Recently, life science companies have faced serious challenges raising financing. While overall venture capital financing in Canada is on the rise compared to past years (though still nowhere near the amounts seen in the early 2000s), life science start-ups are not experiencing the same increase. According to the Industry Canada "Venture Capital Monitor", investment in life sciences companies totalled $40 million during the third quarter of 2013, a decrease of about 56% compared to the same period in 2012.
Pharmaceutical and biotech companies face unique challenges in their pursuit of funding. Life science projects are considered high-risk with historically low returns on investments. Longer development timelines, including lengthy clinical trials for drugs, means investors have to wait much longer to realize returns. The result is that access to capital remains a challenge for life sciences projects. As PwC's "Canadian Life Sciences Industry Forecast 2013" suggests, Canadian organizations will be looking more and more to partnerships and licensing strategies to fill this funding gap, with the need for capital now exceeding $1 billion to achieve further growth.
As pharmaceutical companies face impending expiration of patents for successful drugs, which creates a need for new drugs to bring to market, many are re-strategizing. Rather than focus on in-house research and development, many pharmaceutical companies are looking to farm out the risk of drug development by partnering with, or investing in, early-stage life sciences companies.
Life science companies have also been looking for other ways to attract investment capital, namely by working with research centres that connect innovative and promising academic research with the commercialization capabilities of the private sector.
The NEOMED Institute, a biopharma non-profit research centre launched in Québec in November 2012 is the result of collaboration between AstraZeneca Canada, Pfizer Canada and the Québec Government. According to the institute's website, its primary aim is to help "translate early stage innovations into solid partnership opportunities." Its founders made a commitment to invest $100 million over a five year period.
In 2013, MaRS Innovation and Pfizer also joined forces to identify investment opportunities, within its member institutions and affiliated teaching hospitals, emerging from promising scientific research discoveries and advance early-stage technologies in the therapeutics and diagnostics fields of human health.
Finally, the University of British Columbia "Centre for Drug Research and Development" (CDRD) provides resources to assist researchers to advance early-stage drug candidates and bridge the commercialization gap that often exists.
The Canadian government has also recently taken action after a report it commissioned revealed that companies were struggling to find additional funding beyond an initial financing of a few million dollars. In 2013, the Canadian government launched the Venture Capital Action Plan ("VCAP"), which includes an allocation of $400 million in venture capital support, by establishing new funds while also recapitalizing larger funds. Further to this commitment, in September 2013, the government announced its intent to make a total of $50 million in commitments to four existing venture capital funds – two of which focus on life sciences.
Though times have been tough in terms of raising capital for early stage life science ventures, new programs and strategies can help to ensure that Canada remains a strong presence on the global stage.
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