- Biotech Could Bring Home the Canadian Bacon

[Guest guest]

Can someone explain what they mean when they say

" BioChem relies heavily on marketing

partnerships, most notably with Glaxo Wellcome (NYSE:GLX - news), for

the distribution of its products. Thus, its major revenue

source is royalties, as opposed to outright sales. " ?

I am really curious about that statement, but not sure what is meant by

it.

Somehow, I think it matters.

Marcy

http://biz./wi/000531/7304.html

Wednesday May 31, 10:11 am Eastern Time

worldlyinvestor.com Sector of the Day

Biotech Could Bring Home the Canadian Bacon

By L. Valentine, Columnist

BioChem Pharma, known for discovering a key ingredient for the 'HIV

cocktail,' is

looking cheap.

If the term ``cheap biotech stock'' strikes you as an oxymoron, let me

introduce you to

BioChem Pharma (Nasdaq:BCHE - news), a Canadian biopharmaceutical

company that's a

give-away at these valuations. BioChem, best known for discovering 3TC,

the world's leading

anti-HIV drug, is hitching its wagon to three rising stars:

anti-infective, anti-cancer and vaccine

medicines.

Laval, Quebec-based BioChem is an international biopharmaceutical

company focused on the research, development and

commercialization of medical products for the prevention and treatment

of human diseases. BioChem relies heavily on marketing

partnerships, most notably with Glaxo Wellcome (NYSE:GLX - news), for

the distribution of its products. Thus, its major revenue

source is royalties, as opposed to outright sales.

Recognizable competitors include Amgen (Nasdaq:AMGN - news), Genentech

(NYSE:DNA - news), Immunex (Nasdaq:IMNX -

news), Medimmune (Nasdaq:MEDI - news), Biogen (Nasdaq:BGEN - news) and

Chiron (Nasdaq:CHIR - news).

Mixing Cocktails

BioChem is most known for its anti-infective therapies. Its late founder

Dr. Bernard Belleau discovered 3TC -- a compound

known clinically as lamivudine, which is the world's leading anti-HIV

treatment -- now commonly used as part of the ``AIDS

cocktail.'' 3TC, also marketed as Epivir or Combivir, is distributed by

Glaxo worldwide, except in Canada where BioChem sells it

directly.

The drug is currently being used by 80% of HIV patients on therapy and

should reach $1 billion in sales in 2000. The annual

growth for the drug in this market is expected to be around 8% and

BioChem's royalties tend to run in the range of 12% to 15% of

sales. While 3TC is the current tail that wags the revenue dog of this

company, the most exciting prospect for the company lies in

a different use of the same compound, lamivudine.

Under the brand names Zeffix, Epivir-HBV, and Heptovir, lamivudine is

being used to treat Hepatitis B, the chronic liver disease

that's far more reaching than AIDS or HIV. Hepatitis B is the ninth most

common cause of death in the world, responsible for two

million fatalities each year, and there are nearly 400 million carriers

of the virus worldwide.

Hepatitis B Treatment

Zeffix is the first, and only, oral treatment for Hepatitis B, and is

two years ahead of any competition in this market. In the coming

years, this will easily top C$1 billion in sales. Of that, nearly half

is expected to come from China, where Hepatitis B is an

epidemic. Zeffix received approval for distribution from Chinese health

authorities in January of last year, and BioChem and Glaxo

locked up an exclusive manufacturing arrangement for eight years in the

country. BioChem's revenue from Zeffix should more

than double in each of the next several years.

In the anti-cancer arena, BioChem manufactures PACIS, a treatment for

bladder cancer. PACIS is an antineoplastic agent in the

treatment of superficial cancers and acts through the promotion of local

inflammatory reactions of the urinary bladder. It will be

distributed in the US by UroCor (Nasdaq:UCOR - news), an Oklahoma-based

company with a focus on urological disorders.

The company recently began Phase II trials of troxacitabine for use in

the treatment of a variety of solid tumors and in leukemia.

In the vaccine area, most remarkably, is Fluviral, the only

Canadian-made flu vaccine required for annual vaccination programs. It

has also been working on protections against meningitis and pneumonia.

Its efforts in vaccine medicine was recently bolstered by

the announcement of a joint effort with the Canadian government's

Technology Partnerships Canada that includes an infusion of

C$80 million from the government over six years.

Pegged as a Cheap Stock

Overall, the company is in great financial shape. Revenues grew by 30%

last year to C$290 million, earnings grew by the same

amount on a 51% net margin, and the company's long-term-debt-to-assets

ratio is 20%. This company is firing on all three of its

cylinders, critical to a thriving biotech. BioChem's got established and

growing revenue, a strong pipeline and a strong balance

sheet.

Amazingly, it trades at a fraction of the valuations of its peers, many

of whom can't claim the three aforementioned

characteristics. BioChem stock trades at 21 times next year's expected

earnings, and has a conservative, long-term projected

earnings growth rate of 26%. That means its P/E to Growth (PEG) is an

unbelievably low 0.8. When you compare that with richly

priced Amgen's PEG of 3.3 or Genentech's 3.4, you'll see what I mean by

cheap biotech stock.

Editor's Note: This story was changed from the original copy to fix a

figure incorrectly labeled as Canadian dollars, a

misstated royalties percentage and to specify the time frame in which

the company will receive an infusion from the

government.

L. Valentine, CFA, is president of <a

href=``http://www.valentineventures.com/''>Valentine Ventures LLC,</a>

an

investment manager of global stocks for individual investors. His weekly

column, ``ADR of the Week,'' focuses on one

foreign stock that trades in the US as an American Depositary Receipt

(ADR). At the time of publication, the author

owned shares of BioChem Pharma stock in client accounts.

Go to www.worldlyinvestor.com to see all of our latest stories.

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Personal Finance FAQs ] Related QuotesAMGNBCHEBGENCHIRDNAGLXIMNXMEDIUCOR63 5/823 5/1654 1/237 15/16107 1/856 5/825 7/8155 3/83 13/16+1/4+7/8-1 3/4-2 3/4+2 5/8-1 3/8-3 3/16-8 7/8+3/16delayed 20 mins - disclaimerWednesday May 31, 10:11 am Eastern Timeworldlyinvestor.com Sector of the DayBiotech Could Bring Home the Canadian BaconBy L. Valentine, ColumnistBioChem Pharma, known for discovering a key ingredient for the 'HIV cocktail,' is looking cheap.

If

the

term

``cheap

biotech

stock''

strikes

you

as

an

oxymoron,

let

me

introduce

you

to

BioChem

Pharma

(Nasdaq:BCHE - news),

a

Canadian

biopharmaceutical

company

that's

a

give-away

at

these

valuations.

BioChem,

best

known

for

discovering

3TC,

the

world's

leading

anti-HIV

drug,

is

hitching

its

wagon

to

three

rising

stars:

anti-infective,

anti-cancer

and

vaccine

medicines.Laval,

Quebec-based

BioChem

is

an

international

biopharmaceutical

company

focused

on

the

research,

development

and

commercialization

of

medical

products

for

the

prevention

and

treatment

of

human

diseases.

BioChem

relies

heavily

on

marketing

partnerships,

most

notably

with

Glaxo

Wellcome

(NYSE:GLX - news),

for

the

distribution

of

its

products.

Thus,

its

major

revenue

source

is

royalties,

as

opposed

to

outright

sales.Recognizable

competitors

include

Amgen

(Nasdaq:AMGN - news),

Genentech

(NYSE:DNA - news),

Immunex

(Nasdaq:IMNX - news),

Medimmune

(Nasdaq:MEDI - news),

Biogen

(Nasdaq:BGEN - news)

and

Chiron

(Nasdaq:CHIR - news).Mixing

CocktailsBioChem

is

most

known

for

its

anti-infective

therapies.

Its

late

founder

Dr.

Bernard

Belleau

discovered

3TC

--

a

compound

known

clinically

as

lamivudine,

which

is

the

world's

leading

anti-HIV

treatment

--

now

commonly

used

as

part

of

the

``AIDS

cocktail.''

3TC,

also

marketed

as

Epivir

or

Combivir,

is

distributed

by

Glaxo

worldwide,

except

in

Canada

where

BioChem

sells

it

directly.The

drug

is

currently

being

used

by

80%

of

HIV

patients

on

therapy

and

should

reach

$1

billion

in

sales

in

2000.

The

annual

growth

for

the

drug

in

this

market

is

expected

to

be

around

8%

and

BioChem's

royalties

tend

to

run

in

the

range

of

12%

to

15%

of

sales.

While

3TC

is

the

current

tail

that

wags

the

revenue

dog

of

this

company,

the

most

exciting

prospect

for

the

company

lies

in

a

different

use

of

the

same

compound,

lamivudine.Under

the

brand

names

Zeffix,

Epivir-HBV,

and

Heptovir,

lamivudine

is

being

used

to

treat

Hepatitis

B,

the

chronic

liver

disease

that's

far

more

reaching

than

AIDS

or

HIV.

Hepatitis

B

is

the

ninth

most

common

cause

of

death

in

the

world,

responsible

for

two

million

fatalities

each

year,

and

there

are

nearly

400

million

carriers

of

the

virus

worldwide.Hepatitis

B

TreatmentZeffix

is

the

first,

and

only,

oral

treatment

for

Hepatitis

B,

and

is

two

years

ahead

of

any

competition

in

this

market.

In

the

coming

years,

this

will

easily

top

C$1

billion

in

sales.

Of

that,

nearly

half

is

expected

to

come

from

China,

where

Hepatitis

B

is

an

epidemic.

Zeffix

received

approval

for

distribution

from

Chinese

health

authorities

in

January

of

last

year,

and

BioChem

and

Glaxo

locked

up

an

exclusive

manufacturing

arrangement

for

eight

years

in

the

country.

BioChem's

revenue

from

Zeffix

should

more

than

double

in

each

of

the

next

several

years.In

the

anti-cancer

arena,

BioChem

manufactures

PACIS,

a

treatment

for

bladder

cancer.

PACIS

is

an

antineoplastic

agent

in

the

treatment

of

superficial

cancers

and

acts

through

the

promotion

of

local

inflammatory

reactions

of

the

urinary

bladder.

It

will

be

distributed

in

the

US

by

UroCor

(Nasdaq:UCOR - news),

an

Oklahoma-based

company

with

a

focus

on

urological

disorders.The

company

recently

began

Phase

II

trials

of

troxacitabine

for

use

in

the

treatment

of

a

variety

of

solid

tumors

and

in

leukemia.

In

the

vaccine

area,

most

remarkably,

is

Fluviral,

the

only

Canadian-made

flu

vaccine

required

for

annual

vaccination

programs.

It

has

also

been

working

on

protections

against

meningitis

and

pneumonia.

Its

efforts

in

vaccine

medicine

was

recently

bolstered

by

the

announcement

of

a

joint

effort

with

the

Canadian

government's

Technology

Partnerships

Canada

that

includes

an

infusion

of

C$80

million

from

the

government

over

six

years.Pegged

as

a

Cheap

StockOverall,

the

company

is

in

great

financial

shape.

Revenues

grew

by

30%

last

year

to

C$290

million,

earnings

grew

by

the

same

amount

on

a

51%

net

margin,

and

the

company's

long-term-debt-to-assets

ratio

is

20%.

This

company

is

firing

on

all

three

of

its

cylinders,

critical

to

a

thriving

biotech.

BioChem's

got

established

and

growing

revenue,

a

strong

pipeline

and

a

strong

balance

sheet.Amazingly,

it

trades

at

a

fraction

of

the

valuations

of

its

peers,

many

of

whom

can't

claim

the

three

aforementioned

characteristics.

BioChem

stock

trades

at

21

times

next

year's

expected

earnings,

and

has

a

conservative,

long-term

projected

earnings

growth

rate

of

26%.

That

means

its

P/E

to

Growth

(PEG)

is

an

unbelievably

low

0.8.

When

you

compare

that

with

richly

priced

Amgen's

PEG

of

3.3

or

Genentech's

3.4,

you'll

see

what

I

mean

by

cheap

biotech

stock.Editor's

Note:

This

story

was

changed

from

the

original

copy

to

fix

a

figure

incorrectly

labeled

as

Canadian

dollars,

a

misstated

royalties

percentage

and

to

specify

the

time

frame

in

which

the

company

will

receive

an

infusion

from

the

government.

L.

Valentine,

CFA,

is

president

of

<a

href=``http://www.valentineventures.com/''>Valentine

Ventures

LLC,</a>

an

investment

manager

of

global

stocks

for

individual

investors.

His

weekly

column,

``ADR

of

the

Week,''

focuses

on

one

foreign

stock

that

trades

in

the

US

as

an

American

Depositary

Receipt

(ADR).

At

the

time

of

publication,

the

author

owned

shares

of

BioChem

Pharma

stock

in

client

accounts.

Go to www.worldlyinvestor.com to see all of our latest stories.More Quotesand News:Amgen Inc (NasdaqNM:AMGN - news)BioChem Pharma Inc (NasdaqNM:BCHE - news)Biogen Inc (NasdaqNM:BGEN - news)Chiron Corp (NasdaqNM:CHIR - news)Genentech Inc (NYSE:DNA - news)Glaxo Wellcome PLC (NYSE:GLX - news)Immunex Corp (NasdaqNM:IMNX - news)Medimmune Inc (NasdaqNM:MEDI - news)Urocor Inc (NasdaqNM:UCOR - news)Related News Categories: biotech,

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