COVID pandemic sparks explosion in biotech startup investments
Canadian companies collectively raised a record $2.5B from investors this year
Who would have thought stink bombs and deadly exhaust fumes would be on the cutting edge of medicine.
Enter Antibe Therapeutics Inc. The groundbreaking Canadian biotech drug company is riding an industry investment boom swollen by COVID-19 to harness how hydrogen sulphide, that rotten egg stench, helps relieve pain without bleeding and ulcers, a major drawback in drugs like aspirin, ibuprofen and naproxen.
“We're going to initiate a whole new field around what are called the gaseous mediators: nitric oxide, hydrogen sulfide, and carbon monoxide,” Dan Legault, CEO of Antibe Therapeutics, said by phone this month. “Everyone knows them as poisonous gases for the past 100 years, but it turns out that our bodies produce these three molecules and they play critical roles in physiology at the individual molecule level.”
After phase three trials begin next year, Antibe's effort could be on the market in 2023, targeting the annual multibillion-dollar market of non-steroidal anti-inflammatory drugs with trade names such as Advil, Celebrex and Aleve.
Antibe, which graduated from Venture Exchange to the TSX this month after raising nearly $29 million in June, is one of 38 Canadian biotech and pharmaceutical companies that collectively raised a record $2.5 billion from investors in the first 10 months of this year, dwarfing 2019's total of $817 million, according to FP Data.
U.s.-based investment bank Cowen Inc. led the fundraising in the Canadian biotech space, raising $388.9 million across five deals, followed by Toronto-based Canaccord Genuity Group Inc. which raised $235.5 million on nine deals.
Canada's biotech health-care industry, brimming with small research-stage pharmaceutical companies that are preparing to bring a new drug, treatment or inoculation to market, is booming as part of a global trend after the COVID-19 pandemic spiked awareness in vaccines and all things medical. However, the industry is grappling with access to experts and the potential for government drug price policy to curtail investment by large companies.
Hamilton, Ont.-based Fusion Pharmaceuticals Inc., which pulled in $290 million with an initial public offering on Nasdaq in June, is on the leading edge of another concept, new cancer medicines called targeted alpha therapies. They aim to bring radiation treatment directly to the cell using different delivery vehicles, such as antibodies, instead of zapping the patient with an external beam.
The therapy uses the concept of precision medicine — using imaging to see where the drug goes in a patient, which helps doctors select the right drug for a particular patient's cancer stage.
“The benefit to patients can be tremendous,” Fusion CEO John Valliant said by videophone. “That's going to have a huge impact on how people think about approving drugs and reimbursing drug companies down the road.”
Fusion's lead program is in a phase one clinical trial targeting a marker that's found on multiple types of solid tumours, Valliant said.
There are typically three phases in a therapy's development and he said it was too early to estimate when the treatment might enter the market.
Antibe and Fusion share an approach to drug development in that they're backing a platform for delivery, not one specific drug, which gives them more chances for success, says Richard Bozzato, a senior adviser at Mars Discovery District, an entrepreneurial incubator in Toronto.
Vancouver-based Abcellera Biologics Inc. also made a splash this month after securing emergency approval for an ANTI-COVID drug from Health Canada. The company has developed the human antibody in collaboration with U.s.-based Eli Lilly and Co.
“As a Canadian company, we are proud to contribute to the global fight against COVID-19 and hope our efforts will help people in Canada and around the world in the face of this medical emergency,” said chief executive officer Carl Hansen, a former University of British Columbia professor who owns 26.3 per cent of the company.
Abcellera also filed for an initial public offering on Friday with the U.S. Securities and Exchange Commission, listing the offering as $200 million, a placeholder that's expected to change. Billionaire Peter Thiel also recently joined the company as a non-executive board member. Thiel, who is also on the boards of Facebook Inc. and Palantir Technologies Inc., had acquired a small stake in Abcellera earlier this year, according to a Bloomberg report.
Another platform making headway locally is the use of artificial intelligence to identify targets, design compounds, guide clinical trials and run back-end systems, seen in advances by Toronto-based companies Deep Genomics, Phenomic AI, Netramark, ProteinQure and Cyclica.
“We have a lot of strength in that area and it's one that's going to become very important down the road,” Bozzato said. “You're going to see some significant breakthroughs from some of these companies in the coming year.”
Just this month Deep Genomics, started by Brendan Frey, a University of Toronto medical and engineering professor who co-founded the Ai-focused Vector Institute, inked a deal with Nasdaq-listed Biomarin Pharmaceutical Inc. of California.
“Our second generation AI Workbench continues to unlock a rapidly growing number of therapeutic opportunities for patients with genetically defined disorders,” Frey said in a statement.
Deep Genomics has been focused on neurodevelopment afflictions, neurodegeneration and metabolic disorders, with multiple active programs in each area, he said.
Bozzato says other notable startups include Specific Biologic, which is developing a novel CRISPR genetic engineering technique to treat cystic fibrosis, lung cancer and infectious diseases, and Providence Therapeutics, which the federal government recently funded with $4.7 million for clinical trials of a COVID-19 vaccine. It's also researching personalized messenger ribonucleic acid vaccines for ovarian, breast and brain cancers.
The past decade's boom in gene therapies has combined with encouragement from capital markets and regulators, such as the U.S. Food and Drug Administration, to boost the industry in Canada and elsewhere, says Brian Bloom, co-founder of Bloom Burton & Co., the country's main health-care-dedicated investment banking firm, based in Toronto.
FP Data shows Bloom Burton is ranked seventh among bookrunners raising equity for Canadian biotech companies, having led five deals that raised $109.8 million in the first 10 months of the year.
“Where we do have the biggest challenge in Canada,” Bloom said by phone, “is just having a pool of CEOS and C-level talent that can lead companies that ultimately attract global capital and develop their products globally. That's hard. There's only a limited number of people who fit in those roles.”
In time, the domestic industry will mature, producing more candidates from those in the current corporate mid-ranks, he said.
COVID-19 has heightened retail investors' interest in biotech, however they should vet the companies for investments from bonafide health-care-focused investors or large institutions such as mutual, venture and hedge funds, Bloom said.
“The danger for retail investors is that there are really large market cap and liquid companies, but they didn't get there by convincing any credible or specialized investors that what they have is worth doing,” he said.
There are about 50 Canadian public biotech companies listed on Nasdaq, the New York Stock Exchange or the TSX with a total market valuation for Canada's industry around $14 billion, according to Bloom.
Representing some 230 domestic biotech companies, with about 85 per cent focused on health care, CEO Andrew Casey of Ottawa-based lobby group BIOTECanada says government drug price policy must encourage the kind of deals like Pfizer Inc. partnering with Biontech SE of Germany on a vaccine for COVID-19.
“When you smash drug prices down without thinking about any of the consequences of the ecosystem writ large, it's a fairly narrow way of doing policy and you'll miss out on all the opportunities that a Pfizer will create by being here in Canada and investing in and partnering with other companies. And that's kind of critical to seeing the Canadian biotechs rise to the surface,” Casey said by phone.
“Which isn't to say we shouldn't be doing something to create sustainability for the health-care system. We all acknowledge that, clearly, the health-care system is expensive.”
Bozzato notes “the assault on drug prices is not just here, it's also in the U.S. But in Canada we have a much smaller market, so the incentive for pharmaceutical companies to invest here is that much less.”
Fusion's Valliant says the vibrancy of the domestic biotech space so far outweighs concerns Big Pharma might have about investing in Canada.
“It's a phenomenal time to be in the biotech sector. It's exciting, it's a way to help society, both with innovative medicines and job creation. I'm a proud Hamiltonian, so to be able to kick off a company here and get global investment brought to Canada, I feel very lucky to have this role.”
It's a phenomenal time to be in the biotech sector. It's exciting, it's a way to help society, both with innovative medicines and job creation.