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12:00 AM
Jan 19, 2009
 |  BioCentury  |  Finance

Ebb & Flow

Although biotech banking hasn't looked like a growth opportunity, the combination of Wedbush Morgan Securitiesand Pacific Growth Equities may remind seasoned biotech watchers of a time when specialty banking and retail brokerages combined to make markets for the sector.

Last week, Wedbush Morgan announced it would acquire Pacific Growth, which in the past two years has underwritten 11 follow-on offerings, six PIPEs, four IPOs and three private placements.

"Combined, we will create a larger brokerage that will be able to go into both institutional and retail channels," Tom Dietz, co-CEO of Pacific Growth, told Ebb & Flow.

According to Wedbush, the combination will be the largest West Coast-based securities broker-dealer, combining PacGrow's research and investment banking experience with Wedbush's private client business and sales force in small and mid-cap stocks. The combined business will have more than $13 billion under management.

"The additional scale, infrastructure, expertise and capital that Wedbush brings will allow us to serve our clients even better," said Dietz. "Wedbush is the number one provider of liquidity for NASDAQ stocks, while Pacific Growth will bring in capital market transactions."

Ben Perkins, managing director and head of life sciences banking at Pacific Growth, said the combination will recapitulate the model that PaineWebber and Robertson Stephens once operated.

"Wall Street has witnessed a series of successful combinations between private client businesses and research-driven investment banks, the most recent wave being earlier this decade," he said. "The current struggles these organizations face are a result of acquisition sprees that layered in high-risk business lines and shifted focus away from this established model."

Wedbush has not been an active participant in the life sciences sector since 1998, when it underwrote the IPO completed by drug delivery company Iomed. But Gary Wedbush, EVP and head of the capital markets group at Wedbush, told Ebb & Flow the firm has been looking at life sciences as a growth sector for some time. He said PacGrow "brings significant capital-raising experience and expertise to our investment banking practice."

Terms of the deal, which is expected to close next month, were not disclosed. Most, if not all, of PacGrow's 75 employees are expected to join Wedbush.

Dietz will head up both the combined investment banking business and the Wedbush Pacific Growth Life Sciences practice. He, along with Pacific Growth Chairman and founder Richard Osgood and co-CEO and founder Stephen Massocca, will report to Gary Wedbush.

MPM's exit

Although the principals aren't talking, it's a foregone conclusion that MPM Capital, one of the earliest VCs to have a separate public equities fund, is exiting the business. The buzz at the 27th Annual J.P. Morgan Healthcare Conference last week was that MPM was to send a letter to LPs last Friday informing them that the fund was being closed, that fund manager Kurt von Emster will leave the firm at the end of February, and the capital will be returned to the investors.

Both MPM and von Emster declined to comment. Nevertheless, it arguably has become much harder to provide a return on investment given the fund's focus on small and mid-cap names.

MPM BioEquities had positions in 32 companies. The firm has not disclosed the current size of the fund.

MPM Capital has more than $2.5 billion under management through four funds. It launched MPM BioEquities in 2001, as its...

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