Canada’s life sciences sector is on a roll.
Current levels of venture capital investment are unprecedented. Dollar flows set a record last year, with $1.1 billion deployed to 74 biotech companies, according to Thomson Reuters data. That exceeds the prior record in 2000 by 32 percent.
The robust deal-making has continued in 2017. VC invested is tracking ahead of activity at the same point in 2016, with $443 million going to 26 companies, including Aurinia Pharma and Fusion Pharma.
Today another major deal was announced. Repare Therapeutics, a Montréal developer of precision oncology drugs, emerged from an 18-month stealth period to raise about $90 million (US$68 million) in a Series A financing.
The round was co-led by Silicon Valley’s Versant Ventures, which fostered the startup’s incubation, and MPM Capital. Fonds de solidarité FTQ, Celgene and BDC Capital were among the other investors.
Jerel Davis, managing director at Versant, said Repare is advancing a platform and pipeline of novel medicines that target vulnerabilities of tumour cells in cancer. The funds raised will help the company’s 20-person team to begin “moving multiple drugs into the clinic.”
The Repare round follows Versant’s December partnership with Bayer to invest US$225 million in Toronto stem-cell therapy startup BlueRock Therapeutics.
Repare is led by Canadian biotech exec Lloyd Segal, who recently joined Versant as an entrepreneur-in-residence. His company’s Series A pushes year-to-date VC investment in life sciences north of $500 million, above most annual totals since 2007.
Zymeworks’ public debut
One of the sector’s other big stories is the IPO of biotherapeutics provider Zymeworks.
The Vancouver company last month secured about $86 million (US$64 million) from an issue on the Toronto and New York exchanges, valuing it at about $430 million. The event marked Canada’s first venture-backed life sciences IPO in two years.
Zymeworks focuses on commercializing therapeutic antibodies to treat cancer and other diseases. As a private entity, it raised nearly $170 million.
Shermaine Tilley, managing partner at CTI Life Sciences Fund, Zymeworks’ earliest institutional investor, said the company won backers partly because of its innovative protein engineering technology, which “discovers drugs not just by using a lab, but by using computational power.”
Zymeworks’ capabilities also attracted global pharma giants. In recent years, Celgene, Daiichi, Eli Lilly, GSK and Merck have all entered into strategic partnerships with the company, providing it with revenue streams as well as validation of its approach.
Tilley says Zymeworks’ success also owes to the ambition of its leadership team, including Ali Tehrani, the company’s co-founder and CEO. “They aren’t interested in being the best biotech company in their field at home, but being the best in the world,” she said.
Multiple VC and strategic investors joined Zymeworks’ $87 million (US$61.5 million) Series A financing last year. Led by BDC Capital and Lumira Capital, the round laid the groundwork for the IPO and the company’s “ability to move forward by accessing deeper pools of capital in Canada and the United States,” Tilley said.
From IPO to anchor company?
Going public has encouraged talk of Zymeworks as Canada’s next biotech anchor company.
Dion Madsen, senior managing partner at BDC Capital, makes this case. He says Zymeworks is positioned to become an anchor to an emerging antibodies and immunotherapy cluster in Vancouver, operating as a “magnet for capital and talent” and a source of spinoffs.
Madsen says BDC Capital is exploring a clusters strategy focused on Vancouver, Toronto (medical imaging) and Montréal (AI with health applications). The strategy, intended to take the domestic sector to a next step in its evolution, envisions “a number of billion-dollar companies” that can bring critical mass to local ecosystems.
“We’ve always been good in Canada on the innovation part and less good at the capital and talent part,” Madsen said. “We need to address this by developing world-class companies that control their own destiny, that acquire other companies rather than being acquired.”
More distance to travel
Substantial dollar flows into life sciences are being driven by large rounds, like Repare’s. Last year, startups raising financings of $20 million-plus took more than 70 percent of the overall amount, an all-time high.
Madsen and Tilley say big rounds are the result of improved fundraising and increased cross-border activity. Versant, which closed a US$400 million fund in January with the help of Canadian LPs, is illustrative of both trends.
But Madsen notes that Canadian life sciences funds remain small relative to the U.S. venture industry. Additionally, while financing sizes are today larger than in the past, they may not be equipped to meet demand from the many VC-backed startups that are now maturing.
The topic should be top of mind in Ottawa as it plans to roll out the Venture Capital Catalyst Initiative, a $400 million program unveiled this year to shore up VC supply.
Photo of lab scientists courtesy of AlexRaths/iStock/Getty Images
Photo of Jerel Davis courtesy of Versant Ventures
Photo of Shermaine Tilley courtesy of CTI Life Sciences Fund
Photo of Dion Madsen courtesy of BDC Capital