Investing Trend: Life Sciences in 2011
- Details Posted Jan 23, 2012
By Linda Doell
Despite the global economic quagmire, venture capital’s life science sector experience robust growth in Canada in 2011, a trend that is expected to continue this year.
Look no farther than the number for the third quarter 2011 in a Thomson Reuters report prepared for the Canadian Venture Capital & Private Equity Association.
Life sciences–including biopharmaceuticals and health care–posted impressive gains in the third quarter, with $106 million invested in 21 companies, an 83% increase over the $58 million invested in the same quarter of 2010.
In the first nine months of the year, 48 life science companies received $286 million in financing, and the report predicted the sector would clock in just shy of $400 million for the year.
For more evidence of a strengthening sector, just take a look at a recent Deloitte study into the life science industry in Alberta. The report found an upswing in Alberta's life science industry in 2011 including anticipated increases in research and development spending because of improved access to capital.
The study also anticipated strong growth prospects for Alberta companies following the implementation of the region's Scientific Research and Experimental Development tax credit--tax incentives,matching fund models and other tools meant to improve the investment climate and encourage angel investors.
South of the border in the United States, a report from PwC US that relied on data from MoneyTree showed venture capital funding for the life sciences sector dropped 18% during the third quarter of 2011 after two consecutive quarters of growth.
During the third quarter, venture capitalists poured $1.8 billion into a total of 170 life sciences deals in the U.S. – but that was still the smallest number of deals since the beginning of 2009.
“VCs are saying that challenges in the regulatory environment for life sciences companies are prompting them to look to other industries to put their money to work for a faster return on their investment,” said Tracy T. Lefteroff, global managing partner of the venture capital practice at PwC US, in a prepared statement. “When investors see a lack of exits for their companies, it depresses their appetite for funding on the front end. The nearly shut IPO window and volatility in the equity market during the third quarter contributed to the slowdown in life sciences venture funding.”
While that may be the case in the United States, the trend is almost opposite in Canada. Case in point: three of the top seven venture capital deals listed in the Thomson Reuters report for the third quarter 2011 were life sciences firms:
- MSI Methylation Science of British Columbia received $19 million from three venture capital funds for its dietary supplement
- Affinium Pharmaceuticals of Ontario got $15 million from four VC funds for its work in antibacterial medicines
- And Enobia Pharma of Quebec received $39.1 million total from six VC funds for its enzyme-replacement therapy. At the beginning of 2012, Alexion Pharmaceuticals, in Connecticut, announced it planned to buy Enobia for up to $1.08 billion