Venture capital firm Versant Ventures is expanding its investment network in Canada.
The California-based investment company that specializes in life sciences – from medical devices to biopharmaceuticals – said Monday it is planning to add a Montreal-based investment division aimed at starting new companies from scratch.
This follows other recent efforts by the firm to seek out investment opportunities in the country. This year Versant launched a Vancouver office, and it recently formed a partnership with Bayer HealthCare to invest in a company called Inception 4, which is focused on the treatment of retinal eye disease. Versant invested $10-million.
"There's a lot of good discovery research in Canada," said Jerel Davis, a principal with Versant Ventures who recently moved to Vancouver from San Francisco.
Biotech stocks have soared this year, benefiting from the heat radiating off of the broader health care and technology sectors. Heavyweights Celgene Corp. and Gilead Sciences are both up well over 100 per cent so far in 2013.
Venture capital for life sciences, biotechnology and related fields is hard to come by in Canada. Growth of companies based on science can be stunted without necessary funding because of the high costs of research. While some groups have increased their investments with the favourable markets, funding is still in demand. At the same time, large companies are relying on small companies for new ideas – Versant says that 40 to 50 per cent of new drugs now have their roots in small companies or academic research.
To reduce some of the risk Versant uses a business investment model that prenegotiates a deal for the startup, should it be successful. The established players such as Celgene and Bayer provide some research funding, and gain the option to acquire the business later. This gives Versant an exit strategy in its three– to four-year time horizon.
The process involves looking for promising research, finding corporate partners with specific needs, and then matching them up.
Versant is partnering with major international companies on what it sees as neglected investment opportunities in Canadian science.
"There are very few investors looking at the discoveries in B.C., Ontario and Quebec and trying to figure out how to build companies, and that's attractive to us," Mr. Davis said. "It's in contrast to other geographies in the U.S. where there's lots more investment."
In November it founded Blueline Bioscience, a Toronto-based "biotechnology incubator" that will work with aforementioned Celgene to help startups specializing in areas such as oncology get off the ground. The group works out of the MaRS Discovery District of Toronto.
Versant is already an established investment group in the U.S., where it has $1.6-billion under management, and Western Europe. It has launched more than 120 companies.