Booming Canadian biotech sector on track for record year after raising $1-billion in venture capital so far in 2020

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Canada’s booming biotechnology sector continues to be the bright spot in the country’s pandemic-challenged early-stage investment landscape.

New data from the Canadian Venture Capital and Private Equity Association shows domestic companies in the life sciences sector, anchored by biotechnology firms that develop new therapies, raised $1.03-billion in venture capital (VC) in the first nine months of the year.

That is up 16 per cent over the same period in 2020, leaving the sector likely to surpass 2019′s full-year record of $1.05-billion.

B.C. biotech firms AbCellera Biologics and Chinook Therapeutics raised $144-million and $140-million, respectively earlier this year, the two highest rounds of funding for Canadian companies so far in 2020.

Meanwhile, companies in the information and communications technology sector raised $1.875-billion in VC, down 39 per cent year over year, while agriculture and clean technology startups saw the total amount of VC dollars slump by more than 70 per cent.

Overall, there were 413 VC deals through September 30 that raised $3.5-billion, compared to 397 deals and $4.7-billion in the same period a year earlier. Refinitiv also recently reported a third-quarter slowdown in Canadian VC activity compared to last year.

That follows a stronger second quarter than the previous year, which CVCA president Kim Furlong said was attributable to venture capitalists injecting cash into portfolio companies, partially matched by funds to help them get through the pandemic from federal crown corporates Business Development Bank of Canada and Export Development Canada.

The third quarter slowdown “to me is a signal that this is not necessarily a bull market in Canada,” Ms. Furlong said. “There’s still a lot of work to be done for Canada to continue to grow and to be seen as a place where we’re creating and growing strong companies.”

The biotechnology sector has had a breakout year in Canada, including the two largest initial public offerings ever by Canadian firms in the sector, Repare Therapeutics and Fusion Pharmaceuticals, in June. They could be surpassed by AbCellera, a Vancouver antibody therapy developer which revealed plans late last week to go public on Nasdaq. Equity financing by Canadian biotechs this year have surpassed $3.4-billion, more than three times 2019 levels. There are now four Nasdaq-listed Canadian biotechnology companies valued at US$1-billion or more.

Cedric Bisson, a partner with Montreal fund-of-funds investment firm Teralys Capital, said Canada’s strong biotech performance mirrors a global boom. “It reflects the quality of companies but also hopefully greater investor appetite for the sector, which is highlighted by [the search for treatments for] COVID but a number of other factors.”

The sector is benefiting from several breakthroughs in recent years, including the mapping of the human genome, advances in cell therapy, development of antibodies and the use of computer modeling and artificial intelligence in drug discovery to more rapidly identify drug candidates and devise more targeted approaches to treat diseases. Several drug developers, including AbCellera in partnership with Eli Lilly, have been able to rapidly identify, test and seek regulatory approval for promising COVID-19 treatments in just months, a process that can take years.

The companies have been fueled by strong support from international investors in both private and public markets. But Mr. Bisson noted few Canadian institutional investors other than a handful of big funds in Quebec are active in the sector, adding he hoped that growing investor interest in Canadian software companies would “translate into large backers also joining on the bandwagon and investing in Canadian [biotech] companies as well.”

In fact, the three biggest life sciences venture deals this year were almost entirely funded by foreign venture capital firms. Canada’s four main life sciences-focused venture funds – Amplitude Venture Capital, CTI Life Sciences Fund, Genesys Capital and Lumira Ventures – are in the process of raising their latest funds.

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