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Multinational pharmaceutical company Bayer AG announced it will fully acquire BlueRock Therapeutics, valuing the biotechnology firm with offices in Toronto at approximately US$1-billion.

Bayer already owned 40.8 per cent of the privately held regenerative medicine company headquartered in Cambridge, Mass., and is paying US$600-million for the remaining 59.2 per cent that’s currently held by Versant Ventures, a venture-capital firm, and BlueRock’s management.

“I think it shows there’s some really good science in Canada, in Toronto,” said Emile Nuwaysir, president and chief executive officer of BlueRock. “It should give entrepreneurs and investors confidence.”

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The deal is expected to close by the end of September. Bayer will pay US$240-million upfront, and will pay another US$360-million once BlueRock achieves “pre-defined development milestones,” which a BlueRock spokesperson said are confidential.

BlueRock was created and incubated by Versant, and officially founded in 2016 with a US$225-million investment from the venture-capital firm and Bayer. At the time, the move aimed to establish Canada as a global centre for the commercialization of therapies using pluripotent stem cells. These cells can turn into any type of cell in the human body, and could be used to replace damaged tissue.

A therapy for Parkinson’s disease is the first one BlueRock is bringing to clinical trial later this year. Brain cells manufactured from pluripotent stem cells are surgically implanted in an area of the brain responsible for motor function that normally deteriorates in Parkinson’s patients.

“They will engraft and rebuild the neural circuit that’s lost,” Mr. Nuwaysir said. “It’s an entirely new approach to these devastating diseases.”

BlueRock will continue as an independent company under Bayer, with its existing focuses in neurology, cardiology and immunology.

Duncan Stewart, president and scientific director of the Ontario Institute for Regenerative Medicine (OIRM), said he knows of a small number of pluripotent stem cell clinical trials worldwide, mainly in Japan, but said BlueRock is the only North American company to take the leap in developing them.

He called BlueRock an “anchor” for regenerative medicine in Canada, and said it’s encouraging that Bayer wants to increase its stake because it’s a signal that its “enthusiasm for this technology is increasing.”

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Dr. Stewart’s only concern is that BlueRock could leave Toronto to focus on its Cambridge, Mass., and New York offices. “I sincerely hope it remains,” he said.

ORIM, a government body, provided early funding in the form of a grant to the research program that led to the development of BlueRock’s cardiac technology stream. ORIM does not currently have any stake in BlueRock.

Bayer did not immediately respond to a question on how its acquisition would impact the Toronto offices in MaRS Discovery District.

But BlueRock said its office in Toronto allows it to be close to its partner, the University Health Network. It works with Gordon Keller, director of the McEwen Stem Cell Institute, who’s known for figuring out a way to turn pluripotent stem cells into cardiac muscle cells, which could replace damaged tissue in heart-attack patients. In New York and Cambridge, BlueRock partners with other leading scientists.

Although the venture-capital ecosystem in Canada isn’t as mature as in the U.S. or Europe, this country’s scientific research is every bit as good, said Brad Bolzon, managing director and investment team chairman with Versant.

Speaking on how BlueRock is working to commercialize Dr. Keller’s findings, Janet Rossant, senior scientist with SickKids Research Institute, said the acquisition is “ a demonstration that things that are born here can stay here and grow.”

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“There really is a great opportunity for other venture capitals to come here and see what we have to offer,” Dr. Rossant added.

The sale to Bayer validated Versant’s decision to expand into Canada five years ago, Dr. Bolzon added.

“By any standard, BlueRock would be considered a top-tier return,” he said.

Editor’s note: (Aug. 8, 2019) A previous version of this story incorrectly identified Janet Rossant as the chief of research at the SickKids Research Institute.

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