VANCOUVER -- The tension-filled days leading up to last week's technology selloff on Wall Street may have reminded astute hockey fans of game seven of the 1994

Stanley Cup

finals between the

New York Rangers

and the

Vancouver Canucks

. The back-and-forth classic, an exercise in anxiety control most tech investors are familiar with, left observers to contend with heart palpitations and fight-or-flight syndrome.

For investors with greenbacks tied up in Canadian biotech stocks, however, the parallel may be drawn more closely with that hockey game's aftermath: an ugly hockey riot on the streets of Vancouver, triggered by the displeasure of drunken Canucks fans.

The retail-investing masses -- themselves intoxicated on astounding returns in Canada's biotech sector -- showed their penchant for mob activity after the now-infamous announcement made by President

Bill Clinton

and British Prime Minister

Tony Blair

, calling for free public access to human genetic research.

The ensuing selloff on the

Nasdaq

quickly spread to the

Toronto Stock Exchange

and

Canadian Venture Exchange

, where a number of biotechs quickly gave back their gains from the past several weeks and months, even though their businesses are entirely unrelated to the genetics.

The TSE's

Biotechnology and Pharmaceutical

sub-index, which hovered over 3300 at the beginning of March, dipped below 2700 last Wednesday. Despite the sector's late-week damage control, the index closed at a disappointing 2650 today.

The bloodied have included such biotech heavyweights as

QLT Phototherapeutics

(QLTI)

,

BioChem Pharma

TheStreet Recommends

and

Biomira

(BIOM)

. Another bright northern light,

Angiotech Pharmaceuticals

(ANPI)

, now trades at 50, in stark contrast to an all-time high of 99 reached less than a week earlier.

Canada the Safe. Canada the Boring.

For stateside investors who'd been drawn into Canadian biotechs by dazzling returns, the activity may have served as a wake-up call. In addition to the sector's large-cap and mid-cap plays, Canada's plethora of small-cap outfits showed they, too, were capable of reaching dizzying heights and panic-inducing lows all the same.

Fueled by a group affectionately dubbed cure-for-cancer daytraders, companies like

Lorus Therapeutics

(LORFF)

-- a 30-cent stock last November -- recently traded as high as 6 1/8. That had some analysts asking aloud whether a company whose anti-cancer drug was still in pre-clinical stages should warrant a market capitalization of over $550 million. The stock traded in the 4 range on Monday.

Vancouver-based

Inflazyme Pharmaceuticals

, which hit a record high of C$10.70 ($7.29) just 10 days ago, had dropped by 29% by the middle of last week.

"This momentum buying in small-caps is a problem," says London, Ontario-based Calvin Stiller, manager of the

Canadian Medical Discoveries Fund.

"I don't try to promote it, and I don't sleep better because investments we're involved in have run up because of momentum. It doesn't give me a good feeling."

That said, Stiller maintains that Canada's biotechnology sector remains fundamentally strong, and offers many undervalued stories to the discerning investor.

Claude Camire, a Montreal-based analyst with boutique brokerage

Groome Capital

, agrees that Canada's biotechnology sector holds a world of promise, but has been set back in recent times by irrational buying and Internet hype.

"It's troublesome more than anything else," he says. "People are looking for the flavor of the day. It becomes difficult for investors to invest in a company based on fundamentals if the daytraders are taking over."

Camire says that another cause behind the massive run-up and subsequent fallback for Canadian biotechs: everybody's favorite New Economy culprit, Internet chat rooms.

The good news from all of this is that the recent bloodletting has restored some reality to the sector, giving long-haul investors an opportunity to put their money in one of the country's most ambitious technology sectors.

Indeed, despite the recent shakeout for the tech sector as a whole, Canadian biotechs appear to be on the road to recovery, particularly those large-cap and mid-cap plays that had sold off earlier, in a textbook example of investor mania.

"You can see the templates of good biotechnology investments: ones that have a fundamental platform, good management, and show that they know how to make smart business as well as smart science," says Stiller. "Most of those, when the froth comes off, are still going to be there."

Buoyed by the strong alliance between research institutions, the private sector and increasingly generous venture capitalists, Canada's biotech sector still has plenty of juice in it yet. Investors will just have to learn to protect themselves from the hype and hysteria that can play havoc with the best of portfolios.

Derek Moscato is a freelance financial journalist in Vancouver. At the time of publication he had no positions in any of the securities mentioned, although holdings can change at any time.