Lyndon French/The Globe and Mail
Canadian biotechnology is having a moment: Last year saw the three largest IPOs ever by domestic therapeutic developers, including AbCellera Biologics. The Vancouver startup is now the country’s most valuable biotech company ever. Victoria’s Aurinia Pharmaceuticals received regulatory approval in the United States for a lupus drug this year, becoming one of the few Canadian developers to take a treatment to market without a Big Pharma partner in the lucrative American market. Canada finally has several companies with potential to grow into pharma giants and turn our life sciences sector into a global contender.
As it turns out, Canadians have been part of the biotech revolution for a long time, just not…here.
South of the border, Canadians occupy many senior roles in one of the world’s leading value-creating sectors. Wall Street’s top biotech investment banker is Canadian, as is its top-ranked analyst. The chairman of COVID-19 vaccine maker Moderna? Canadian. So is the chief scientific officer of biopharmaceutical giant AbbVie.
Perhaps you were aware that Marc Tessier-Lavigne—the president of Stanford University and the former chief scientific officer of Genentech—is Canadian, too. (Nice Order of Canada pin, Marc.) Well, so are John Hamer and Kiersten Stead, managing partners of San Francisco venture capital firm DCVC Bio, which recently turned a US$18.2-million investment into a US$1.1-billion-plus fortune. The company they bet on? Canada’s own AbCellera.
There’s Sylvie Gregoire, past president of Shire PLC’s rare-disease unit, and Sanofi SA’s former CEO Chris Viehbacher, plus at least a dozen other Canadians in top roles with U.S. biotechs. There are more in Europe, like James Sabry, global head of pharma partnering with Roche Holding AG.
You get the picture. We’re not talking about a brain drain, but a full-scale brain transplant.
“The world of biotechnology and health care, and frankly Wall Street itself, is built with Canadians,” says Marc Harris, an American who heads research at Wall Street investment bank Evercore ISI and employs two Canadian biotech analysts, Liisa Bayko and Josh Schimmer.
Canadians “are probably over-represented [in senior U.S. biotech roles], but I think that’s because you get attracted to great opportunities, and there’s been the fluidity in terms of one’s ability to go to the U.S.,” says Ottawa native Jessica Chutter, Morgan Stanley’s chair of biotech investment banking. In other words, when it comes to biotech, Canadians own the podium—but most compete for Team USA.
What follows is an introduction to some of the most successful Canadians operating at the top echelons of American biotech. Canadians can be proud that so many compatriots have reached the pinnacles of success in the dynamic sector. In recent years, the field has delivered significant gains in human health—along with shareholder returns—thanks to developments in areas such as monoclonal antibodies, precision oncology and gene therapy.
But it should also give us pause, particularly after a slow vaccine rollout that highlighted Canada’s meagre domestic manufacturing capability and lack of anchor pharmaceutical giants. What caused many of our best and brightest to move away? What has the Canadian economy lost with their departures? And, perhaps more important, can we get them back?
Jessica Chutter – Chair, biotechnology investment banking, Morgan Stanley
JENNIFER ROBERTS/The Globe and Mail
Jessica Chutter is a rarity for a Wall Street banker. For one, she’s worked for the same company, Morgan Stanley, for more than 30 years. Despite offers to cover higher-profile sectors, she stuck with biotech, even when it was a much quieter field, because she wanted to do good in society. “I know it sounds a bit schmaltzy, but it’s what I’ve been most excited about,” she says.
Most surprisingly, for the past 26 years, Wall Street’s top biotechnology investment banker—a key adviser on seminal industry deals including Centocor Inc.’s US$5-billion sale to Johnson & Johnson in 1999 and Moderna’s 2018 initial public offering—hasn’t actually worked on Wall Street. Instead, she’s been based in Toronto, where her husband, Derek Berghuis, ran radio station 680 News for Rogers Communications.
How does she do it? In non-COVID-19 times, it involved a lot of travel, typically three days a week, to Morgan Stanley’s Manhattan offices and to see her many Boston-based clients (a colleague oversees Morgan Stanley’s West Coast biotech group). When you consider her clients are primarily outside New York, being a flight away from the city isn’t really a problem. In fact, it took Chutter less than a day to convince her boss that moving to Toronto wouldn’t be an issue. She was right: Chutter has worked on mergers and acquisitions worth a total of US$85 billion, and another US$70 billion in capital raises.
She’s also highly regarded by clients. “Today she is the top of the top people in this industry,” says fellow Canadian Noubar Afeyan, whose Flagship Pioneering has tapped her for at least seven IPOs of portfolio companies, including Moderna, as lead or co-lead banker.
“She’s a great company picker,” says Clarissa Desjardins, former CEO of Montreal rare-disease drug developer Clementia Pharmaceuticals, which used Morgan Stanley to lead its 2017 IPO and advise on its 2019 sale to Ipsen SA. “Within Morgan Stanley, her name echoes in the hallways, and all the junior bankers are thrilled to work on her team. When you’re that good, you don’t have to move to head office—you can live where you want.”
Similarly, Chutter says top investors are indifferent to where the opportunities are located. That bodes well for Canadian biotechs. In the past four years, she has led IPOs for three of them, which were backed by big foreign investors: Clementia, Repare Therapeutics (run by Desjardins’ husband, Lloyd Segal) and Fusion Pharmaceuticals Inc. “I think we’re at a point where, fortunately, capital is blind to geography,” Chutter says.
Chutter grew up in Ottawa’s east end, the middle-class daughter of a construction consultant father and a Dutch mother who had come to Canada on an assignment with the Netherlands embassy. Chutter was a nationally ranked tennis player in her teens, and studied economics and business at McGill University, where a professor encouraged her to work on Wall Street. She started at Morgan Stanley in the early 1980s, working in New York and San Francisco before moving to Toronto in 1995. “The opportunity was in the U.S. at the time—there was just really no question,” she says. “I would not have been able to continue a career if I were focused on Canadian biotech.”
Biotechnology was still an early-stage industry. That meant she handled financings for a range of health sciences companies, including clinical research organizations and medical device makers. But as researchers mapped the human genome and made other breakthroughs, interest in early-stage drug developers heated up in the late 1990s. She’s been a full-time biotech investment banker ever since.
Chutter considers herself a storyteller. Her job is to translate deep science and the potential of breakthrough drugs into a compelling, easily explainable tale for investors. “You should be able to reduce every vision and every business plan to a very succinct articulation of what a company is doing,” she says. “If you can’t do that, there’s probably something flawed about the business plan.”
For her, the deal that changed everything was advising Pharmasset during its US$11.1-billion acquisition by Gilead Sciences. Until then, biotech companies typically became takeover targets only once their drugs were approved and commercialized. By contrast, Gilead was willing to pay handsomely for a company just entering late-stage human efficacy trials for a hepatitis C treatment. The deal was “a big wakeup call” because it meant investors could expect potential takeovers much earlier in the lives of young drug companies.
Chutter is optimistic about Canadian biotech, but advises founders and funders here to think big. “We’re now at a place in Canada where we’ve got fearless senior executives who recognize how big their platforms can be, how big the opportunity can be and, as a result, considerable capital is coming in to enable that,” she says.
She’s also hoping to see more Canadian institutional investors start backing the biotech sector. “It is obviously generating significant returns, and to date it has not been as prominent an area of focus for a number of Canadian institutions,” she says. They’re missing out on a great story.
Tom Hudson – Senior vice-president of R&D and chief scientific officer, AbbVie Inc.
Lyndon French/The Globe and Mail
Tom Hudson is one of Canada’s top biotech exports to the U.S., but he has imported some of that knowledge back to his home country.
After earning a medical degree at Université de Montréal and doing post-graduate work in immunology at McGill University, the native of Jonquière, Que., moved to the Boston area in the early 1990s to join the most exciting science project of the day: mapping the human genome. He did post-doctoral studies and served as assistant director of the Whitehead Institute for Genome Research at the Massachusetts Institute of Technology in the 1990s.
Then he came back, keen to apply some of the lessons from his pioneering work to drug discovery and commercialization. “He saw problems but with new eyes, and he became a real major player in every fashion,” says Phil Gold, a pioneering cancer researcher and past chair of McGill’s medicine department.
In 2003, Hudson founded and ran a genome innovation centre in partnership with McGill to apply his knowledge of treating genetic disease to drug development programs. Three years later, he went to Toronto to lead the Ontario Institute for Cancer Research (OICR). Finding adequate research funding for drug development has been a chronic problem in Canada. But with determination and an infusion of dollars from the Ontario government, OICR helped create 20 companies during his tenure.
Then, five years ago, America came calling again.
Hudson now oversees 11,000 employees as chief scientific officer of AbbVie, the U.S. biopharmaceutical giant that was spun out of Abbott Laboratories eight years ago. Ever the builder, Hudson has overseen the expansion of AbbVie’s franchise in cancer treatments and immunology, splitting time between his home in San Francisco and AbbVie’s headquarters in the Chicago area.
He could have continued to do discovery work in Canada, “but I was also interested in learning more about the later phases of drug development,” Hudson says. For the most part, that work happens outside Canada. He wasn’t sure if Big Pharma would be constraining compared to academia, “but actually it wasn’t the case,” he says.
He’s optimistic about Canada’s opportunity to compete in biotech but says “it takes a long-term investment in that ecosystem and being able to identify strong players to take every opportunity.” But AbbVie is also on the hunt for Canadian biotech firms and university researchers to purchase or partner with.
“The thing with Tom is it’s the happiest story of a guy who is truly an intellectual leader in his field finding a role at the pinnacle of his practice in drug discovery,” says Lloyd Segal, the veteran biotech entrepreneur and investor based in Montreal. “The only sad part is Canada can’t keep someone like that, because there is no platform that big for drug discovery and development in Canada. It’s not a complaint; it is what it is.”
Noubar Afeyan – Founder and CEO, Flagship Pioneering, and chair, Moderna Inc.
Simon Simard/The Globe and Mail
As he was finishing his PhD in biochemical engineering at the Massachusetts Institute of Technology in 1987, Noubar Afeyan spent six months travelling back and forth to Montreal to see if he should set up his first company there.
He had strong ties to Montreal; his family had arrived in 1975, when he was 13, after fleeing the civil war in Lebanon, where he was born to Armenian parents. Within months of the family’s arrival, he had a federally funded job where he interviewed fellow Armenians about their experiences in Canada, and scored free tickets to events at the 1976 Summer Olympic Games. He went to high school and college in Montreal and earned a degree in chemical engineering at McGill University before getting into MIT.
Afeyan was looking to start a biotech instrument company. “I was pretty interested in actually doing it in Canada,” he says. But after meeting potential investors and partners in Montreal, he concluded “there weren’t quite the conditions, the people, the support that I thought one needed to create a biotechnology company. The only money available was government money,” which came with strings attached, and he didn’t want to end up “a semi-government employee.”
Simon Simard/The Globe and Mail
So he went back to Cambridge, Mass. “If we could turn back the clock and there had been a vibrant private-sector funding mechanism [in Canada], I think the odds would have been for me to be in Montreal, not Boston. My family was there, my comfort was there, the science was there. But a team of us were going to invent no matter where we were.”
Of the Canadians who went south for a career in biotech, Afeyan’s departure might have hurt Canada’s industry the most. Consider what he’s done since. After selling his first company, PerSeptive Biosystems, in 1998, he founded what is today called Flagship Pioneering. That firm has created, incubated and financed dozens of biotech companies, often based on nascent and way-out-there scientific ideas. Twenty-four have gone public, and several have achieved multibillion-dollar valuations, including a company you might have heard of: COVID-19 vaccine maker Moderna.
Moderna, whose messenger RNA treatment starts a chain reaction that results in the body producing virus-fighting antibodies, started at Flagship in 2009 and completed the largest biotech IPO in history in 2018. Its stock market value soared to more than US$60 billion after it produced its COVID-19 vaccine last year, which has been shown to be 94.5% effective in clinical trials and is now being distributed globally. In addition to the tens of millions of shares held by Flagship funds, Afeyan’s 2.1 million shares were worth more than US$320 million at the end of February.
Just imagine what the 58-year-old Afeyan might have contributed to the Canadian economy had he stayed and incubated companies here instead. “The legacy of Noubar Afeyan is that he’s not just challenging pharma and biotech; he has successfully challenged the entire model of company creation in the biopharmaceutical sector,” says Montreal biotech maven Lloyd Segal.
Afeyan stresses that the unfavourable conditions he spurned in Canada are “ancient history.” It has top universities and an “increasingly” favourable funding landscape. “I see no reason why Canada can’t have multiple active vibrant hubs of biotechnology innovation, soon and for a long time,” he says.
His advice to governments here is to provide not just support to the sector but also “figure out how to be catalytic” by taking steps that can have a significant impact in stimulating Canadian biotech. And there’s no time like the present to get started. After the pandemic, he believes biotech “will undergo a massive increase in impact, in investment and in global notoriety as a provider of health solutions, and Canada should be a big beneficiary of that.”
Josh Schimmer – Senior managing director, biotech team, Evercore ISI
Supplied
Last November, shares of Bellus Health Inc. jumped nearly 30% to close at US$3.08 on the Nasdaq stock market. The reason? Evercore ISI analyst Josh Schimmer had just initiated coverage on the Montreal developer of cough medication, issuing an outperform rating and a price target of US$12. That prompted investors to take a second look at a company whose stock had crashed four months earlier, after some disappointing trial results.
Schimmer’s calls carry more clout than those of the average analyst: He’s been Institutional Investor’s top-rated analyst for small and mid-size biotech stocks for the past three years. “He stands out uniquely in terms of his almost philosophical approach to how he looks at biotechnology,” says his boss and Evercore’s head of research, Marc Harris. “He believes his work is helping the world.” Harris adds Schimmer is fuelled by an intense work ethic.
Not bad for a kid from the Greater Toronto Area who realized early on he wasn’t cut out for the family business: medicine. His father was a molecular genetics and pharmacology research professor at the University of Toronto, his uncle is a rheumatologist, and his older brother heads research at Toronto’s Princess Margaret Hospital. Schimmer was studying internal medicine and rheumatology at U of T, but after realizing he didn’t have the chops to be a researcher, he decided to try something else. “I thought the intersection of science and business could prove quite interesting,” he explains.
Schimmer earned an MBA from Harvard Business School in 2003, but found himself “frustrated and disappointed” with the lack of opportunities. “There were a lot of career paths where I was still way underqualified because I didn’t have any relevant business experience, and others for which I was overqualified.”
After a series of introductions, he landed an associate job at Deutsche Bank and became a full biotech analyst a year later at Cowen & Co., while biotech was a relatively fledgling industry. He did stints at Leerink Partners, Lazard Capital Markets and Piper Jaffray, and made a stop at a buy-side investment firm before joining Evercore in July 2017. He was able to do the job while living in San Diego, where his family had moved for quality-of-life reasons. It turns out San Diego also has a teeming biotech sector—and serious Canadian representation. One of the area’s top biotechs, Mirati Therapeutics, started as a Montreal-based company called MethylGene, and Faheem Hasnain, CEO of Gossamer Bio, hails from Windsor, Ont.
Having dual citizenship (his parents are American) made going to school and working in the U.S. “a lot easier,” Schimmer says. Though he has considered returning to Canada, “there was little place else to go for biotech than the U.S.,” he says. “For what interested me, which was cutting-edge innovation and its intersection with finance, it was clear it would be hard to find that path in Canada.”
Schimmer probably made the right call not moving back home. After the credit crisis, Canadian banks retreated from the biotech sector, and the number of Bay Street analysts covering the field declined sharply. “My sense was that if I wanted to build a skill set that would give me longevity in the industry,” he says, “then the best place and lowest-risk way to find it would be in the States.”
John Hamer – Managing director, DCVC Bio
Markku Lahdesmaki/The Globe and Mail
John Hamer had decided it was time to come home. After earning degrees at the University of Windsor in the early 1980s, the Torontonian went to the University of California, Davis, near Sacramento for his PhD in microbiology, then took a research job with E.I. du Pont de Nemours and Co. in Delaware.
But when he interviewed Canadian universities for post-doctoral assignments, he was unimpressed. There was scant startup money. One school offered him a lab that needed to be renovated—out of his own pocket. As he pondered the meh circumstances in his home country, he got a call from Purdue University in Indiana. In contrast to indifferent Canadian schools, Purdue rolled out the red carpet. “They actually told me I didn’t have a startup budget—I should just keep spending until I got a grant. It was almost a blank cheque,” Hamer says. He took the Purdue post in 1988 and was soon promoted to full professor, becoming a David and Lucille Packard Fellow, winning national awards, meeting U.S. President Bill Clinton, and editing a genetics and biology journal.
Hamer could have carved out a successful career in academia. But one night in his late thirties, he was reading Anne of Green Gables to his daughter. He came upon the passage where Anne describes her future as a straight road that has come to a bend: “I don’t know what lies around the bend, but I’m going to believe that the best does.” Hamer realized he needed a bend in his own road. At the time, the genomics boom was starting, and he wanted in.
He left Purdue in 1998 to join an agriculture biotech startup in North Carolina called Paradigm Genetics as chief science officer. Paradigm went public in 2000 and sold three years later to Monsanto. Paradigm board member and prominent venture capitalist Steve Burrill (who years later would be jailed for fraud and tax evasion) persuaded Hamer to join his firm in San Francisco. Hamer didn’t know much about early-stage investment. “I had to go to Amazon to order books on venture capital,” he says. But he did well at Burrill & Co. for eight years, before decamping to co-lead Monsanto’s venture capital arm.
Markku Lahdesmaki/The Globe and Mail
After Bayer bought Monsanto, Hamer and partner Kiersten Stead, another Canadian, left to set up their own biotech fund, joining San Francisco’s Data Collective Venture Capital (DCVC), a data science–oriented technology fund they’d backed. The first investment from DCVC Bio’s inaugural, US$210-million fund was a Vancouver company called AbCellera Biologics.
This was not a case of one Canadian scratching another Canadian’s back: “The fact he was Canadian was a coincidence,” says AbCellera CEO Carl Hansen, who had started the company while running the bioengineering group at the University of British Columbia’s Michael Smith Laboratories. Hansen had previously worked with California Institute of Technology professor Steve Quake. When Hansen needed funding, Quake connected him with DCVC, where he was an adviser.
Hansen was wary of venture capitalists, but he appreciated Hamer for his shrewdness and depth of experience. Hamer, for his part, admits he was “underwhelmed” when he heard AbCellera was an antibody company.
But the two hit it off, and Hamer got excited as he learned more about AbCellera’s unique technology. Using artificial intelligence and a credit card–size device filled with hundreds of thousands of tiny chambers, AbCellera could simultaneously test many antibodies from blood samples. It could then determine which had the potential to be disease-fighting treatments, dramatically speeding up drug discovery. AbCellera had participated in one project funded by the U.S. Defense Department’s Defense Advanced Research Projects Agency (DARPA) to rapidly find medical responses to future pandemics and was embarking on a second. It also partnered with drug makers on dozens of drug discovery programs. “You could see the technology could really, really scale,” says Hamer.
He invested US$7.7 million in August 2018. DCVC provided another US$10.5 million in the next two years as other investors, including Silicon Valley billionaire Peter Thiel, signed on.
The onset of COVID-19 was showtime for AbCellera. Three days after receiving a blood sample from a recovered patient on Feb. 28, 2020, its researchers isolated hundreds of antibody candidates. Within months, they found their antibody, which could provide temporary immunity to some patients; it partnered with drug giant Eli Lilly & Co. and put the treatment into clinical trials. By year’s end it was authorized for emergency use by regulators in the U.S. and Canada. That set up AbCellera for the biggest IPO ever by a Canadian biotech this past December, giving it a market capitalization north of US$10 billion—and DCVC a stake valued at more than US$1.1 billion.
Having struck gold in his home and native land, Hamer thinks Canada has “a huge role to play” in producing more success stories. “If one thing has been proven, it’s that this entire sector could turn on a dime and deliver things for the health of the planet,” he says. “Canada can take advantage of all that, whether it’s to generate returns or generate employment, and attract firms to Canada rather than Boston.”
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