By Matthew Willett
BioChem Pharma Inc. is exercising its option to purchase the 79 percent of CliniChem Development Inc. it doesn't already own for about C$50 million (US$32.9 million).
The deal for about 2.71 million shares of CliniChem at C$18.43 per share is subject to clearance by the Securities and Exchange Commission, expected around Dec. 15.
BioChem's stock (NASDAQ:BCHE) closed Friday at $24.875, up 87.5 cents.
Laval, Quebec-based BioChem spun off CliniChem in June 1998 with a capital contribution of C$150 million and a dividend in-kind share distribution to BioChem shareholders of one share of CliniChem for every 40 shares owned of BioChem.
The buyback comes as BioChem matures as a company, having reintegrated its wholly owned subsidiary BioChem Therapeutics two years ago. BioChem purchased 8 million of its shares from research partner GlaxoWellcome Inc., of Research Triangle Park, N.C., last year, reducing the pharma company's interest from 12.2 percent to 5.3 percent.
BioChem prefaced the reacquisition with a $3.8 million purchase of 396,274 shares of CliniChem from Glaxo in August, giving BioChem a 21 percent interest in CliniChem.
Peter McBride, BioChem vice president of communication and investor relations, said the reacquisition of CliniChem represents the company's growing maturity in cash position and cash flow.
"When we launched CliniChem in 1998, it was designed to do a couple of things," McBride told BioWorld Today. "First, it was a dividend for shareholders, and also it was a financing vehicle for increasing research and development expenditure in the company. Both of those missions have been accomplished. And it was running out of money."
The only other option, McBride said, was refinancing the company that was set up to do clinical development work for BioChem.
"We decided at the first of the year that we intended to repurchase it, since our only other option was to refinance it. The reality is that the company has grown stronger in our cash position and cash flow, and that's why we decided to buy it back," he added.
PaineWebber analyst Elise Wang on Friday reaffirmed her neutral rating for BioChem Pharma, basing her assessment on lower-than-expected lamivudine sales, which were up 8 percent in the third quarter to total $209.7 million.
Founded in 1986, BioChem founded its drug discovery platform on AIDS research, becoming the first company to produce an HIV diagnostic kit in 1988 and launching the anti-HIV compound lamivudine (3TC) in 1995.
By 1998, sales of lamivudine exceeded $1 billion, making it the world's most widely prescribed HIV treatment, the company said.
Currently, BioChem is developing anticancer compounds including angiogenesis inhibitors, antineoplastic compounds and apoptosis-promoting compounds. Its program in anti-infectives targets HIV and hepatitis C.
McBride said the buyback will make no difference in BioChem's operations, and that the impact the acquisition has on the company's income statement should easily be absorbed.