Canada Has Biotech Too: Check Out Biomira

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By Bob Beaty
Special to

The Street

BOWEN ISLAND, British Columbia -- There's more to the stock market in Canada than

Bre-X

. In fact, we have quite a big biotech industry in Canada. One of the more intriguing biotech upstarts these days is

Biomira

(BRA:Toronto;

(BIOMF)

BIOMF).

On May 5, Biomira, of Edmonton, Alberta, announced a revenue-sharing and development partnership deal with California-based

Chiron

(CHIR) - Get Report

-- the huge biotech conglomerate -- to license Biomira's flagship product,

Theratope

, for the U.S. and European markets. Once

Food and Drug Administration

approval is received (later this year, Biomira hopes), Chiron will distribute Theratope.

Theratope is a chemotherapy alternative that can delay disease progression and prolong survival in a large number of patients in remission from breast/ovarian/colorectal cancers. Theratope Phase II trials extended the median survival of breast cancer patients to over two years, compared with the control group's nine months. Phase III trials --the final hurdle in the regulatory approval process -- will begin soon. On May 21, Biomira announced it had received approval for a U.S. patent for Theratope that should be issued in the next few months, a development that will further solidify the company's lead position in the cancer management field.

Biomira has C$90 million (U.S. $70 million) in cash, and virtually no debt. Analyst coverage is low, two at this writing, one of whom has had an investment banking relationship with the company. Maybe the story isn't interesting enough yet, or perhaps Biomira doesn't need any financing help... The company is market-capped at C$350 million (U.S. $250 million). Positive earnings are still a few years off, but with significant free cash and more heavyweight partnerships on the horizon, Biomira's stock price has settled in the C$7.50 ($5.50) range.

As with a lot of small biotech companies, we'd go blind looking for a profit at the bottom of the income statement. Most of these companies spend years in the red as heavy research and development costs eclipse any hope of quick, meaningful earnings. As is the case with small high-tech companies, shareholder faith and a good constitution are far more important than analytical or statistical norms. A whacking great amount of free cash also helps.

The price is idling as the company negotiates the appropriate regulatory hoops. Early enthusiasm in 1992 drove the stock to an unrealistic C$30 (U.S. $22.50). As Biomira gets closer to completing the approval process, interest, and by extension volume, are picking up. One analyst's report compared Theratope to Taxol, which generated over U.S. $800 million for

Bristol-Myers

(BMY) - Get Report

in 1996. The potential for successful chemotherapy alternatives is, apparently and understandably, enormous.

The risk with Biomira is modest. The company has a stable of vaccines and therapies in its pipeline. One product approved and selling well is

Truquant BR

-- key to the early detection of recurrent cancer. This physician-ordered blood test is at the forefront for detecting "circulating tumor-associated antigens" in the blood of those stage 2 and 3 cancer patients previously treated.

Truquant has proven itself as a significant and independent predictor of recurrent breast cancer. Biomira's growth in revenue over the last year from C$1.4 million to C$2.7 million is largely attributable to initial sales of Truquant. While it's not cleared yet for ovarian and gastrointestinal cancer in the U.S., outside the U.S. Truquant provides similar benefits for those diseases.

Biomira has a significant time advantage of several years over competitors. Only

Centocor

(CNTO)

has a similar product in Phase III trials, but the product is meant to be used differently than Biomira's. The Chiron deal sets the standard and caliber of partners interested and getting on board. Chiron has also made a commitment to inject a significant, though undisclosed, upfront payment, and the company is putting up 50% of Theratope development costs.

Biomira's therapies should be much more cost-effective than current methods. Trials have shown that Biomira's proprietary products have the potential to simplify "cancer management" procedures with fewer, if any, side effects that have accompanied traditional cancer treatments. Stay tuned for regulatory approvals, more strong partnerships and profitable R&D. Don't bet the farm, but for those who like to participate in biotech stocks with a strong balance sheet (too often a contradiction in terms), Biomira has enormous speculative appeal.

Beaty runs

Beaty & Co.

, the Canadian personal finance area on

America Online.