By Sarah Mortimer, MaRS Discovery District
With venture capital and private equity investing hitting levels not seen since the dot-com boom, Canada is increasingly drawing foreign investors scoping the latest innovations. One of their areas of focus is the country’s medical device and equipment sector, which is now ranked ninth globally, according to Canada’s federal department of Foreign Affairs, Trade and Development.
“The medical devices sector in Canada is one to watch,” says Dan Mathers, investment director at the MaRS Investment Accelerator Fund (IAF), noting that the same government report estimates the sector’s worth at $6.8 billion, with additional exports totaling $1.9 billion. “Canada has always had a very strong ecosystem for driving innovation in health sciences, particularly in medical imaging, equipment and devices. The vision here is big.”
Over the past decade, Canada’s medical device sector has seen steady growth, with close to 1,500 medical device firms based in the country (not including medical imaging or assistive device companies), and a growing number of companies being acquired internationally. For example, companies like Mitra (acquired by Agfa), Karos Health (acquired by Vital Images) and Sentinelle Medical (acquired by Hologic) have paved the way for a new generation of companies getting noticed on the global stage.
Many of these firms are based in Toronto, the fourth-largest city in North America, as well as Canada’s largest city and a hub for innovation and entrepreneurship. “There’s a lot of activity here,” said Mathers, referring to successful medical device companies like Perimeter Medical Imaging, Synaptive Medical, eSight and Intellijoint Surgical. “With all the research centres and innovation activity in Toronto, you end up with the ability to turn what was previously science fiction into real-life solutions.”
This growing reputation is drawing investors to Toronto’s annual Redefining Early Stage Investments (RESI) on MaRS conference on April 4. Canada’s largest health investor event, it connects investors to the country’s top health startups across a range of key sectors, including medical devices. Over 150 investors have already confirmed attendance. This year, RESI on MaRS will be followed by MaRS HealthKick on April 5, an invite-only event that will see a select number of companies pitch to investors for the opportunity to win a cash prize.
Mathers, who has invested in eSight and Intellijoint Surgical – both of which recently expanded to the US market – believes Toronto’s concentration of top talent and “hospitals and universities with significant research budgets” is part of what makes the city an ideal location for medical device ventures. For example, the University of Toronto, which ranks 11th worldwide for clinical research and first in Canada for innovation, is located within a short walk of five renowned research hospitals and just across the street from MaRS Discovery District, an innovation hub that is home to a range of tenants, including life science giants like Johnson & Johnson’s JLABS incubator.
All of this is reflected in the bold medical device research currently taking place in the city. “Investing money in trialing new technologies is one of our greatest strengths,” said Mathers, adding that the US National Institutes of Health has ranked Canada third globally when it comes to the number of sites for active clinical trials for medical devices.
Generous funding opportunities for medical device businesses are another draw for investors, Mathers says. A number of Toronto-based venture firms, including MaRS IAF, the Business Development Bank of Canada (BDC), Genesys Capital and Lumira Capital, include the medical devices sector as a specific area of focus. The country also offers “significant grant money” for medical device businesses, Mathers says. For example, it offers up to $500,000 in low-interest loans for small businesses, as well as federal research grants, federal tax credits like SR&ED and market readiness funding from organizations like the Ontario Centres of Excellence.
These factors, combined with the low cost of manufacturing medical devices in Canada and the expertise and entrepreneurial support of organizations like MaRS, all lead Mathers to predict “accelerated growth for the sector.”
Arun Menawat, CEO of Profound Medical – a company that makes a real-time MRI-guided ultrasound procedure that destroys cancer cells in the prostate while sparing surrounding tissue – says it’s an exciting time to be in the medical device industry in Toronto.
“There has been a stream of medical device companies that have successfully created growth in the area,” he said. “I think that trend is likely to continue.”
Profound Medical won the MaRS HealthKick Challenge in 2014 and is among the many Canadian medical device companies heading to this year’s RESI on MaRS conference. The company, which went public two years ago, has since grown to a market valuation of $50 million. And in a sign of continued momentum, they secured $17.4 million in bought deal financing just last October.
“There are more and more people in New York and San Francisco who are getting the message that there is a pool of talent in Toronto, which is a great thing,” Menawat says, adding that he looks forward to connecting with investors and other great minds in the medical device industry as Profound prepares to present at this year’s conference.
“Getting the medical device community together is something I’m always excited about,” he says. “I think there’s going to be a lot of talent at that conference.”