RBC taps into biotech surge, investing in new Lumira venture fund

Royal Bank of Canada is backing the country’s largest life sciences venture capital fund in two decades, making it one of the few Bay Street institutions to invest in the surging domestic sector.

RBC’s undisclosed investment with Toronto-based Lumira Ventures, which has financed some of Canada’s most valuable biotechnology companies, is “not a one-off and is part of a broader strategy” by Canada’s largest bank to support the sector, said Anthony Mouchantaf, director with RBC’s technology and innovation banking group.

Mr. Mouchantaf offered few details but said “there will be an investment component and a more dedicated fund-of-funds strategy” that will see RBC back other biotech funds. “It’s a long-term bet and commitment for us. Our goal is that we play a role … in helping get to another generation of breakout Canadian and North American companies.”

RBC’s move follows a record year in 2020 for private and public fundraising by Canadian biotech companies, including the three largest initial public offerings ever by domestic drug developers: AbCellera Biologics Inc. , Repare Therapeutics Inc. and Fusion Pharmaceuticals Inc.

The addition of RBC to Lumira’s investor ranks is big news for Canadian biotech. For years, financiers and companies have attempted to entice Canadian asset managers outside Quebec – where support has been strong – to back the sector.

Previously the only bite was from Canada Pension Plan Investment Board, which invested US$20-million in Fusion Pharmaceuticals months before the Hamilton cancer therapy developer’s IPO in June, 2020. That, however, was part of a global toe-in-the-water approach by CPPIB to fund emerging sectors and not part of a Canadian-focused effort.

“The great thing about RBC coming into the asset class is that it will provide more depth to our local funds and they can then take bigger stakes, bolder moves and be more inclined to” create companies, said Geneviève Guertin, vice-president of investments, life sciences, with Quebec’s Fonds de solidarité FTQ (FondsFTQ), a leading backer of the sector.

Lumira is raising its fourth fund with a target of reaching US$200-million to back Canadian and U.S. drug and medical technology developers. It is about three-quarters of the way to its goal and is already larger than any Canadian biotech fund since the early 2000s. (Lumira raised $178-million for its previous fund in 2017.) Managing general partner Peter van der Velden said an unidentified Chinese pharmaceutical company has also invested, and that most additional capital would likely come from outside Canada.

The rest of Canada’s coterie of biotech venture capital firms – CTI Life Sciences, Genesys Capital and Amplitude Venture Capital – are also raising funds. San Francisco’s Versant Ventures is expected to launch a sequel to its Canada-focused Voyageur fund this year.

Lumira, once known as MDS Capital, struggled for years under previous owner MDS Laboratory Services, before a 2007 management buyout and rechristening. Mr. van der Velden said the goal when Lumira raised its first postspinout funds in 2012 was to create companies worth US$1-billion. That was “a big, hairy, audacious idea,” as no new Canadian company had hit that threshold in years, he said. Two Lumira companies – Zymeworks Inc. and Aurinia Pharmaceuticals Inc. – have since reached that level.

Lumira has had a solid run lately: Aurinia got regulatory approval last month to sell its lupus drug in the U.S. and is aiming to become one of the few Canadian developers to become a fully integrated drug company. Lumira has realized returns of five to 10 times its investment in Aurinia.

Two Lumira-backed U.S. companies, Bardy Diagnostics and Engage Therapeutics, have sold for hundreds of millions of dollars each since June, and Toronto digital health care company Think Research Corp. went public in December.

“Financial returns are why we are in business,” Lumira managing director Gerry Brunk said. “But those result in concrete, meaningful impact on patients around the world.”

Lumira’s returns rank among the top quartile of all North American venture funds. “Back in the day, we backed [Lumira] because we saw its potential to become a flagship Canadian venture capital franchise,” Ms. Guertin said. “We’re proud because they did deliver … very good returns.”

Despite that, most of Lumira’s Canadian institutional backing has come from Quebec investors, including FondsFTQ, Caisse de dépôt et placement du Québec, Fondaction and Teralys Capital. Its investors also include Ontario fund-of-funds managers Northleaf Capital and Kensington Capital Partners, as well as Vancouver City Savings Credit Union.

“If it wasn’t for those Quebec-based pension plans we wouldn’t exist,” Mr. van der Velden said.

Ms. Guertin said: “It has always puzzled us that other [Canadian] institutions seem to be a bit more afraid of the asset class.”

Source:- The Globe and Mail

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