Days after Vancouver’s Aspect Biosystems Ltd. landed US$115 million in Series B financing in early January, CEO Tamer Mohamed likely surprised many by telling BIV that he thought the investment climate for biotechnology companies was awful.
“This is the worst funding climate for biotech in an entire generation,” he said. “It’s a bloodbath out there.”
The backdrop of that climate, he said, was what made Aspect landing the new capital so impressive.
While there are examples of B.C. biotech companies that are struggling, that situation is not uniform sector-wide.
Vancouver drug-maker AbCellera Biologics Inc. has seen its share price fall by more than 95 per cent since soaring above US$70 per share after its December 2020 initial public offering.
Investors in late 2020 were likely giddy about AbCellera because the COVID-19 pandemic was in full swing, and AbCellera had partnered with U.S. pharmaceutical giant Eli Lilly and Co. to develop what was then a COVID-19 treatment approved in the U.S. and Canada: Bamlanivimab.
AbCellera then co-developed a second COVID-19 treatment, Bebtelovimab, which would be approved to better treat newer COVID-19 variants.
Approximately 2.5 million people received the treatments, CEO Carl Hansen told BIV in 2023, and the drugs saved countless lives.
Notch Therapeutics is another Vancouver-based biotech company that has enjoyed better days.
The good times were in February 2021, when the company landed US$85 million in Series A financing.
In January, it laid off two-thirds of its staff, or about 40 of 60 workers, CEO David Main told BIV.
Notch said in a statement that it is seeking to “explore alternative paths forward.”
What makes matters bleak for Notch, Main added, is that its niche within biotechnology is allogeneic therapies.
“We’re early stage, but the companies that are in later stages than us [within that niche] have not been very successful,” he said.
Notch aims to create cell therapies that use immune cells as drugs.
Those who have cancer have cells that are not effectively fighting off cancer. Healthy people, in contrast, have immune cells able to fight cancer, Main said.
Notch’s science aims to create a therapy that can be matched to specific patients, and then provided to the patients via intravenous (IV) bags, much like how blood transfusions are conducted.
“I would not describe it as a bad biotechnology investment climate,” Main said. “I would describe it as the investment community becoming very selective, because there are some biotech companies that are doing very well, and capital is flowing.”
Biotech investment shows signs of improvement
Industry insiders say the investment climate for biotech companies suffered a post-pandemic hangover and evidence now points to a rejuvenation.
“People invested so heavily in biotechnology companies during the pandemic and then, as interest rates started to come up, the whole business model of, ‘Give us money for 10 years and then we’ll let you know if we’re giving you any back,’ started to look a lot less attractive,” said Farris LLP partner James Hatton, who has done a lot of work with biotechnology companies.
One sign of tough times in business can be when there are acquisitions, and that can mean more work for lawyers, said Hatton, who said he leads a busy practice.
Vancouver’s Stemcell Technologies last year bought Maryland-based Propagenix Inc. for an undisclosed amount. It then spent US$11.8 million to buy substantially all assets from distressed Massachusetts-based biotech firm Sqz, which had recently laid off about 80 per cent of its workforce. The biotechnology trade journal Fierce Biotech described the Sqz transaction as being a “fire sale.”
Good news for the sector came January 23 when global pharmaceutical giant AstraZeneca plc announced an eye-popping $820 million (US$570 million) investment in Canada, creating more than 700 high-skilled jobs across all areas of the business, it said.
While those jobs are set to be in Toronto, other investors are placing money in B.C.
San Francisco-based EcoR1 Capital paid nearly US$26 million in January to increase its holding in Vancouver-based Zymeworks Inc.
“2024 was a pivotal year for Zymeworks, marked by the first FDA (U.S. Food and Drug Administration) approval of our internally developed product, Zanidatamab, significant clinical progress with our novel, antibody-based therapeutic candidates in solid tumors and advancements in our emerging pre-clinical pipeline,” said Zymeworks CEO Kenneth Galbraith.
The Aspect Biosystems’ cash infusion is other good news.
Mohamed told BIV that he believed his company was able to land that US$115 million in financing in January in part because of established partnerships.
That includes a US$2.6 billion partnership with pharmaceutical giant Novo Nordisk A/S in 2023.
It also includes a separate agreement, in 2024, with B.C. and federal governments that sent a combined $72.75 million toward Aspect Biosystems’ $200 million project to establish a world-leading clinical biomanufacturing facility.
“It comes down to the business fundamentals and the progress that our amazing team has been making and the pioneering work that we’re doing,” Mohamed told BIV.
It also helped that Aspect’s platform uses artificial intelligence.
Technology and life sciences firm Dimension led the round, with participation from Novo Nordisk, Radical Ventures, InBC, Pallasite Ventures, Pangaea Ventures, Rhino Ventures and T1D Fund.
Longtime biotechnology investors are optimistic and see this as a buying opportunity.
“Royal Bank did a really great look-back at venture capital over the last couple of decades,” Nancy Harrison, a venture partner at Amplitude Ventures, told BIV.
Her firm lists 15 life sciences investments on its website.
“When you look at it in Canada, three of the four largest rates of return in venture capital are in the life sciences space, and it comes in the same time frame and speed as it does in IT,” she said.
“That’s been the same for 30 years. So, I fundamentally believe in investing in the life sciences sector.”
