former University of Manitoba professor Dr. Magdy Younes. The device “uses a piston, so it’s very good at volume control,” which could make it better suited for COVID-19 patients than regular pressure control-based machines, Phillips said. Contract electronics manufacturer Celestica is handling production and delivery. 

StarFish, which has 130 employees, has “slowed down our existing work by about 30 per cent for the last three months,” to focus on the ventilator order, said Phillips, estimating his team has put in almost double its usual number of design hours over that time. He’s also set up a new entity to handle the federal contract, since “the program revenues flowing to the company [are] far in excess of our normal annual revenues.”

Phillips told The Logic foreign governments have inquired about licensing the technology—which StarFish has assigned back to the Winnipeg firm that launched Younes’s original ventilator—or simply buying units from the company. StarFish will determine how aggressive to be in pursuing those international inquiries as it gets clinical data from units in use. But long term, it’s “not really interested in duking it out with Philips and Medtronic in the ventilator market at large,” Phillips said, calling it a mature business that has already undergone consolidation. “It would be naive to think that we’re going to just go charging in there and try to displace them.” Pandemic-related purchasing will saturate the market, making it a difficult next five years for those competing in it, he predicted.

The federal and Ontario governments placed their ventilator orders in early April, part of major procurement efforts to fill shortfalls of other crucial medical supplies like personal protective equipment. Some doctors and researchers have since expressed concerns the machines are being overused to treat COVID-19 patients, and recommended trying other breathing assistance methods to avoid intubation injuries. 

Of course, there is considerable uncertainty about the length of the pandemic, and even about what impact a second wave of infections this fall might have on health-care systems. Ottawa’s purchases are intended to ensure health authorities will have enough machines for a potential resurgence. “We almost hope that these devices will not be needed,” said CAE’s Grenier, but the government is “doing the right thing in being ready.”

Public health authorities or governments in nine provinces—the Alberta health department did not respond to multiple requests for comment—told The Logic the number of patients needing ventilators has not exceeded the number of devices available at any point during the pandemic. They currently have just over 6,928 units between them, and most have already received some from the federal orders, or expect to.

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“While our orders surpass the current need for ventilators in Canada, we continue to press forward on ensuring that we have a stock of this equipment available so that we are ready for any eventuality,” said LaRose at PSPC. 

Whatever the outcome, both StarFish and CAE will maintain and upgrade the devices they sell Ottawa. “We’re essentially working towards a strategic reserve for Canada,” said Phillips.