Canadian biotechs poised to dazzle
U.S. investors
TORONTO, Feb 13 (Reuters) - Canadian biotechnology
stocks are acting like Internet high-flyers this year and
analysts think the party is far from over as about 70 of these
companies tell their stories to U.S. investors next week.
Investor interest in the sector is exploding with financing
activity in the form of private placements that has topped
C$100 million so far this year. Firming up a secondary
market is next on the agenda.
The Bio CEO & Investor conference on February 15 and 16 in New York will
bring chief executives of Canada's most promising biotech firms together with
investors and potential partners, seen as a warm-up for the massive Bio 2000
conference in Boston next month.
''When we show the Americans that more and more companies that go to Nasdaq
have an increase in price thereafter, it will motivate them to come and take
participation in our Canadian companies,'' said Normand Balthazard, Chief
Executive of BioCapital Investments, a Montreal-based fund that specializes in
healthcare investments.
Recently, U.S. buying has lit a fire under a handful of Canadian biotech stocks
including Inflazyme Pharmaceuticals (Toronto:IZP.TO - news), Vasogen
(Toronto:VAS.TO - news), Angiotech Pharmaceuticals (Toronto:ANP.TO -
news), Lorus Therapeutics (Toronto:LOR.TO - news), and to a lesser extent
SYNSORB Biotech (Toronto:SYB.TO - news), said Balthazard.
''The Americans find our companies damn cheap,'' he added.
This week Vasogen, a Toronto-based developer of immune modulation therapies,
announced a C$14.2 million private placement of its shares with U.S. institutional
investors, which boosted its stock 34 percent to a high of C$15.70.
Angiotech, which is in late stage trials of its stents used in coronary surgery, has
been rumored to be seeking a Nasdaq listing, and its shares have more than tripled
to C$69.
But while the North American biotechnology sector has been in a slump for the
past three years, risky valuations for Internet companies has pushed risk-tolerant
investors into cheaper biotechs, said Balthazard.
''All of those making big money on the Internet wanted to recycle some of that
money into another field. After tech, you don't go into mines and minerals, you
don't go into banks, you want to have fun, you want to have two digit returns, so
the next obvious cycle is biotech,'' said Balthazard.
Cameron Groome, a biotech analyst at National Bank Financial in Toronto agreed
that Internet profits were being redeployed in the high-growth biotech sector,
which until January was largely overlooked.
''The last big bull in biotech was back in late 95' through to mid- 96'. Since then,
companies have been hammering away trying to get new products through
development, and the equity markets haven't always recognized that value,'' said
Groome.
On January 21, Yorkton Securities' healthcare index overtook its May 28, 1996
record and is up about 70 percent.
''Biotech tends to go in waves. The money that is raised is deployed in developing
products and in research, and it takes a few years to bear fruit,'' said Groome.
Those poised to take off include Angiotech, which is only now being recognized
in the U.S, and Inflazyme -- busy with human trials for its asthma drug -- which
did the sector's largest corporate alliance in Canadian history with Aventis
(NYSE:AVE - news) Pharmaceuticals Inc. for $91 million, said Groome.
Groome described Axcan Pharma (Toronto:AXP.TO - news), a developer of
gastroenterology drugs, as a ''coiled spring''. The firm has had ten-fold revenue
growth since its public share offering in 1995, and could report revenue of over
$120 million this year.
Then there is ID BioMedical (Toronto:IDB.TO - news), which is developing a
strep throat vaccine that is showing positive results in humans, and could tap into
a $1.5 billion market if results continue to show promise.
Claude Camire, a biotech analyst at Groome Capital Corp. in Montreal, said
Canada's next big success stories were Angiotech, AnorMED (Toronto:AOM.TO -
news), developing metals-based therapeutics, and AEterna (Toronto:AEL.TO -
news), another Montreal-based company that has moved into late-stage testing of
its cancer and psoriasis anti-angiogenesis treatments based on shark cartilage.
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