Canada's life sciences venture capitalists are raising again, led by Amplitude Ventures, which is announcing today it has raised $263m for its 2nd fund. As usual, Canada's pension giants (except the Caisse de dépôt et placement du Québec (CDPQ)) are a non-factor in their fundraising plans.
The continued absence of Canada's giant capital pools from the life sciences industry in their backyard comes despite the fact these VC funds have led the Canadian industry in returns for the past decades (according to a new report from BDC Capital (Canada)) and have spun up and funded several promising companies that have been gone public and/or been snapped up by global giants in US$1-billion+ deals including Fusion Pharmaceuticals and Inversago Pharma. (CPP Investments | Investissements RPC is an investor in Fusion; it's one of 2 biotech deals they've done here, but it has a global mandate and has made most of its deals in the sector abroad).
With limited resources to draw upon, Cdn VC funds typically raise about half of what they could if they were elsewhere. For Canada's pension funds, the domestic sector likely looks too small for them to deploy big cheques. It's odd that we have some of the world's largest capital pools and one of the largest and most renowned collection of leading edge research institutions and the two seem so disconnected when it comes to translating discoveries at the latter to the commercial domain navigated by the former.
There are consequences. The early stages are where Canadian VCs are most active. But as their funded companies advance and raise larger sums, the early local investors have limited capacity to invest in later rounds. Who shows up to write the big cheques and reap the lion's share of rewards when the companies exit? US and European investors.
Innovative idea are a natural resource but those who've reaped the biggest rewards from the lucky strikes in Canadian petri dishes have mostly not been Canadian. I'm often surprised by how much this sector is ignored by most investors here.
Investing in life sciences comes with extremely high risks and requires technically adept teams teams who can parse the lab results and read the tea leaves of global pharma trends (the Fonds de solidarité FTQ is one of the few here to make that investment in time and people).
But many groups - elsewhere - have built giant companies (for fun, compare the market caps of Denmark's Novo Nordisk, which built its dominance around Canadian-discovered insulin, and the much smaller RBC, our largest company), and a lot of that value was built around Canadian discoveries. (Novo and Eli Lilly and Company, the other global insulin leader, are the world's two most valuable drug companies).
Canada's pension funds are among the world's largest investors and it will be interesting to see if Chrystia Freeland's efforts to cajole them to invest more at home, in sectors like tech and biotech, will change that.
