Panel: Life Science Sector Encouraged by Strong Financing Deals

The well-funded venture capital market is helping position life science companies for impressive growth, some experts say.

During a panel at the Vancouver-based Access to Innovation Conference last week, experts and players in the field spoke about the momentum with which the sector is growing, as well as possible obstacles that may cause hiccups in 2020.

Vince Lozada, managing director of biotechnology investment banking at RBC Capital Markets, said so far US$3.7 billion has been raised by public companies in 2020’s first quarter, putting it on track to rival Q1 2019, when about US$5.8 billion was raised.

“The markets are incredibly encouraging from a financing perspective in life sciences, which as you think about some of the geopolitical concerns, some of the public health concerns that we’ve seen more recently, and the market’s ability to overcome that, (is) quite notable,” Lozada said.

In Lozada’s view, a receptive regulatory environment and advancements in pharmaceuticals and biotechnology have created significant demand for the evolution of the sector, providing tailwinds that should give life sciences a good foundation amid volatility.

And investors’ pockets are deep, Lozada continued, creating a large supply of capital for firms working within the industry.

Building on the investment discussion, Lozada said that the overarching investment thesis when it comes to life sciences is often based on the potential for merger and acquisition exits.

“If you think about companies with platform technologies … it is unrealistic to think that a single company can truly exploit all of the opportunities that platform technology delivers,” Lozada said. “Smart partnering actually increases the value of the pie as opposed to decreasing the value of the pie.”

Though the life science industry overall is well positioned for continued growth, a gap between the size of the sectors in Canada and the US has raised its own set of concerns.

Simon Pimstone, CEO of British Columbia-based Xenon Pharmaceuticals, said venture capital exits in the US are an order of magnitude larger than those for Canadian deals in life sciences. In his opinion, it’s due to the fact that Canadian companies don’t scale up their operations.

“I think we’re at a point now where we have to be (on) a level playing field with with global companies,” Pimstone said. “Ultimately, I think if we do, we’ll be able to keep our companies in this province.”

Lozada chalked up the difference to the sheer size of both the life science market and the venture capital space in the US, which allows for more opportunities.

Despite the challenges and regardless of location, investors are always looking for great science, Lozada said, adding that large pharma investment teams spend a substantial amount of time looking for investments outside of the US, where valuations tend to be inflated.

When it comes to initial public offerings, Lozada said private companies in the life science space are increasingly prepared to make the jump into the public markets when it comes to factors like financial controls and auditing.

However, he warned that firms should take care to consider the benefits and drawbacks of going public and being at the whim of public sentiment.

“Sometimes you (have to) be careful what you wish for as a public company, particularly as you think about pipeline concentration from a clinical perspective, recognizing that inevitably … there is going to be some type of clinical hiccup along the way.”

To combat that potential stumble, Lozada suggested that pipeline diversification is key for public life science companies to maintain investor confidence.

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Securities Disclosure: I, Danielle Edwards, hold no direct investment interest in any company mentioned in this article.