Health sciences are in the pink: renewed interest in life sciences goes beyond COVID

Investors, government and companies are realizing the value and viability of the sector
Health sciences are in the pink: renewed interest in life sciences goes beyond COVID

Life sciences are enjoying a renaissance. With the rise of telehealth — related but not tied to the COVID-19 pandemic — and research and investment in diagnostics, oncology and psychedelics, the IPO and M&A markets in the sector are bright.

“Life sciences’ time has come,” says Vanessa Grant, a partner in Norton Rose Fulbright LLP’s Toronto office.

Grant says she has seen several cycles in the sector during her 24 years in practice. Although there was always interest in investing in the life sciences sector, she says, COVID-19 has “really shone a bright light on the life sciences sector, and to the good.”

Investors, government and companies realize the value and viability of the sector, including in Canada. A renewed interest in and desire to understand the industry spurred by a global virus “has been both the blessing and the curse of the COVID pandemic,” she says.

Many players are investing in research and development and developing innovative R&D partnerships and trial designs. A notable example is a collaboration between Pfizer Inc. and BioNTech SE, which produced a vaccine within eight months of the pandemic declaration. That was remarkable, and the acceleration of research and development is exciting, says Grant.

“What’s coming out of it and what will last for years to come is that kind of dynamism, that acceleration of growth, that focus on novel research and development partnerships, and making investments in the sector that are more broadly characterized than just money.”

Even before COVID, “the prediction was that this was going to be the decade of health innovation,” says Cheryl Reicin, practice leader of the Life Science Group at Torys LLP in Toronto. That’s due to the convergence of artificial intelligence and older digital software and the need to keep aging baby boomers healthy.


Telehealth refers to a broad range of technologies that provide virtual health care, medical and education services through advanced technologies and related platforms.

In February, Global Market Watch predicted that telehealth could become a US$175-billion market in the next five years, and at least one telecommunications company has gotten in on the action. In 2017, Right Health, a Toronto-based company that combines virtual with face-to-face health care for Canadians, acquired Akira Medical, an on-demand mobile health-care platform providing instant access to health-care practitioners via text and video chat. Less than two years later, Telus Health, a division of Telus, purchased Right Health.

Telus now has “a very robust telehealth solution,” says Michael Watts, a partner at Osler Hoskin & Harcourt LLP in Toronto, which has acquired and offers health and well-being solutions that consumers and allied health professionals can access. Telus’ Babylon app allows users to see a doctor, mental health counsellor or dietitian via their smartphones. The app now has a licence in Canada and is partnered with Babylon Health in the U.K.

In December, MindBeacon Holdings Inc., a Toronto-based company providing mental health services through an online platform, closed an IPO that raised $7.5 million. And Dialogue Health Technologies Inc., which describes itself as “Canada’s premier virtual health-care and wellness platform,” closed an IPO in March that raised approximately $100 million.

“What we’ve seen now is some of these early startups be acquired . . . and now some of them have gone public,” says Watts, whose firm worked on the MindBeacon and Dialogue IPOs. “We’ve assisted them in becoming some of the first virtual, digital health-care apps to go public.”

The biotech and biomedical boom

“I think the biggest innovations of the 21st century will be the intersection of biology and technology,” Steve Jobs was once quoted as saying in referring to his son’s choice to work in biotech rather than computers. “A new era is beginning, just like the digital one was when I was his age.”

According to Toronto-based investment firm Bloom Burton & Co., which focuses on the health-care sector, Canada accounts for about three per cent of the biotech sector’s global market capitalization. Canadian biotech companies raised $3.2 billion in financing in 2020, compared to more than $110 billion raised globally.

There is also international interest in Canadian offerings. In June, Repare Therapeutics, a clinical-stage precision oncology company based in St.-Laurent, Que. and with an office in Boston, raised US$253 million in its IPO on the Nasdaq Global Select Market. The company preferred to list exclusively on the U.S. exchange. Two other Canadian biomed companies did likewise. Hamilton, Ont.-based Fusion Pharmaceuticals also listed only on Nasdaq in June, as did Vancouver’s AbCellera Biologics Inc. in December — at a whopping US$483 million.

As Bloomberg reported in mid-December, AbCellera’s IPO pushed the total value of Canadian IPOs in 2020 to $5.72 billion, taking the country’s IPO market to its highest level since 2014. The AbCellera offering exemplified a strong year for IPOs in the pharmaceutical industry, as the pandemic raised interest in companies creating novel therapies.

The Nasdaq-only listings are “really a reflection of the fact that [the companies] attracted a lot of U.S.  . . . venture capital,” says Grant.

Many of the investments have come from the U.S., on the Nasdaq exchange, “but there’s a lot of action here, too,” Reicin says, with more U.S. venture capital funds coming up to Canada. New Canadian venture capital funds are emerging as well.

Conversely, one company that made an IPO only on the Toronto Stock Exchange in March is Eupraxia Pharmaceuticals, a clinical-stage biotechnology company based in Victoria, B.C., which likely reflected its Canadian investors as well as the company’s Canadian presence, Grant says.

The focus on life sciences markets may reflect a pent-up demand, says Grant. “These are companies that have long-term fundamentals have been watched for a long time and that have products that are going to change our lives . . . will change our health care [and] the way we are treated in the future.” And the companies that are doing the IPOs are not in “the hot areas,” she says, but the “ones who’ve been doing R&D for a not inconsiderable period” and “will have a long-term trajectory.”

Overall, “it’s been a phenomenal year in 2020, and we certainly expect the same for 2021.”

Grant predicts the next significant segment of the life sciences sector will be oncology, both for size and research. The capital markets focus less on vaccines than on companies making breakthroughs in oncology and other sectors. Some companies will also produce vaccines and develop nanomedicine technologies to solve different problems.

Reicin has seen oncology products reach phase 3 of a clinical trial but then not meet the clinical research milestones, meaning that some patients may have reacted very favourably to the product, but not enough.

“Was there a subset of patients with a certain profile that the drug actually worked for? The more we can figure that out, it could be that some of these drugs that were rejected in the past can . . . get approval.”

This research falls under the rubric of personalized medicine, she says, and science is becoming more sophisticated in identifying patients for whom a specific treatment will work. “The more we’re using AI now and software and genetic testing to get that information, [the more we will] have more targeted therapeutic regimes to the individual.”

Psychedelics and cannabis

The psychedelics market is very active now, Reicin adds, and some players have shifted to it from the cannabis sector. “Canada was a leader in the cannabis market and continues to be a leader in psychedelics, too.”

In early May, Tilray Inc. and Aphria Inc. announced their merger’s closing, which created the world’s largest cannabis company by revenue. But the merger continues consolidation in the sector rather than representing a shift.

There has been “a bit of a consolidation play” in the cannabis sector for a while, says Clemens Mayr, a partner in McCarthy Tétrault LLP’s Montreal office. Despite the “big hype” in the cannabis space a few years ago, many smaller players were and are struggling, he says. Now that the sector is maturing, “some of the larger players are completing this consolidation trend.”

That consolidation will be similar to that in the tobacco and liquor industries as the cannabis industry matures, says Reicin. Proprietary or unique medical cannabis products may form part of niche businesses, but one or two handfuls of companies will control recreational cannabis, she predicts.

Products made from cannabidiol — the second most prevalent active ingredient in cannabis known as “CBD” — are being increasingly investigated and tried as therapeutic alternatives to chemical medicines, says Mayr, who expects global growth in the medicinal cannabis sector. “I don’t think recreational cannabis, which was at the origin of the hype, is really the long-term value creator in this space,” Mayr says.

However, he says, much will depend on what the United States does; 36 states, the District of Columbia and most U.S. territories had legalized the use of cannabis for medicinal purposes by late 2020, but at the federal level, it remains a prohibited substance.