Biotech is like the rest of the market on steroids, says Cheryl Reicin in Financial Post

January 30, 2007

Vancouver-based cancer therapy developer OncoGenex Inc. plans to raise up to C$62-million, or 30% more than originally expected, in a public offering announced late in 2006.

The firm originally planned to sell up to $48-million in common shares, making yesterday's announcement a meaningful jump for a company operating in what has been a weak sector of the market.

Life sciences merchant bank Burrill and Co. predicts that biotech IPOs will pick up steam this year. In a recent report, Burrill said it expects more than 30 IPOs to be completed in the United States in 2007, a 50% increase over 2006. Of the 71 biotech firms that have gone public since 2003, 35 are "underwater," but "by the end of 4Q 07, most or all will be trading above their offer price."

Biotech does appear to be getting busier, although it's tough to say exactly what is fuelling this, says Cheryl Reicin.

"Biotech is a bit like the rest of the market on steroids: When it's up it's really up and when it's down it's really down. It's been a roller-coaster. It's been very busy lately and we've had lots of calls, but I can't attribute that to anything specific."

The recent volatility in commodities prices could be having an impact on the biotech sector in Canada, she adds. "When mining and energy are hot, all of the risk money goes into those areas. When there's a pause in those markets, some of that money appears to flow back into life sciences again. This is an interesting correlation I've noticed specifically in Canada."

Some of the IPO chill in 2006 may have had more to do with a lack of good companies reaching the public markets, rather than investors' appetite for new offerings. Activity trailed off last year as a number of big pharmaceuticals companies' products came off-patent and they looked to grow through acquisitions, says Cheryl. "They started grabbing up the good companies earlier, before they had reached the IPO stage."

OncoGenex, which originated at the University of British Columbia about seven years ago, is in what is seen as the prime stage for a company to tap the public markets. In mid-stage human clinical trials it has a large need for capital, but isn't far enough along with product development yet to be a likely takeover target for a bigger company.


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