B.C. leads life sciences financing

Vancouver attracts 30 per cent of the sector’s venture capital, more than Toronto

By Gillian Shaw, Vancouver Sun
November 16, 2005

Vancouver’s life sciences sector has pulled ahead of Toronto and Montreal to lead the country in venture capital investments this year, the Canadian Financing Forum West heard in Vancouver Tuesday.

Mary Macdonald, vice-president of investment banking for Thomson Financial told the forum that Vancouver accounted for 30 per cent of the $242 million in life sciences disbursements across Canada in the first nine months of this year, compared with nine per cent of last year’s $470 million.

“What is happening here is that we are seeing substantial transactions in B.C. in life sciences and that indicates B.C. has carved out a position in both the IT [information technology] sector and in life sciences,” Macdonald said in an interview after her presenation to the forum.

Vancouver was pushed into the forefront in the VC rankings thanks to multi-million-dollar deals, including the $40 million US raised earlier this year by Celator, a biopharmaceutical company focusing on the treatment of cancer that vaulted into the ranks of the largest VC investments in biotechnology in North America in 2005. 

“There has been a lot of success in B.C. in rolling out the science from UBC and SFU,” Macdonald said of the growth of B.C.’s biotech sector. 

The buoyant figures for B.C. came despite a drop across Canada in VC activity in the third quarter of this year, after successive quarters of stable or increasing numbers. The market figures presented in Vancouver by Macdonald were released Tuesday by Canada’s Venture Capital and Private Equity Association and its research partner, Thomson Macdonald, which Macdonald heads.

Canadian and foreign investors pulled back, putting total venture investments in the third quarter at $261 million, a 59 per-cent drop from the $635 million invested in the second quarter of this year. However, the third quarter followed a large rise in second quarter investments, leaving the yearto-date investments only 10 per cent behind the same period for 2004.

“We had a bit of a precipitous drop in the third quarter but we had an equally precipitous rise in the second quarter,” Macdonald told the forum. “Overall I would say we are sitting at a reasonably stable level of activity.”

Year-to-date venture capital investments in Canada totalled $1.23 billion, compared with $1.36 billion invested in the first nine months of 2004. So far this year 551 companies have received venture capital funding, close to the 560 firms that were funded over the same period in 2004. 

Macdonald said venture capital activity has been demonstrating a slight upward trend in both technology and biotechnology since the technology downturn and she expects that will continue.

“We are in an environment where things have settled down,” said Macdonald, past president and chief executive officer of Macdonald & Associates, which was acquired by Thomson Financial last spring. “In both markets we are starting to see some modest upward trend.

“I think realistically we can expect to see more of the same in the coming quarters.”

Vancouver leads the West in IT venture capital, but its share of the IT dollars disbursed in Canada dropped this year to six per cent, down from 10 per cent in 2004. Ottawa continued to account for the lion’s share of the IT dollars, capturing 39 per cent of the $678 million disbursed in the first three quarters of this year, up from last year when it tied Toronto, with each taking 28 per cent of the $940 million in disbursements.

Canada continues to lag behind the U.S. when it comes to venture capital disbursements, even when this country’s smaller size is taken into account, Macdonald said. While the number of firms funded in Canada should be about 10 per cent of the number funded in the U.S., instead Canada captures only six or seven per cent of the deals.

The average investment in Canada also lags behind that of the U.S., with Canada doing more deals to come up with less money than its neighbour.

“We have had consistent trend lines between the two countries, the disparity in that ratio has persisted,” Macdonald said.