Genesys Capital has collected almost three-quarters of the $125 million target set for its third venture fund, adding to the momentum felt of late in Canada’s life-sciences sector.
Genesys Ventures III initially closed at $90 million in committed capital, the Toronto firm said today. It is expected to reach its goal early next year, Managing Director Damian Lamb told PE Hub Canada.
Should the fund reach its $125 million target, it will be the largest Genesys has raised in its 16-year history.
Fourteen limited partners committed to Fund III. The first to sign on was HarbourVest Canada Growth Fund, a $375 million venture fund-of-funds managed by the Boston asset manager HarbourVest Partners.
Other fund investors, which were not identified, reflect a mix of new and repeat LPs, Lamb said. They include institutional funds, high-net-worth individuals and strategic investors.
Fund III, earmarked for investments in North American biotech and healthcare companies, launched in April 2015. Its initial close comes as life-sciences deal-making in Canada is intensifying.
Venture investment in life-sciences companies has grown steadily in recent years, hitting $523 million in 2015, the largest deployment to the sector in nearly a decade, according to Thomson Reuters.
A run of major financings may push the numbers even higher this year. In the first half, 45 deals backing such companies as DalCor Pharma and Zymeworks garnered $368 million, an amount that exceeds annual totals in four of the past six years.
Lamb, who co-founded Genesys with Managing Director Kelly Holman in 2000, said the data suggest an improving picture for Canadian life-sciences investment. He added, however, that many companies, especially those in the early stages, continue to be “starved for capital.”
“There is very good science in Canada and great opportunities to be had,” he said. “But there have not yet been enough venture-backed successes.”
A shortage of risk capital has probably given Genesys a competitive advantage.
Genesys has tended to focus on seed and startup life-sciences financings. Many of its best opportunities, found primarily in the Toronto-Montréal research corridor, began as “a clean sheet of paper,” Lamb said.
Genesys has taken the lead in more than 90 percent of its early-stage investments. This activity demands that the firm do some “heavy lifting” but also gives it access to multiple “unpolished gems,” Lamb said.
Genesys reaped the benefits in a recent series of portfolio wins. They include last year’s public-market debut of Profound Medical, a specialist in prostate-cancer treatments.
Another is Naurex, a developer of therapies for neurological disorders. Naurex was sold to Allergan last August for US$560 million. The deal awarded Genesys five times invested capital up front and is expected to deliver as much as 15 times via additional payouts.
A recent spin-out of Naurex called Aptinyx counts Genesys as one of its founding shareholders. Earlier this year, the company raised a US$65 million Series A financing led by New Leaf Venture Partners.
These liquidity events have significantly boosted Genesys’s bottom line. Its current fund, Genesys Ventures II, is expected to deliver an overall net return of 25 percent to 30 percent.
In the months ahead, Genesys will give priority to closing Genesys Ventures III, Lamb said. The firm will also begin turning its attention to new life-sciences investments.
Fund III’s debut deal, already in the hopper, may be announced as soon as the fall, he said.
Lamb wants to use the fund’s proceeds to add to the investment team and “expand the capabilities we can bring to bear on the portfolio.”
Along with Lamb and Holman, Genesys’s team includes General Partner Jamie Stiff and Director of Finance and Operations Jennifer Williams.
Photo of Damian Lamb courtesy of Genesys Capital
Photo of science-lab workers courtesy of ©iStock/sanjeri.