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B.C.’s Eupraxia Pharmaceuticals Inc. is trying to accomplish something no other Canadian biotech startup has done in 18 years: go public solely on the Toronto Stock Exchange.

The proposed $50-million IPO, underwritten by Raymond James, BMO Nesbitt Burns and Canaccord Genuity, is being closely watched by Canada’s life sciences sector. “If it’s successful … it could pave the way for other high quality, innovative Canadian biotech and therapeutics companies to use a Canadian IPO as a springboard for scaling their businesses,” said Peter van der Velden, managing general partner with Toronto-based biotech financier Lumira Ventures.

Victoria-based Eupraxia was hoping to price the deal on Wednesday after setting an initial range of $9 to $11 a share. After a bad day for biotech stocks on Tuesday, however, a few expected institutional orders didn’t come through, prompting the deal team to restructure the offering, said two sources familiar with Eupraxia. It is now looking to price its offering later this week at $8 a unit, consisting of one share and a half-warrant with an $11.20 strike price. The Globe and Mail is not identifying the sources as they are not permitted to speak on the matter. Eupraxia declined to comment.

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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 Richard Glickman, who co-founded Aurinia Pharmaceuticals and Aspreva Pharmaceuticals, two of Canada’s most successful biotechs. “It’s great to have a Canadian-listed company on the TSX and we need to see more,” Mr. Glickman said in an interview. “If this deal gets done … it could be an awakening.”

Canadian drug developers typically take one of three IPO routes: listing on the TSX Venture exchange; dual-listing on the TSX and a big U.S. exchange; or going onto the Nasdaq, the premier biotech market. Canadian names have gotten a warm reception from global investors – last year saw the three largest-ever IPOs by Canadian biotechs: AbCellera Biologics Inc., Repare Therapeutics Inc. and Fusion Pharmaceuticals Inc., all on Nasdaq.

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 owing to 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 and moved to San Diego. It’s now called Mirati Therapeutics Inc. and worth US$10-billion.

The dearth of biotechs on the TSX – there are less than 20 – at a time when drug stocks are delivering solid returns has become a worry for TMX Group Ltd. CEO John McKenzie. This 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 of 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,” Mr. Glickman said. “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 is an interesting test case. The company, co-founded in 2012 by CEO James Helliwell, a former cardiac anesthesiologist, and chief scientific officer Amanda Malone, is not like other cutting-edge biotechs 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 currently 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.

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The company 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.

According to the sources, Eupraxia believes the offering is suited to Canadian investors who want to buy biotech but lack experience and tolerance for riskier names. Because Eupraxia uses established materials that are effective and safe in humans, they believe they have a good chance of gaining regulatory approval, in less time than other therapies. The involvement of well-known names in Canadian biotech and finance are also selling points. In addition to Mr. Montalbano, Eupraxia’s chief financial officer, Alexander Rothwell, is ex-president of Macquarie Capital Markets Canada.

Eupraxia’s safety trial produced some puzzling results likely because of its small sample size of 32 patients and low dosing, as patients that took the placebo saw pain levels fall more than expected. The company aims to settle the data issue with a larger effectiveness trial of 240 patients beginning this year using a higher dose than the first trial, funded with the expected proceeds of the IPO. If successful, the hope is that Eupraxia can deliver a range of other treatments in similar fashion.

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