Financing an early stage biotechnology company in Canada

Abstract

Immunovaccine, a young Canadian biotechnology firm, for many years relied on several methods to finance its operations to date, including investment from angels, various forms of government grants and a reverse takeover (RTO) on the Toronto venture stock exchange (TSXV) to access the public markets. Currently the firm which has very favorable and expanding prospects is finding it difficult to raise significant funds in Canada. Investor interest is focused on natural resources stocks and the company, being listed on the TSXV, has limited access to US private equity and venture funds who view the stock as unpredictable and illiquid. Big pharma remains interested in more advanced products and the limited access to US public markets is crippling. The provincial government lends its support in the form of a repayable loan. In the end, the company turns to private investors in the UK and is over-subscribed in a private placement that extends its runway to 2015 while it contemplates its next move. This case outlines the difficulties experienced by an early stage biotechnology firm in Canada looking for capital to finance its long term requirements. Differences in the financing environment in Canada and the US and a roadmap to US capital markets are discussed. This is not intended to illustrate either effective or ineffective handling of a managerial situation. It is meant to provide a reasonable account of events and situations for the purposes of stimulating discussion.