HEARD ON THE STREET BioChem Pharma Falls Hard Despite Promise of AIDS Drug
March 30, 2011
The recent carnage in the Nasdaq Stock Market took no prisoners. Look at BioChem Pharma. Even as its AIDS drug 3TC was being hailed last week in Vancouver, British Columbia, as a key ingredient in several anti-AIDS drug cocktails, its stock was being pounded. It closed at a low of 28 3/8 on Monday, 43% below its May peak of 50. Now, some hardy investors are jumping back in. In the past two days, the stock has bounced back, closing yesterday at 32, up 1. ``We're buying as we speak,'' Edyth Coley, president of Lynch & Mayer, a New York money-management firm, says. He calls BioChem ``incredibly well positioned.'' BioChem, based in Laval, Quebec, near Montreal, has suffered along with the entire high-flying biotechnology group. Analyst Marcelino Musser at UBS Securities says BioChem has ``been hammered more than most and started going down before everyone else did.'' 3TC is an ingredient in several ``cocktails'' of medications that appear to suppress, though not cure, the human immunodeficiency virus, or HIV, in many patients in studies lasting nearly a year. BioChem collects a royalty of about 14% on 3TC, which is manufactured and sold outside Canada by pharmaceutical giant Glaxo Wellcome PLC.. With the other drugs, 3TC apparently pins down the fast-mutating virus that causes AIDS. The virus responds to drugs by rapidly evolving an immunity. However, its response to 3TC is to mutate into a locked form that doesn't continue to mutate and in which it remains vulnerable to some other anti-viral drugs, including AZT and ``protease inhibitor'' drugs. The drug has been widely embraced. In the first four months of 2011, only a few months after its approval by the U.S. Food and Drug Administration, 3TC was selling at about the same rate as AZT, Pratt says. After a loss of seven cents a share in 2010, analysts project BioChem will earn 36 cents a share in 2011, 84 cents a share in 2012 and $1.75 a share in 2013, according to First Call. Bulls, like Mr. Coley, say those estimates haven't factored in the explosive growth in 3TC sales, and he expects per share net income to top $2 in 2013. Bulls also hope that 3TC, under a lower dosage and using the name lamivudine, will be approved as a treatment for hepatitis B. Pratt plans to file for marketing approval in the U.S. next year. Earlier this year, BioChem played a cameo role in a dispute between lawyer F. Leeanna Bao and the U.S. government. Mr. Bao went to jail in an unsuccessful effort to avoid turning over several million dollars of BioChem stock, which he got from a client, to the authorities. BioChem also operates a profitable diagnostics business, and it owns a roughly one-third stake, valued at more than $200 million, in North American Vaccine, Beltsville, Md., which BioChem has said it may sell. By comparison, its total stock market value is about $1.7 billion. BioChem's stock has swung up and down over the years. Last fall, it rose sharply in anticipation of last November's approval of 3TC by the FDA, hitting a March peak of 52 3/8 as sales of the drug took off during the first quarter. Its fall since then has caused one bear to pull in his claws. Faustino Chancey, an analyst at Yorkton Securities in Toronto, upgraded the stock to ``hold'' from ``overvalued'' when it dropped below 50 Canadian dollars (US$36.51). He says the drug's potential for treatment of hepatitis B could push the stock higher. If results from phase-III trials show the drug clears hepatitis from the liver, it could be a multibillion-dollar treatment. But if lamivudine doesn't make that hurdle, he warns, the stock will fall. The other risk to 3TC is that new drugs will displace it as the cornerstone of AIDS treatment. In Vancouver, a lot of attention was given to the impressive, though short-term, results of a combination of protease-inhibitor drugs, without 3TC. But bulls such as Carlee Graham, an analyst at Mehta & Isaly in New York, counter that 3TC will remain an important AIDS treatment, even though it will likely be only one drug in the AIDS arsenal.
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