A Drug Stock For Skeptics

With the market turned off by drug and biotech stocks, why are some pros buying Belmac, a small pharmaceutical company? True, Belmac's stock has slid from 20 in January to 11, but there's more to the buying than just bottom-fishing.

Whispers are that Belmac is in talks with two major drug companies about selling a 20% stake in return for a cash infusion and marketing clout. Some pros believe that the big companies are keen on Biolid, a Belmac antibiotic that is already marketed in France and is undergoing last-stage clinical trials in the U.S. Belmac hopes to file a new-drug application for Biolid this year and expects Food & Drug Administration approval by mid-1994.

Biolid is an erythromycin derivative of the class of antibiotics that accounts for some 15% of all antibiotic prescriptions. Analyst Deborah Dzierzeski Wardwell of Dain Bosworth calls it Belmac's "propeller of earnings growth." Biolid is designed for twice-a-day treatment of upper and lower respiratory-tract infections, skin ailments, and urogenital diseases. Belmac is said to be working on a once-a-day dosage. Major drug companies, including Abbott Laboratories and Warner-Lambert, make their own brands of this type of antibiotic.

Wardwell explains that Biolid is "more efficacious than erythromycin at lower dosages." She predicts that in five years, Biolid will produce sales of $375 million. Wardwell sees Belmac making money for the first time next year, with earnings of $8 million, or 40 cents a share, vs. an expected $6.4 million loss, or 65 cents a share, in the year that ended June 30. Her 12-month target for Belmac: $32 a share.