Biochem Pharma Beats Estimates
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individualinvestor.com
Senior Analyst: Eric Singer (5/1/00)
Late last week, Biochem Pharma (NASDAQ:BCHE - Quotes, News, Boards) released financial
results for its first quarter of fiscal 2000. Earnings per share of $0.28 per share were $0.06
ahead of consensus forecasts. Driving upside was $7.2 million in realized investment gains.
Sales of Biochem's two key out-licensed products, Zeffix and 3TC posted strong results for the
quarter, with Zeffix sales of $20 million and 3TC sales of $200 million. Both Zeffix and 3TC
have demonstrated strong clinical utility and are prescribed to treat chronic hepatitis B and HIV,
respectively.
While worldwide sales of 3TC in U.S. dollars increased by only 3% on a year-over-year basis,
sales at constant exchange rates actually increased by 8% when compared to the same
period last year. Sales growth was strong in key geographies, including 10% growth in the
U.S. market, 9% growth in Western Europe and 4% in Canada. In other geographies, sales
decreased by 13%. Part of the decrease in other geographies may be related to stocking and
inventory issues with partner Glaxo Wellcome (NYSE:GLX - Quotes, News, Boards).
Zeffix sales surged to $20 million in the quarter, from $13.3 million just three months earlier.
Asian sales were especially strong. Further country approvals as well as reimbursement
should continue to fuel higher sales levels of Zeffix in future quarters.
Biochem achieved several key milestones in the first quarter that should drive shareholder
value over the course of this year. On March 15th, the company completed the divestiture of its
diagnostic business, a move that will enable it to focus resources on drug development
programs. Additionally, the company announced plans to partner with Technology
Partnerships Canada, a federal government agency, to develop protein vaccine technology.
The agreement provides for guaranteed funding to Biochem. Additionally, Biochem make
clinical progress on troxacitabine, an anti-cancer compound that the company is developing.
Biochem continues to have an attractive drug pipeline. In addition to troxacitabine, Biochem
and its partner AstraZeneca are planning to advance BCH-3963 for the treatment of pain into
Phase III studies this year. Also, in the anti-infective arena, Biochem will resume clinical
studies of dOTC for HIV later this year following some toxicity concerns.
Biochem shares are languishing in the low $20s. While shares advanced sharply earlier in the
year as investors plowed into biotech stocks, Biochem has been unable to gain any
momentum recently. We believe that Biochem shares will trade higher over the next several
months as investors comfort level with Zeffix and 3TC sales increase.
Additionally, Biochem has a very strong clinical pipeline and news flow can ignite shares.
Biochem shares have considerable upside with a more modest safety profile than most
biotech stocks. With two established, revenue producing drugs, a strong balance sheet and
operating profits, Biochem shares still look very attractive.
Updated on 05/1/00 with BCHE at $22.50
Recommended on 12/11/99 at $20.81
(The Magic 25 is a diversified portfolio of stocks that Individual Investor believes will
outperform the market over the course of the year. In 1999, the Magic 25 portfolio was up
79.3%. On average the portfolio has risen 31.6% annually
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