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MERCK PRIMAXIN AND VASOTEC LAUNCHES SPUR 14.5% SECOND QUARTER SALES GROWTH; ANTIBIOTIC BUSINESSES DOING WELL; LILLY CITES CECLOR AND KEFLEX; W-L SAYS ERYC UP

Executive Summary

Merck's Primaxin and Vasotec launches in late 1985/early 1986 contributed to a 14.5% sales gain to over 1 bil. in the second quarter ended June 30, the company indicated in its preliminary financial report for the second quarter and six months of 1986. "In the human and animal health products segment of Merck's business, six month results reflected the rapid acceptance in the U.S. of two new products, which had been previously introduced abroad" -- the ACE inhibitor Vasotec and the injectable antibiotic Primaxin, Merck said. In addition, the company cited the launches of the H[2] antagonist Pepcid (famotidine), outside the U.S. "We expect to have approval for U.S. introduction of Pepcid later this year," Merck Chairman Roy Vagelos, MD, predicted. "Overall unit volume gains contributed to the sales growth in the first half," Vagelos said. "The favorable effect of the weakening of the U.S. dollars, as compared with last year, added nine percentage points to the sales gain." However, he continued, "more than half of this exchange gain was offset by the adverse impact of the previously announced divestments" of the firm's former Calgon and Baltimore Aircoil subsidiaries last year. Merck reported a 25.6% jump in net earnings for the quarter to $173.2 mil.; net income for the half is up 22.8% to $331 mil. Abbott's second quarter worldwide sales were $938 mil., a 13.4% increase over the second quarter a year ago ($827 mil.). Net earnings were up 16% to $134 mil. from $115 mil. for the same period last year. Abbott said its second quarter business was aided by several developments, including: the agreement with Squibb to put its drug products into Abbott's ADD-Vantage I.V. drug packaging system; continued market share growth in hospital I.V. solutions and administration equipment; and a contract to become the primary supplier of enteral nutritional products for the Voluntary Hospitals of America (VHA) through the VHA Supply Company system. For the six months. Abbott sales were up 13.9% to $1.8 bil. and net profit was ahead 18% to $257 mil. Pharmaceutical and nutritional products sales were up 11.5% for the first half to $971 mil., up from $870 mil. for the comparable period a year ago. In addition, Abbott said "it expects to receive FDA approval shortly to begin marketing a new form of the antibiotic erythromycin, called PCE or polymer coated erythromycin. PCE was developed to provide fast, consistent absorption of erythromycin while minimizing gastrointestinal side effects." Abbott Chairman Robert Schoellhorn said that the firm's higher earnings were "attributable to several factors: continued productivity improvement, higher volume, better product mix, the weaker U.S. dollar and the new accounting standard for determining employee pensions expense." Upjohn reported that its Micronase second quarter sales "more than offset" declining sales of the company's first generation oral hypoglycemic products Tolinase and Orinase. The firm said that Micronase, along with the central nervous system disorder drug Xanax, "led major products in rate of growth." Xanax, Halcion Sales Pace Upjohn 24% Second Quarter Net Earnings Gain Among its other pharmaceutical products, Upjohn said another CNS drug, Halcion, joined Xanax in registering an "excellent performance." The company added that "the antibiotic Cleocin Phosphate continued to show good sales increases, with exceptionally strong growth in Japan." Sales of Upjohn's nonsteroidal anti-inflammatory agent Motrin, however, "were down slightly from second quarter 1985." The second quarter of 1985 was a big period for Motrin due to a special promotion and the introduction of the 800 mg dose. Overall human health care product sales and services "rose $70 mil. over the second quarter of 1985, a 19% gain," Upjohn declared. Upjohn's consolidated sales for the quarter increased 9% to $594 mil. ($398 mil. in the U.S.) from $543 mil. in the second quarter last year. Earnings from continuing operations were up 24% to $65 mil., from $52 mil. in the comparable period a year ago. Upjohn Chairman R. T. Parfet explained that "earnings for the quarter were excellent because of the continuing strong performances of our major pharmaceutical products, particularly Xanax, Halcion and Micronase. Gross margins benefited from a favorable product mix as cost of goods sold decreased as a percent of sales compared to the year-earlier quarter." Lilly touted its oral antibiotics Ceclor and Keflex for its second quarter pharmaceutical sales increase. The company said that its injectable antibiotics showed "good growth." Overall, the company's second quarter sales increased 16.2% to $879.3 mil., up from $756.8 mil. last year, while net earnings for the quarter rose 14.2% to $125.7 mil. Lilly noted that its recently acquired Hybritech subsidiary posted a 40% sales gain to $11.3 mil. while gross profits slipped 2% to $4.3 mil. Lilly said the decline in profitability was due to "an increase in manufacturing costs resulting from decreased production yields and by costs associated with reworking of product." Warner-Lambert reported an 80.3% jump in second quarter net income, as earlier predicted ("The Pink Sheet" June 30, T&G-9), due to "greater-than-anticipated proceeds" from the sale of the company's health technologies businesses -- IMED, Deseret, and Reichert Scientific -- during the quarter. "The net nonrecurring gain registered in the second quarter amounted to $48 mil. after tax," the company noted. Due to the divestitures, sales for the quarter were off 6.1% to $761.2 mil. However, excluding the divested businesses, sales grew 10% compared with the same period a year ago. Second quarter sales of ethical pharmaceuticals rose 11%, Warner-Lamber said. In the U.S., the company credited the performances of ERYC, DORYX, and Lopid for the sales gain. The new Rx rate for Lopid, the company noted, "is up 60%, reflecting the recognition by physicians of the role of blood lipids in the development of atherosclerosis." Reporting fourth quarter results, the Revco drug chain attributed strong Rx sales to its earnings turnaround. For the 16 weeks ended May 31, Rx sales of "like" drugstores were up 14.4% compared with 11% in the fourth quarter of fiscal 1985. For the recent quarter, the company booked net earnings of $22 mil. compared to net loss of $3 mil. during the 1985 fourt quarter. In addition, sales during the most recent quarter were up 12.7% to $848 mil. "Revco's strong pharmacy image contributed to a substantial increase in Rx department volume," Revco Chairman Sidney Dworkin remarked. "Sales of other merchandise increased at a slower pace, reflecting the competitive environment and the effects of lower inflation." Rx sales for the 12 months ended May 31 were up 13.2% compared to 1985, Revco reported. The chain's total volume rose 14.5% to $2.7 bil., while net earnings jumped 46.3% to $56.9 mil. Total like-store sales were up 8.5% for the year. "The strength of the Rx sales increase confirms the overall health of Revco's core business -- pharmacy," Dworkin emphasized. "The overall increase in the number of Rxs filled in our stores rose 9.5% this year against a 5.3% increase in 1985." Revco had a net gain of 133 drugstores in fiscal 1986 -- slightly ahead of the 120-store net gain in 1985. As of May 31, the chain operated a total of 2,031 drugstores. The total includes 136 new stores and 42 gained through acquisition. Revco closed 45 stores during the year, up from 24 in fiscal 1985. Walgreens reported that for the third quarter ended May 31 corporate volume rose 15.3% to $913.9 mil., resulting in net earnings of $24.1 mil., an increase of 12% over the comparable 1985 period. Pharmacy sales spearheaded the increase, jumping 26.5%. During the thirteen weeks, the chain made a major move into the Northeast market with the acquisition of 66 Medi Mart stores ("The Pink Sheet" May 5, p.6). For the nine months ended May 31, Walgreens volume rose 14.7% to $2.7 bil., while net earnings advanced 13% to $76.9 mil. Drug Store division sales were up 15.3%, 15.8% for the quarter, and pharmacy sales increased 27.7%. Chart omitted.
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