The availability of seed and early-stage funding is critical to sciencebased research and development. Venture capital has traditionally been the primary source of such funding. Without adequate capital, Canadian entrepreneurs cannot create commercially available scientifi c innovations.
The environment for raising venture capital funding has been very diffi cult over the last several years — but we are pleased to report some modest good news from 2010.
According to Canada’s Venture Capital and Private Equity Association and Thomson Reuters, total venture capital market activity in Canada totalled $1.1 billion in 2010, a 10 per cent increase compared to 2009. While investment remains below the $1.4 billion invested in 2008 and far below pre-2007 levels, this modest increase represents the fi rst year-over-year increase in disbursement levels since 2007. The downward trend appears to have ended.
There is also modest good news specifi c to venture activity in the Canadian biopharmaceuticals and other life sciences sectors. Life sciences venture fi nancings in Canada were up 38 per cent from 2009 to 2010 at $300 million.
In the United States, venture capital investment in 2010 increased for the fi rst time since 2007. Venture capitalists invested US$21.8 billion in 3,277 deals, an increase of 19 per cent in dollars and 12 per cent in number of deals over the prior year, according to the MoneyTree Report by PricewaterhouseCoopers LLP and the National Venture Capital Association, based on data from Thomson Reuters. However, coming off a very strong year in 2009, biotechnology investing increased more modestly in 2010, 3 per cent in dollars and 8 per cent in number of deals, with US$3.7 billion invested in 460 deals.
Some of the recently reported and more notable Canadian life sciences venture deals are listed on the following page.
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By its nature, the venture capital model is dependent on successful exit transactions. Venture returns crystallize only when a company makes a public offering or when it is acquired. Successful IPO and M&A exits by Canadian venture-backed life science companies are critical to attracting additional capital for Canadian early-stage life sciences ventures.
In 2010, M&A activity in the pharmaceutical and biotechnology sectors outside of Canada continued to be robust. In Canada, there have been a few notable deals in the past year and a half, including Biovail’s acquisition of Valeant Pharmaceuticals International. Overall, however, Canadian companies have been far less involved in M&A activity than their counterparts in the U.S. and other international markets.
The conditions for continued strong life sciences M&A activity remain in place for 2011. Pressures on biomedical companies of all sizes to reduce the costs and risks of product development have been and will continue to be a catalyst for mergers and acquisitions activity. Accessing new and high-growth markets has also been a strong motivator for deal activity. Further, major pharmaceutical fi rms are looking to fi ll their product pipelines through the acquisition or licensing of biotech assets. In 2011, we will continue to see the large pharmaceutical and device companies search out attractive acquisition targets in Canada and elsewhere to help them address their strategic and competitive challenges.
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