A week after Gilead Sciences Inc. collected $151 million frominvestors eager to cash in on the stock's possible growth from ananticipated product approval, Canadian-based BioChem Pharma Inc.,with an AIDS drug on the market, scored an even bigger payday with$159.25 million.

Until BioChem Pharma's equity financing was recorded Friday,Gilead's was the largest follow-on offering in the past four years andsignaled a continuation of last year's resurgence of investor interestin biotechnology stocks, particularly those with near-term earningspotential.

If underwriters for BioChem's offering exercise options to purchaseshares to cover overallotments, total gross proceeds would reach$183.25 million. Gilead's overallotment options could push theFoster City, Calif., company's gross proceeds to $174 million.

"The sector is still hot," said Edmund Debler, an analyst with Mehta& Isaly, of New York. "The whole market is still incredibly strong. Itmakes you begin to wonder how long it will last. Investors have tolook harder to find the hidden jewels."

BioChem Pharma, of Laval, Quebec, and its partner, London-basedGlaxo Wellcome plc, received FDA and Canadian approvals late lastyear for BioChem's nucleoside analog, 3TC (lamivudine), for usewith Glaxo's nucleoside analog, AZT (zidovudine), for AIDS. Inaddition, Glaxo and BioChem Pharma are evaluating 3TC in sevenPhase III trials for hepatitis B.

With 3TC as a proven performer, BioChem registered in earlyFebruary for a follow-on offering of 3 million shares. Its stock, tradedin Canada and the U.S., was at $41.75 per share. Demand pushed theoffering Friday to 3.5 million shares and they were priced at $45.50for total financing of $159.25 million.

BioChem (NASDAQ:BCHXF) closed Friday up $1 to $46.62. In thepast 14 months as 3TC clinical trial data were reported, BioChem'sshares have quadrupled. Since Nov. 20, 1995, when 3TC wasapproved in the U.S., the stock has jumped about 30 percent.

Following the offering, BioChem has 53.5 million shares outstanding.The company will not release its year-end 1995 fiscal report untilmid-March 1996. As of Sept. 30, 1995, the company had $35.6million in cash. For the first nine months of 1995, revenues totaledabout $99 million and the company had a net loss of $6.2 million.

Glaxo markets 3TC in the U.S. under the brand name Epivir and thedrug is sold in Canada under a BioChem-Glaxo partnership. Inaddition to 3TC, Biochem Pharma sells diagnostics and vaccines.The company also owns 36.6 percent of North American VaccineInc., of Beltsville, Md.

BioChem has other drug development collaborations with Astra AB,of Sodertlje, Sweden, for a pain treatment and with Warner-LambertCo., of Morris Plains, N.J., for an oral anti-blood clotting compound.

Proceeds from the offering, BioChem officials said, will be used forpossible acquisitions of companies, technologies, products anddistribution rights. However no negotiations are under way and theydid not identify any specific targets.

Five underwriters managed the offering: Hambrecht & Quist LLCand Robertson, Stephens & Co. LLC, both of San Francisco; UBSSecurities Inc., of New York; Midland Walwyn Capital Inc., ofToronto; and Levesque Beaubien Geoffrion Inc., of Montreal.

The underwriters have options to purchase another 525,000 shares tocover overallotments. That would increase the total number of sharessold to more than 4 million and total gross proceeds to $183.25million.

Gilead's successful offering Feb. 16, 1996, was fueled byanticipation of the company's first approved drug. Vistide, anucleotide anti-viral, is under FDA review for AIDS-relatedcytomegalovirus retinitis. An FDA advisory committee will considerVistide's new drug application March 15, 1996.

In addition, Gilead has a strong pipeline of products, includinganother nucleotide compound, GS 840, which is expected to be testedin Phase III trials this year for AIDS.

With continuation in 1996 of last year's surge in investor interest inbiotechnology, Debler observed, "The sector has recovered to whereit was in the early 1990s. A lot of share prices are justified, but we'realso getting to the point where extra value is placed on some." n

-- Charles Craig

(c) 1997 American Health Consultants. All rights reserved.