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The global pandemic has sparked a gold rush in the health-care and biotech sector, as companies of all sizes scramble to bring COVID-19 treatments to the market at breakneck speed.

Along with those companies pursuing legitimate lines of medical research, less-credible actors saw an opportunity to profit from the flood of investor money into the space.

Biotech blind spot: How Canada’s big investors missed the boom happening right now

“There was a lot of promotion, a lot of pump and dumps, and a lot of tangential connections between the technology they had and COVID-19,” said Brian Bloom, chief executive of Bloom Burton, a Toronto investment banking firm specializing in health-care companies, and the first stop for many Canadian biotechs looking to raise funds.

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Mr. Bloom spoke to the Globe about the role of Canadian health care in the race for a cure.

Back in the spring, many companies with pandemic-related treatments seemed to come out of nowhere.

From February to April, any company that announced anything to do with COVID-19 saw their stock react in a positive way, and saw their prospects for financing dramatically increase. Health Canada has been incredibly responsive to get new clinical trials up and running as quickly as possible. So companies have taken advantage of that in a good way and in a bad way. When you’re incredibly sick and in hospital with COVID-19, you might be given repurposed drugs that are used for other diseases, to see if they can save you from death. But because there are hundreds of anti-inflammatories on the market and in development, everyone all of a sudden had a coronavirus treatment. Most of those won’t pan out.

It’s reminiscent of the investor frenzy for all things blockchain.

It was the same with cannabis, the same with artificial intelligence. And the sad result, which was the case with everything from cannabis to blockchain to AI to tulips, is that the retail investor ends up holding the bag. There are many companies that have started going down, and my prediction is they will continue to go down to where they started, or lower. What you’re going to see, for the vast majority of these companies that have inappropriately linked themselves to COVID, they won’t report negative clinical results, they will just quietly bury it.

Where have Canadian institutional investors been in all of this?

Canadian institutional investors do invest in health care, but in U.S.-listed companies. By definition, Canadian companies are smaller cap, and generally less liquid. For the funds that are set up to own Canadian equities as their mandate, there isn’t a great selection of companies with the liquidity and market cap for them to choose from. The S&P/TSX Health Care Index has around 10 names, and I think six are cannabis names. And then you have extended care and senior living, which are really real estate companies.

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Is Canada contributing meaningfully to legitimate pandemic research and drug development?

Our whole industry has mobilized quickly and with enormous resources. There are hundreds of products in development, from vaccines to antivirals to device diagnostics and healthcare software, that are all part of the global fight against the coronavirus. These products that will make a huge difference in this pandemic and Canada is playing its part.

What are some of the Canadian companies you’re excited about?

AbCellera, in Vancouver, is neck and neck with a massive U.S. company, Regeneron, in developing a drug that can neutralize the virus. They got a government grant and a big partnership with Eli Lilly. Another company is Appili Therapeutics, which is sponsoring one of the most important coronavirus clinical trials anywhere in the world. It’s a prophylactic clinical trial in long-term care facilities, where 80 per cent of deaths in Ontario are. I’m on their board and Bloom Burton has a large ownership stake.

What about vaccines?

On the vaccine side, we have privately held Medicago. They have a large manufacturing and research facility in Quebec City and they have a leading program for a coronavirus vaccine. That’s a Canadian technology with a Canadian facility and with Canadian government backing in clinical testing. The other TSX-listed company that is looking to test a coronavirus vaccine is IMV. It mainly has clinical programs in oncology, but they have turned their technology toward coronavirus vaccine development, and I’m excited to see what happens with their program.

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What non-Canadian companies have the most promising lines of research?

With direct antivirals, we have big biotechs like Gilead and Regeneron, which have very exciting programs related to lowering the severity of coronavirus symptoms, the amount of infection spread, and ultimately, the number of people who may be hospitalized and die. Companies with big vaccine programs like Moderna and Novavax are moving very, very quickly. There is unlimited brainpower and unlimited capital.

When do you think a vaccine might be available?

The combination of three things – screening and diagnostics, frontline antivirals, and social practices – is already resulting in a decrease in the severity of the disease, the amount of spread, and how many people ultimately get a severe form that requires hospitalization. We already have much better knowledge than we did months ago about what protocols work, when to intervene, and with what device or drug. People are sharing all kinds of information and coming up with protocols for the tools we already have – use this generic drug first or wait to ventilate until this happens. That’s already resulting in dramatically lower mortality rates compared to the horrific news that came out of places like New York City, when it was at its peak. Lastly, I do believe a vaccine will be available within the next 12 months. That could be just for the most vulnerable populations, but it should be available.

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