5 critical challenges that biotech startups face in Canada

For years, Canada’s biotech strategy was simple: Woo large multinational companies to provide an anchor for the sector. The idea was that these firms would create deep talent pools, generate commercialized IP in Canada and lead to the creation of new startups, provide valuable experience for founders and increase the amount of available capital. But that hasn’t materialized. While multinationals bring jobs and activity, they have not provided the necessary conditions for a self-sustaining ecosystem.

Ali Tehrani, a veteran biotech founder and investor who helped establish Vancouver’s biotech ecosystem, argues the problem is one of fit. “We have to stick to what we are good at and what we’re good at is startups.” he says. Rather than chasing a few anchor firms, he points to the value of developing a broad base of small to mid-sized innovative companies that create jobs, develop IP, train talent and recycle experience back into the ecosystem. As he puts it, “We do better when we’re small and nimble.” The challenge is to design a biotech ecosystem that reflects this reality and provides ventures with the support they need.

This shift also requires a different mindset. “You need to be willing to fail fast,” says Eddy Nason, a director of health at Signal49 (formerly the Conference Board of Canada). Too often, he argues, “we spend too much time and too many resources trying to keep things alive that probably shouldn’t be kept alive.”

To understand why promising biotech ventures struggle to scale domestically, MaRS undertook a venture-first study of the sector, which involved interviewing entrepreneurs and the organizations that support them across the growth journey. The goal was to map pain points at different stages of growth to uncover what systemic changes are needed to improve domestic commercialization and capacity.

Here, in the first of a series of articles based on our findings, key experts from across the ecosystem weigh in on some of the most significant barriers that are preventing Canada’s biotech sector from reaching its full potential.

Innovators can’t readily access well-equipped wet labs space

There’s a common belief that Canada has an acute shortage of wet lab space. In fact, what we lack is affordable, well-equipped spaces that early-stage ventures can access.

The extended leases, rigid build-outs and high upfront commitments that developers and landlords favour are fundamentally misaligned with how ventures in this sector evolve. “Biotech companies don’t grow on real estate timelines,” says Gordon McCauley, president and CEO of adMare BioInnovations, noting that it can be challenging for early-stage ventures to predict what they’ll need in five years.

When gatekeepers are faced with so much uncertainty from prospective tenants, “the easiest thing to say is no,” says Alex Muggah, director at Synapse Life Science Consortium and vice president of life sciences at Innovation Factory in Hamilton. “If something is perceived as risky, the system tends to avoid it.” When the economics and risk profiles don’t align, buildings default to simpler, lower-risk uses, even in regions with strong biotech demand. And when ventures can’t access the kind of space they need on a timeline that works, their growth stalls or shifts elsewhere.

Canada lacks a critical mass of companies

To attract and keep the best and brightest, you need to give them options. In Canada, the challenge is one of density. A thriving biotech cluster needs to foster career development for everyone from C-suite executives and veteran operators to regulatory leaders, lab managers, technicians and manufacturing specialists. As Ilse Treurnicht, a managing partner at TwinRiver Capital, puts it, “talent goes where there are opportunities.”

We need to develop a standardized tech transfer process

Biotech innovations that are being spun out of Canadian universities and hospitals often get stuck at the tech transfer stage. Founders consistently describe the process as slow, expensive and misaligned with the realities of early-stage growth when speed matters, runways are short and delays can derail financing, development plans and market timing. As one founder told us, “having the university in control of every single IP and technology will hinder commercialization.”

That friction shows up most clearly in timelines and deal complexity. One early-stage biotech founder described a licensing process that stretched more than 18 months and came with a suite of demands: “they want equity, they want royalty, they want licensing fees and sometimes they want [payment] upfront.”

At the same time, institutional leaders point to structural constraints that shape how tech transfer operates today. Because universities don’t receive any dedicated funding to support commercialization, the process can vary widely across the country. Institutions are often required to conduct extensive due diligence processes and negotiate terms independently, which helps explain why tech transfers are fragmented and slow. The result is a landscape where each deal is effectively negotiated from scratch.

Fragmented support systems and unclear or misaligned approaches to intellectual property are among the reasons why many promising ideas get stalled before finding commercial success, says Derek Newton, senior vice president of business development and strategic partnerships at Mitacs. “We have a real opportunity now to deepen collaborations between universities and industry to strengthen and create new IP pathways from the lab to the marketplace,” he adds.

We need to derisk investment in biotech

Jacki Jenuth, partner and COO at Lumira Ventures, frames Canada’s biotech capital challenge as a problem of scale and ownership rather than startup formation. In her view, the country lacks sufficient domestic capital to carry companies forward. “We need an ecosystem that’s funded locally enough to keep the innovation in this country,” she says. Founders are compelled to take capital wherever it’s available, which, as Jenuth points out, can require companies to reincorporate and move their headquarters.” But once startups relocate, ownership, talent and long-term value creation tend to shift as well.

TwinRiver’s Treurnicht emphasizes that Canada’s problem is structural, not cyclical. “We don’t have enough specialized life sciences funds,” she says. “So the capital ecosystem isn’t set up to support companies all the way through.”

She also points to the limited role of domestic public markets and institutions, observing that “companies are often pushed to look outside Canada earlier than they want to.” The result: fewer Canadian-owned successes, fewer experienced leaders reinvesting locally and less capital flowing back into the next generation.

We need to streamline access to clinical trials and biomanufacturing

Many Canadian biotech companies hit a wall when it comes to clinical trials. The regulatory and financial hurdles are too high. Molly Shoichet, a professor at the University of Toronto and serial biotech founder, has seen a lot of other founders conduct their trials in Australia, “because you can get into clinical trials easier there.”

What early-stage companies need is operational efficiency. When that pathway isn’t clear, founders look elsewhere.

Biomanufacturing presents a parallel challenge. As Treurnicht explains, “it’s two-fold: how do we secure manufacturing capacity to respond to future health threats and how do we make that capacity more available to emerging ventures?”

Supporting innovation in the country’s biotech sector means recognizing the unique characteristics of the industry: long timelines, high capital intensity and the critical need for interdisciplinary collaboration. Canada must adopt policies that de-risk early-stage science, invest in shared infrastructure, create stronger procurement pipelines and provide predictable, mission-driven funding. Without these reforms, our biotech sector will fail to achieve its full potential, and the country will miss out on both economic opportunity and scientific leadership in one of the world’s most consequential industries.

Next up: An exploration of what founders need to develop their ideas: sandboxing opportunities, contract research organizations and wet lab spaces.

About this series

The Building Biotech series explores how this country can become a global player in life sciences by streamlining the entrepreneurial path to commercialization. We conducted in-depth interviews with 50 experts nationwide, issued a national survey to 320 biotech companies (receiving responses from 33 firms), and held a roundtable discussion with 25 sector leaders.

Photo illustration by Stephen Gregory; Images: Unsplash