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B.C.’s Eupraxia Pharmaceuticals Inc. will become the first Canadian biotech startup to go public solely on the Toronto Stock Exchange in nearly two decades, after closing the books on an offering that encountered some difficulty last week.

Eupraxia set out last month to raise $50-million in a deal underwritten by Raymond James, BMO Nesbitt Burns and Canaccord Genuity. The Victoria company was hoping to price the deal last Wednesday after setting an initial range of $9 to $11 a share.

But after some rough trading sessions last week for biotech stocks, the deal team cut the offering, pricing it Monday evening at $8 a unit, consisting of one share and a half-warrant with an $11.20 strike price. The total raised will be $41-million, rising to $47-million if the underwriters exercise their option to buy shares at the offering price, according to a source familiar with the details. The Globe and Mail is not identifying the source as they are not permitted to speak on the matter. Eupraxia declined to comment. The deal is set to close and the stock should start trading next week.

While the outcome falls short of expectations, it’s a big step for the Canadian biotechnology sector. Most drug developers typically either list on the TSX Venture exchange, dual list on the TSX and a big U.S. exchange, or list solely on Nasdaq, the globe’s premier biotech market.

Several TSX Venture-listed stocks have graduated to the TSX, but those with the best prospects typically set their sights on a U.S. listing. Vancouver cancer drug developer Zymeworks Inc. tried dual-listing on the TSX and New York Stock Exchange in 2017 with a goal of stimulating Canadian investor interest in biotech. However, it delisted in Canada two years later because of a lack of support. The most recent Canadian biotech to pursue a TSX-only IPO was Montreal’s MethylGene Inc. in 2004; in 2013 it shifted to Nasdaq, moved to San Diego and changed its name to Mirati Therapeutics Inc.

The dearth of biotechs on the TSX – there are fewer than 20 – at a time when drug stocks are delivering solid returns has become a worry for TMX Group Ltd. CEO John McKenzie. Last month he told The Globe, “we are looking for solutions” to encourage biotech and pharmaceutical companies to list in Canada.

Part of the issue is that few Canadian institutional investors outside Quebec have been willing to back Canadian biotechs.

“We need to be stronger at an institutional level at supporting biotech in Canada if it matters that we have a Canadian industry,” Eupraxia director Richard Glickman told The Globe last month. “Having a route in Canada to finance businesses that don’t require massive U.S. participation … is good for Canadian biotech. I think it will be great for the TSX because they’re missing an opportunity.”

Eupraxia previously raised US$38-million from private investors and features big names on its board, including ex-RBC Global Asset Management chief executive officer John Montalbano, Xenon Pharmaceuticals CEO Simon Pimstone and Mr. Glickman, who co-founded Aurinia Pharmaceuticals and Aspreva Pharmaceuticals.

Eupraxia, co-founded in 2012 by CEO James Helliwell, a former cardiac anesthesiologist, and chief scientific officer Amanda Malone, is not a cutting-edge biotech trying to deliver breakthrough therapies in areas such as gene therapy, precision oncology or monoclonal antibodies.

Rather, it is taking an existing, established treatment – an anti-inflammatory steroid used to relieve knee pain for millions of osteoarthritis patients – and aiming to make it better by wrapping the injectable molecules with a polymer coating.

Eupraxia believes the coating would enable the steroid to be more slowly and gradually released, providing longer, steadier relief and reducing side effects from the current standard of care, including degradation of cartilage.

The company believed its IPO would be well-suited to Canadian investors who were risk averse but keen to buy biotech. Because Eupraxia uses established materials that are effective and safe in humans, the company’s leaders believe they have a good chance of gaining regulatory approval, in less time than other therapies.

The source familiar with the offering said about 75 per cent of the IPO orders came from institutions, about evenly split between the U.S. and Canada, and the balance came from individual investors.

The company is set to launch a 240-person trial this year to assess the treatment’s effectiveness, funded by the proceeds of the IPO.

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