Key Takeaways
- • Amplitude Ventures is set to announce the close of its second precision medicine fund at $263 million, up from $204 million for its first fund in 2019, according to The Globe and Mail.
- • Canadian life-sciences VC firms are raising new funds despite a decade of strong returns, yet Canada's large pension plans outside Quebec have not committed capital to the sector.
- • Business Development Bank of Canada reports its life-sciences venture investments generated an average internal return of 22.6% over the past decade, above IT and clean technology levels.
- • Fund managers say the lack of domestic pension capital has limited fundraising and forced them to cede later-stage gains to U.S. and European investors.
- • Federal government's working group led by former Bank of Canada governor Stephen Poloz is seeking ways to channel more pension capital into domestic investment.
Summary
Canada's life-sciences venture capital firms are raising new funds following a series of lucrative buyouts of domestic startups and a decade of strong returns. According to The Globe and Mail, Amplitude Ventures is set to announce it has closed its second precision medicine-focused fund, raising $263 million, up from the $204 million raised for its first fund in 2019. The firm was spun out of Business Development Bank of Canada (BDC), and its founding partners are Dion Madsen and Jean-Francois Pariseau. Genesys Capital has closed two-thirds of its $150 million target for its fourth fund, Lumira Ventures is preparing to raise its next core fund after raising US$223 million in 2021, and Amorchem will begin raising a third preseed and seed fund aiming to match the $45.5 million raised in 2017.
Despite this performance, the sector continues to struggle to attract Canada's large pension plans outside Quebec. BDC said its life-sciences venture investments generated an average internal return of 22.6% over the past decade. Amplitude's new fund drew mainly Quebec-based institutions, including the Caisse de depot et placement du Quebec, Fonds de solidarite FTQ, Teralys Capital, Investissement Quebec, BDC and Fonds CSN, along with new investors Northleaf Capital, the B.C. government's InBC fund and the Goodman family.
Canadian life-sciences VC executives say the shortage of domestic institutional capital has limited how much they can raise and deploy. Cedric Bisson of Teralys said that comparable U.S. or European firms with the same performance would have easily raised double the amount from local investors. As a result, most large returns from successful portfolio companies, such as weight-loss drug developer Inversago, have gone to American and European investors. Governments have partly filled the gap through Crown corporations and programs such as the Venture Capital Catalyst Initiative. Pension funds generally avoid early-stage life-sciences investing, which they view as too small and risky relative to their preference for tickets in the tens or hundreds of millions of dollars. The exception cited is CPP Investment Board, which backed Fusion and Deep Genomics as part of a global sector mandate.
Policy pressure is building. A federal working group led by former Bank of Canada governor Stephen Poloz is gathering ideas from pension chief executives and board chairs on attracting more institutional capital to domestic investment. Lumira managing general partner Peter van der Velden suggested pension funds could invest through funds-of-funds or pool capital collectively to avoid building in-house infrastructure. Fonds FTQ's life-sciences vice-president, Genevieve Guertin, said biotech offers strong impact potential as ESG considerations grow among global investors.
Despite this performance, the sector continues to struggle to attract Canada's large pension plans outside Quebec. BDC said its life-sciences venture investments generated an average internal return of 22.6% over the past decade. Amplitude's new fund drew mainly Quebec-based institutions, including the Caisse de depot et placement du Quebec, Fonds de solidarite FTQ, Teralys Capital, Investissement Quebec, BDC and Fonds CSN, along with new investors Northleaf Capital, the B.C. government's InBC fund and the Goodman family.
Canadian life-sciences VC executives say the shortage of domestic institutional capital has limited how much they can raise and deploy. Cedric Bisson of Teralys said that comparable U.S. or European firms with the same performance would have easily raised double the amount from local investors. As a result, most large returns from successful portfolio companies, such as weight-loss drug developer Inversago, have gone to American and European investors. Governments have partly filled the gap through Crown corporations and programs such as the Venture Capital Catalyst Initiative. Pension funds generally avoid early-stage life-sciences investing, which they view as too small and risky relative to their preference for tickets in the tens or hundreds of millions of dollars. The exception cited is CPP Investment Board, which backed Fusion and Deep Genomics as part of a global sector mandate.
Policy pressure is building. A federal working group led by former Bank of Canada governor Stephen Poloz is gathering ideas from pension chief executives and board chairs on attracting more institutional capital to domestic investment. Lumira managing general partner Peter van der Velden suggested pension funds could invest through funds-of-funds or pool capital collectively to avoid building in-house infrastructure. Fonds FTQ's life-sciences vice-president, Genevieve Guertin, said biotech offers strong impact potential as ESG considerations grow among global investors.
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