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DUPONT MERCK/SYNCOR RADIOPHARMACEUTICAL DISTRIBUTION AGREEMENT

This article was originally published in The Gray Sheet

Executive Summary

DUPONT MERCK/SYNCOR RADIOPHARMACEUTICAL DISTRIBUTION AGREEMENT will make Chatsworth, California-based Syncor International the primary distribution channel for DuPont radiopharmaceuticals in the U.S., with independent radiopharmacies and pharmaceutical wholesalers selling the DuPont products, the companies jointly announced Dec. 3. Syncor will distribute products sold direct, in bulk form, to nearly 2,000 customers, the companies said. Additionally, Syncor will continue to be the primary commercial distributor for prepared unit-dose radiopharmaceuticals and will retain preferred distribution rights to "a number of DuPont Merck's proprietary products." The new agreement, which goes into effect Feb. 1, replaces a supply agreement that has been in existence since 1988. The addition of North Billerica, Massachusetts-based DuPont Radiopharmaceuticals' direct customer base is expected to add $50-$60 mil. in incremental sales during 1994 to Syncor revenues, Syncor said. The company, which is changing its reporting year from one ending May 31 to the calendar year, reported first quarter sales of $60.5 mil. and net earnings of $2.9 mil. for the period ended Aug. 31. Syncor noted that gross margins for direct customers are "traditionally lower than Syncor's core business. As a result," the company said, "the pretax profit contribution of this segment of the business is expected to be in the range of $2.5 mil. to $3.5 mil. during 1994." Syncor has established a reserve for alliance development costs in 1993 in the range of $3.5-4.5 mil. Syncor is also committed to extending its current credit financing line from $8 mil. to $20 mil. The company said it will use the increase in its credit line facility to continue to invest in its positron emission tomography (PET) and Syncor Oncology Services (SOS) programs. DuPont said the agreement will allow it to focus on core business, development and manufacturing operations, while taking advantage of Syncor's distribution and service. Syncor operates 110 full-service nuclear pharmacy centers, compounds and dispenses individualized imaging agent I.V. drugs and solutions, and services more than 6,000 hospitals, clinics, and physicians' offices.
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