Canadians missing out on late-stage life sciences investments

While early-stage life sciences companies attract Canadian investment dollars, those in the later stages of development have to rely more on global investors with deeper pockets. That’s according to a new white paper posted Wednesday by adMare BioInnovations, a Montreal-based life sciences innovation hub.

“We’re building high-value companies here in Canada, but too often, the economic returns and control over intellectual property end up elsewhere. [Merger and acquisition] (M&A) activity is a natural part of a healthy ecosystem and often a sign of success. But if the capital behind those deals is mostly foreign, we never break the cycle,” said Gordon McCauley, president and CEO of adMare BioInnovations in a media release.

“With greater Canadian participation, the value created here can be reinvested to grow the next generation of companies, advance homegrown innovation, strengthen our life sciences ecosystem and create lasting impact for Canadians.”

The sector delivered $842 million in deal value in 2024 — a far cry from the $122 million it produced in 2013, according to adMare. (In 2021, that figure was $1.2 billion.)

Therapeutic companies are the primary centre of attention. They make up 42% of Canada’s life sciences companies, but account for 78% of venture capital (VC) deal value in aggregate. And it’s the VCs that are doing the heavy lifting, funding domestic therapeutics firms — 69% at start-up, 78% in the early-growth stage and 94% at the late stage, according to the report.

Canadian investors prefer start-ups and early-stage opportunities because late-stage companies require so much more funding. The white paper reports that 61% of the Canadian deals written in 2024 were funded entirely by domestic investors. Yet that money made up just 22% of dollars invested in Canadian life sciences companies during the year.

“[T]he domestic funds are too few and too small to support scaling therapeutic companies throughout the entire funding life cycle,” reads the report. “Indeed, comparing the total amount of life sciences VC capital in the US and Canada in relation to GDP over the last decade points to a notional funding shortfall of approximately $1.5 billion per year.”

The paper reports that more than 75% of investors in Canadian life sciences companies are from outside the country. “Alongside international investment can come pressure to redomicile companies outside of Canada. Additionally, investors participating in the earliest stages of company growth, where Canadian investors focus, are under pressure to generate returns that can counter long-term development needs,” according to the white paper.

“Taken together, these data present a compelling case to increase domestic investment so that Canadian investors take advantage of the sector’s strong returns and so that Canada captures more economic and social benefit from the sector.”

Kevin Press

Kevin Press is editorial director for Advisor.ca. He has been writing about money since 1997. Reach him at kevin@newcom.ca.