UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

STATEMENT OF CHANGES IN BENEFICIAL OWNERSHIP

Filed pursuant to Section 16(a) of the Securities Exchange act of 1934, Section 17(a) of the Public Utility Holding Company Act of 1935 or Section 30(f) of the Investment Company Act of 1940

Form 4

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OMB Number: 3235-0287

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¨ Check this box if no longer subject to Section 16. Form 4 or Form 5 obligations may continue. See Instruction 1(b)
.

(Print or Type Responses)

1 .Name and Address of Reporting Person

2. Issuer Name and Ticker or Trading Symbol:
PharmChem Laboratories, Inc. (PCHM)

6. Relationship of Reporting Person(s) to Issuer
(Check all applicable)

______Director __XX__10% Owner

______Officer (give ______Other (specify title below) below)

____________________________

(Last) (First) (Middle)

Edwards William Leland

3. IRS Identification Number of Reporting Person, if an entity
(voluntary)

4. Statement for
Month/Year

July 2001

(Street)

470 University Avenue

5. If Amendment,
Date of Original
(Month/Year)

7. Individual or Joint/Group Filing

(Check Applicable Line)
___Form filed by One Reporting Person
_X_Form filed by More than One Reporting Person -
See Note 1

(City) (State) (Zip)

Palo Alto, California 94301

Table I - Non-Derivative Securities Acquired, Disposed of, or Beneficially Owned

1. Title of Security
(Instr. 4)

2. Trans-
action
Date

(Month/
Day/
Year)

3. Trans-
Action
Code
(Instr. 8)

4. Securities Acquired (A)
or Disposed of (D)
(Instr. 3, 4 AND 5)

5. Amount of
Securities
Beneficially
Owned at
End of Month

(Instr. 3 and 4)

6. Owner-
ship
Form:
Direct
(D) or
Indirect
(I)

(Instr. 4)

7. Nature of Indirect Beneficial Ownership

(Instr. 4)

Code

Amount

(A) or

(D)

Price

Common Stock

7/10/01

7,700

$2.50

1,520,935

D & I

See Notes 1 & 2

Reminder: Report on a separate line for each class of securities beneficially owned directly or indirectly.

* If the form is filed by more than one reporting person, see Instruction 4(b)(v).

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(Over)
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Table II - Derivative Securities Acquired, Disposed of, or Beneficially Owned
(e.g., puts, calls, warrants, options, convertible securities)

1. Title of
Derivative Security
(Instr. 4)

2. Conver-
sion or
Exercise
Price of
Deri-
vative
Security

3. Trans-
action
Date

(Month/
Day/
Year)

4. Trans-
action
Code
(Instr. 8)

5. Number of Deriv-
ative Securities Ac-
quired (A) or Dis-
posed of (D)
(Instr. 3, 4, and 5)

6. Date Exer-
cisable and
Expiration
Date
(Month/Day/
Year).

7. Title and Amount of Securities
Underlying
Derivative Security
(Inst. 4)

8. Price
of
Deriv-
ative
Secur-
ity
(Instr.
5)

9. Number
of deriv-
ative
Secur-
ities
Bene-
ficially
Owned
at End
of
Month
(Instr. 4)

10. Owner-
ship
Form of
Deriv-
ative
Security:
Direct
(D) or
Indirect
(I)
(Instr. 4)

11. Nature of Indirect
Beneficial Ownership
(Instr. 5)

Code

(A)

(D)

Date
Exer-
cisable

Expira-
tion
Date

Title

Amount or
Number of
Shares

Explanation of Responses:

(1) The reporting persons consist of William Leland Edwards, Palo Alto Investors, LLC, a California limited liability company ("PAI LLC") and Palo Alto Investors, a California corporation ("PAI Corp"). The sole manager of PAI LLC is PAI Corp. Mr. Edwards is the President and principal member of PAI LLC and the President and controlling shareholder of PAI Corp. PAI LLC is an investment adviser registered with the Securities and Exchange Commission. PAI LLC serves as investment adviser to investment limited partnerships of which it is the general partner and to other clients. Mr. Edwards, PAI LLC and PAI Corp are filing this Form 4 jointly as a group. All shares owned indirectly by Mr. Edwards, PAI LLC and PAI Corp are held in client accounts, and Mr. Edwards, PAI LLC and PAI Corp disclaim beneficial ownership of such shares except to the extent of their respective pecuniary interest therein. No client account of PAI LLC owns more than ten percent of the outstanding stock of the Issuer.

(2) As of the date of this report, Mr. Edwards owns 70,935 shares directly and 1,450,000 shares indirectly through PAI. PAI owns 1,450,000 shares indirectly through client accounts including the accounts of investment limited partnerships of which PAI acts as general partner. No client account of PAI owns more than ten percent of the outstanding stock of the Issuer.

Dated: August 10, 2001

PALO ALTO INVESTORS
, a California corporation

By:

William L. Edwards, President

PALO ALTO INVESTORS, LLC

By: Palo Alto Investors, a California corporation

Manager

By:

William L. Edwards, President

**Signature of Reporting Person

** Intentional misstatements or omissions of facts constitute Federal Criminal Violations.
See 18 U.S.C. 1001 and 15 U.S.C. 78ff

Note: File three copies of this Form, one of which must be manually signed. If space is insufficient,
See Instruction 6 for procedure.

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Joint Filer Information

Name: Palo Alto Investors, LLC

Address: 470 University Avenue, Palo Alto, CA 94301

Designated Filer: William L. Edwards

Issuer and Ticker Symbol: PharmChem Laboratories, Inc. (PCHM)

Statement for Month/Year: July 2001

Signature: Palo Alto Investors, LLC

Palo Alto Investors, a California corporation, Manager

By:

William L. Edwards, President

Name: Palo Alto Investors, a California corporation

Address: 470 University Avenue, Palo Alto, CA 94301

Designated Filer: William L. Edwards

Issuer and Ticker Symbol: PharmChem Laboratories, Inc. (PCHM)

Statement for Month/Year: July 2001

Signature: Palo Alto Investors, a California corporation

By:

William L. Edwards, President

Name: William L. Edwards

Address: 470 University Avenue, Palo Alto, CA 94301

Designated Filer: William L. Edwards

Issuer and Ticker Symbol: PharmChem Laboratories, Inc. (PCHM)

Statement for Month/Year: July 2001

Signature:

William L. Edwards

PALO ALTO INVESTORS 4