Belgian venture capital firm to finance Canadian biotechs

Open this photo in gallery:

One of Canada’s most active funders of domestic biotech startups, the Fonds de solidarité FTQ, has persuaded a Belgian venture capital firm to set up shop in this country.

Theodorus Investment Funds, which typically finances biotech startups spun out of the Free University of Brussels, has opened a three-person office in Montreal and will allocate about 30 per cent of a €38-million ($55-million) seed capital fund to 15 to 20 Quebec companies created at Quebec universities, associate Théo Risopoulos said. The seed capital fund is the firm’s fourth since its creation in 2003.

The Quebec Federation of Labour-backed Fonds, which invests $100-million a year in Canadian biotech startups and venture funds, is committing €5-million to the fund.

“Without the Fonds de solidarité this wouldn’t have [happened]," Mr. Risopoulos said, adding the office, his firm’s first outside Belgium, is intended as a jumping off point for global expansion.

“The Fonds has been really instrumental in our setting up [here] and introducing us to this research ecosystem here in Quebec.”

The courtship started more than two years ago when the Fonds was organizing a life sciences symposium and made contact with the principals at Brussels-based Theodorus. “I said to them, if you are interested in discovering this ecosystem and targeting it as the next place to expand your platform, you should get in,” said Didier Leconte, vice-president of investments for life sciences with the Fonds.

The move by Theodorus follows one of the best years for the Canadian life sciences sector.

Several Canadian-based companies went public on the Nasdaq exchange and raised nine-figure financings to further their development. Two publicly listed B.C. firms, Zymeworks Inc. and Aurinia Pharmaceuticals Inc., achieved $1-billion-plus market capitalizations, while two startups with Canadian operations, Clementia Pharmaceuticals Inc. and BlueRock Therapeutics, were purchased at 10-figure valuations.

Venture capital firms invested more money in Canadian biotech firms – $921 million – in 2019 than in any previous year, according to data firm Refinitiv.

Despite the recent flurry of activity, and Canada’s long track record of producing breakthrough discoveries from insulin to the first approved Ebola vaccine, biotech startups here have struggled to raise local capital to fuel their later-stage growth beyond a handful of funders. Those exceptions include the Fonds, the Caisse de dépôt et placement du Québec and a smattering of family offices, institutions and early-stage venture capital firms as well as U.S. venture capital firms Versant Ventures and Sanderling Ventures.

The Canada Pension Plan Investment Board recently made a rare Canadian biotech investment, committing US$20-million to Hamilton cancer treatment developer Fusion Pharmaceuticals Inc., but that was part of a global strategy that doesn’t specifically target Canada.

“Canadian institutions as a whole are still underinvesting in biotech,” said Cedric Bisson, a partner with Montreal’s Teralys Capital, one of the top funders of Canadian biotech.

“Despite the successes and the financial returns, it’s still difficult to mobilize generalist Canadian investors in the asset class" because of their lack of understanding of a sector that typically delivers either huge investor wins or sharp sell-offs, depending on results of high-risk trials.

"The funds that we have are successful, but they still have difficulty raising larger and larger funds at a time when their U.S. and European counterparts are raising much larger funds.”

Mr. Risopoulos, who is leading the Theodorus operation in Montreal, said that was also his firm’s observation. “We witnessed a lot of beautiful science and technologies at the university level here. ... On the other hand, we witnessed a financing gap to commercialize those technologies.”

Mr. Leconte is hoping to see a change in that trend. “Perhaps people will read the news and look at what’s happened in the market and reconsider their investment strategy. It’s a good time for them to come [to the sector]. … They’re welcome to join.”

Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.