Two articles (IBD and worldlyinv) ON SCLN (A@P Long):
FOREIGN AID
Biotech Goes Overseas to Market Treatment for Hepatitis Patients
by Gloria Lau
One day in 1983 while playing tennis, Dr. James Kim found himself so weary he couldn't finish his set.
After a couple of medical tests, he was startled to find he had hepatitis. For the next nine years, he took the only drug on the market - Schering-Plough Corp's protein drug Intron A.
The drug slowed the viral onslaught on his liver, but also made him suffer nausea, fever and severe pain. The side effects were so great, he had to take other drugs to curb them. Intron A even affected Kim's career. He could only take the drug at night; otherwise he couldn't work during the day.
Then in 1992, Kim learned of Zadaxin, a new drug made by a biotech start-up SciClone Pharmaceuticals. That drug wasn't available in the U.S., but was being tested overseas. So he flew to Italy to try it.
"This drug saved my life, and I really believe in it," Kim said. "This drug was my last resort. I took this medicine and I saw a definite change in my physiology. I didn't suffer any side effects."
Two months after taking the drug, he felt better than he had in years. After six months of treatment, the virus became dormant and his life went back to normal. Now he jogs three times a week and plays tennis again.
Kim was so excited about the drug's potential that he sold off his entire stock portfolio in 1993 and put the cash into SciClone. Today, those holdings are valued at more than $4.3 million.
SciClone's Zadaxin, which targets hepatitis B and C, is approved in 16 countries, but not in the U.S. Analysts don't expect it to win Food and Drug Administration approval until 2003.
Zadaxin has entered Phase three testing, the last stage before SciClone can apply for marketing approval from the FDA.
Zadaxin can work alone, but has better results if used with other drugs. Early clinical studies show that using Zadaxin with Intron A, an inteferon, or protein that blocks the virus from replicating, helps 60% of patients. That compares with the 30% of patients who take Intron A on its own.
But Zadaxin is pricey. Patients need just a six-month course, but that alone costs about $5,500.
"We've sold this in countries (where patients bought the drug) without insurance for two to three years. That's the strongest clinical data," said SciClone Chief Executive Don Sellers. "And interferon is a dirty drug. It's potent all right, but it's like hitting someone with a hammer."
Sellers claims Zadaxin has no competition because it works by boosting the immune system's ability to recognize and attack viral cells hiding among healthy ones - not by attacking the virus directly as the other drugs do.
Wayne Lottinville of the Red Chip Review disagrees. The drug still will compete against all hepatitis C treatments, he says. Zadaxin faces not just Intron A, which also works by boosting the immune system, but also Glaxo Wellcome's Lamivedine for hepatitis and Hoffman-LaRoche's interferon. Lottinville concedes, though, that Zadaxin likely can be used in combination with these medicines.
Early studies show that the drug may be useful in treating other diseases too, including liver cancer, melanoma and HIV, the virus that causes AIDS.
Last year, SciClone's Zadaxin sales totaled $9 million. Red Chip's Lottinville expects sales to climb to $20 million this year and $50 million next year, based on just overseas sales. Portland-based Red Chip doesn't underwrite deals for companies it analyzes for investors.
In the fourth quarter, SciClone's losses narrowed to 2 cents a share from 23 cents. Revenue rose 137% to $3 million. in 1999 it lost 26 cents, vs. a loss of 88 cents the year prior, while revenue rose 152% to $9 million. Analysts surveyed by First Call predict it will lose 9 cents this year and turn a 46-cent profit in 2001. The company sells as SCLN near 17.
Since 1989, SciClone has incurred a total net loss of more than $114.5 million, according to a recent quarterly filing with the Securities and Exchange Commission. Expenses will get worse before they get better. The company expects operating costs to climb over the next few years as it expands its number of distributors overseas and finishes up clinical testing.
SciClone has tried to cap costs by outsourcing.
"We're not a drug discovery company," Sellers said. "We contract with toxicologists when we need them. When the job is done, I pay them, and handsomely - and say, 'Thank you very much.' This way I don't have to keep high-paid toxicologists on staff. Others have called it a virtual business. I call it a smart business."
Thursday March 9, 8:28 am Eastern Time
worldlyinvestor.com Sector of the Day
Two Companies Bank on Hepatitis Treatments
By Nadine Wong, Biotech Stocks Columnist
BioChem Pharma and SciClone have the products and the marketing, but revenues may be hard to collect.
BioChem Pharma (Nasdaq:BCHE - news) and SciClone (Nasdaq:SCLN - news) are two companies currently marketing compounds to treat the millions of hepatitis B patients worldwide.
Both these companies show a lot of potential, but the bottom line in selling therapeutics internationally is that some countries don't have access to health care. If SciClone or BioChem Pharma intend to operate in those countries, reimbursement of their drugs under government or private health insurance programs may not be available.
Hepatitis B is one of the most common infectious diseases in the world, causing both acute and chronic forms, which can lead to cirrhosis and cancer of the liver. More than 300 million individuals are infected with hepatitis B virus (HBV) worldwide (mostly in Asia), of which about 20%, or 60 million, are likely to be eligible for therapy.
Potential for Piece of $3 Billion Market
Despite the staggering numbers of victims, HBV infection can be prevented. In the US, vaccines are available that can prevent the transmission of HBV; however, these vaccines cannot help those already infected.
When the illness progresses to the point where the liver stops working properly, the patient must receive a liver transplant. Transplantations are costly procedures with a good success rate and are just one reason why the estimated economic impact for hepatitis B is easily over $3 billion dollars.
BioChem Pharma is a Canadian biopharmaceutical company developing therapeutic products, vaccines and diagnostics. BioChem Pharma's stock has been depressed recently, primarily due to sluggish sales and setbacks in their second-generation anti-HIV therapy, but in my opinion the potential remains strong.
Shares of BioChem Pharma appear to be cheap based on most financial valuations. The company needs a catalyst to re-ignite investor interest. In that sense, the market for hepatitis B treatment is important.
BioChem Shares to Stay Dormant in 2000
I expect shares of BioChem Pharma to be stagnant until sales of anti-HBV therapy Zeffix start to beat expectations, which may not take place until the end of the year at the earliest. However, there is limited downside for the time being, and the shares may appeal more to value-oriented investors with a time horizon of one year or more.
BioChem Pharma is best known for its anti-HIV compound 3TC, also known as Epivir. Worldwide sales of Epivir, which is co-marketed with Glaxo Wellcome (NYSE:GLX - news), were $873 million in 1999. Zeffix, the company's next major product, is a actually a different formulation of 3TC.
For the fourth quarter, US sales of Zeffix were only $13.3 million, $5 million short of the company's quarterly goals. Last year, BioChem Pharma began to market the drug outside the US, where the bulk of the HBV patients reside. At an annual treatment price of over $1,000, this could be the market driver for BioChem Pharma.
Revenues Not Guaranteed in All Markets
However, in economically deprived areas such as China, where there is a huge potential market, even the discounted treatment price of less than $500 may not be affordable. Besides China, BioChem Pharma has also recently opened its distribution network to South Korea, Canada, the Philippines, Japan, and Hong Kong markets.
The company is anticipating reimbursement in Europe, South Korea and the Middle East, but penetration into these areas has been slower than hoped. And until the company can make some strong governmental and marketing inroads into the international forum, sales of Zeffix may not reach its potential.
SciClone Sees Profitability by Year End
SciClone is currently marketing Zadaxin, a treatment that has been approved in 16 countries primarily as a treatment for hepatitis B and C, although it has investigational status in the US. SciClone's global marketing strategy has rewarded the company with increased sales and will fuel an upward movement in the stock price. I anticipate that SciClone can meet its goal to be profitable by the end of 2000.
For the year 1999, SciClone reported total revenues of $9,397,000, up 152% from 1998. Total Zadaxin sales for 1999 were $9,090,000, up 151% from $3,625,000. For the year, the company lost 26 cents per share, narrower than the loss of $1.29 per share in 1998.
SciClone expects these trends to continue in 2000 and maintains the goal of operating profitably by year end. SciClone has filed for Zadaxin marketing approval in 19 additional countries. So there is substantial potential for SciClone to continue to grow in sales.
Another biotech company that can play a role in the large hepatitis B market is Gilead Sciences (Nasdaq:GILD - news). Gilead's drug Adefovir is expected to receive Food Drug and Administration approval for treating hepatitis B in 2003 and will be marketed shortly afterwards. The company has a bright future with a decent product pipeline plus the data from clinical trials with Adefovir looks promising.
Nadine Wong is editor and publisher of the BioTech Navigator Newsletter (www.biotechnav.com), the leading biotech investment newsletter in the nation. Her weekly column looks at the hottest stocks in the biotech sector. |
