Canada’s Life Sciences Sector: Driving Results
The COVID-19 pandemic has had a devastating impact on Canada’s healthcare system, society, and economy. Canada is not alone on this, as societies and economies globally were unprepared for the scale and scope of the virus’ impact. It is increasingly clear that in order for us to return to the world we once knew, we will need: efficient testing and tracing capacity; a diverse suite of anti-viral therapeutics, and an availability and acceptance of effective vaccines and the ability to distribute them to the world’s population in a timely fashion. The biotechnology industry is tasked with delivering on each of these. Thankfully, there is some cause for optimism as early indicators show the industry is responding on several fronts with several Canadian early stage companies including AbCellera, Medicago, and IMV, and prominent Canadian institutes such as VIDO-InterVac that were ready to move quickly towards delivering solutions.
In anticipation of solutions being found, many governments are wisely turning their attention to the rebuilding of their respective economies as well as preparing for a future pandemic crisis. In this process, there is an honest recognition that post-COVID-19, some important economic sectors will be slow to return while some may never recover. In this context, governments will be looking for other sectors to both launch the economic recovery and become economic cornerstones in the longer term.
The Canadian biotech sector uniquely holds the potential to help fuel our economic recovery while offering the potential to deliver solutions for future healthcare challenges. Canada has a demonstrated history of scientific discovery, innovation and development which has led to the creation of a robust, diverse biotech ecosystem that extends across the country and includes: world-class research institutions and hospitals; proven biotech entrepreneurs and enterprises; a highly-educated workforce; and scientific, regulatory and legal expertise.
The financial opportunity of the sector is undeniable and demonstrated. Indeed, over recent years life sciences companies generally have been some of the best performers in the IPO market including: Fusion Pharmaceuticals, Aurinia Pharmaceuticals, Repare Therapeutics, Zymeworks, Clementia Pharamceuticals, whose combined value amounts to $4.1 billion at time of IPO, representing phenomenal value creation for investors, founders, employees and the economy. Moreover, the Business Development Bank of Canada (BDC) reported life sciences funds having twice the rate of return than non-life sciences funds, including those focused on information and communications technology (ICT) and clean tech. The evidence clearly demonstrates there is a significant opportunity for further investment and growth.
There is already a strong venture capital sector in Canada upon which we can build. Mirroring the growth of the sector itself, Canada’s life sciences venture capital sector has seen significant growth over recent years. Between 2013 and 2019, the Canadian sector has experienced a 121% increase in the number of deals (53 to 117) and a 300% increase in dollars invested (CAD $271M to CAD $1.085B). As we look ahead, there remains significant headroom for Canada to become more competitive in creating, attracting, and retaining companies and talent by growing the pool of available investment capital.
Canada has a demonstrated history of scientific discovery, innovation and development which has led to the creation of a robust, diverse biotech ecosystem that extends across the country and includes: world-class research institutions and hospitals; proven biotech entrepreneurs and enterprises; a highly-educated workforce; and scientific, regulatory and legal expertise.
Yet, as the recent Globe and Mail article “Biotech blind spot: How Canada’s big investors missed the boom happening right now” served to highlight, there is an important gap which needs to be addressed. Despite the recent boom and its corresponding returns to investors and the sector’s investment potential going forward, Canadian pension plans, foundations, endowments and other institutional investors which represent significant investment pools are for the most part not active in the Canadian life sciences investment space. With one notable exception, the Fonds de solidarité FTQ which has been an active institutional investor in the Canadian life sciences sector having successfully invested in several Canadian companies and several of Canada’s leading healthcare venture capital firms for many years now. The sector and economy more broadly would benefit greatly if other institutional investors were to follow the Fonds’ lead.
Performance data as of the end of 2019 provided by BDC demonstrates the tremendous opportunity in the sector. On average, funds dedicated exclusively to life sciences had twice the 10-year Internal Rates of Return (16%) than non-life science funds (7%). Recent US industry data has also demonstrated that life sciences investments are less volatile and generate significantly better returns than other sectors such as ICT, cleantech and energy.
As we sit amidst the uncertainty generated by the COVID fog it is very difficult to find the sightline on longer term objectives. That said, now is exactly the time when we should be focusing on the future. This sector has demonstrated its resilience and importance throughout this crisis. Leveraging and investing now in its multiple strengths and components including early stage companies, universities, research institutes, and large multinational companies, will create the environment for life sciences companies to bring the high value next generation solutions the world needs and will enable the economy to get an early jump on recovery.