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GENERIC DRUG STOCKS LED BY ZENITH AND PAR CONTINUE TO PACE O-T-C INDEX IN APRIL; COMBINE WITH GLAXO TO LIFT COMPOSITE TO TWO-YEAR HIGH POINT

Executive Summary

GENERIC DRUG STOCKS LED BY ZENITH AND PAR CONTINUE TO PACE O-T-C INDEX IN APRIL; COMBINE WITH GLAXO TO LIFT COMPOSITE TO TWO-YEAR HIGH POINT Generic drug stocks, led by Zenith (up 7 to 32-1/4) and Par (up 4 to 17), sustained their long-running charge in April as they continued to ride the wave of excitement on Wall Street created by the new patent/ANDA law. Also enjoying the recent surge in "Street" interest for the generic drug stocks were LyphoMed (up 3-1/8 to 16-3/4) and Mylan (up 3/4 to 21-3/8). During April, LyphoMed announced that first quarter net increased 68% to $1.25 mil. on a 70% sales gain to $11.4 mil. Of the four generic stocks listed on the "F-D-C" Monthly Index of O-T-C stocks, both Zenith and Par have doubled their market valuations since the beginning of the year, LyphoMed's market value has grown by over 80%, and Mylan has jumped nearly 70%. Mylan's sub-Par performance so far in 1985 may be due in part to the stock's run-up in recent years. Since Jan. 1, 1983, Mylan stock has increased roughly eight-fold in price. The 3/4 point gain in April came in a month when the firm reported a 166% increase in net earnings for FY 1985 (ended March 31) on top of the firm's announcement that it had received FDA approval for its generic methyldopa. The gains by the generic drug stocks helped boost both the Pharmaceutical Component, up 8.7% to 136.1, and the Index Composite, up 2.6% to 185.5, to 12 month highs. Both stock indexes are at their highest respective points since July 1983. The O-T-C Composite is up 15.2% so far in 1985. In comparison, the S&P 400 was flat in April and has gained 4.74% since January 1. Zenith's seven point gain (27.7%) in April might ve viewed as a vote of confidence from the "Street" for the generic mfr.'s purchase of Whiteworth and Towne Paulsen earlier in the month. Although not profitable at the time of purchase, Whiteworth and Towne Paulsen will greatly expand Zenith's presence on the West Coast and will put the firm over the $60 mil. level in annual sales. Giving the Pharmaceutical Component a big boost in April was heavily weighted Glaxo (up 1-1/8 to 14-5/8). Glaxo's mid-April report of first half earnings apparently caught the "Street" by surprise. For the six months ended Dec. 31, Glaxo's net income jumped over 70% due to currency translation gains and increased penetration of foreign markets by the British firm's antiulcer agent Zantac. Overall, advances outnumbered declines by nearly two to one on the 41-issue O-T-C Index in April as 26 stocks posted gains, 14 lost ground, and one, Block, remained unchanged for the month. Heading southward in April were several Diversified stocks including Frigitronics (down 2 to 25-3/8), Natl. Patent (down 1-3/4 to 14), Biogen (to 5-7/8) and VLI (to 7-1/4), each down 3/4, and Beecham (down 1/2 to 4-3/8). On the plus-side were Hybritech (up 2-1/2 to 20-1/2) and IMS (up 1-1/2 to 23). Despite an ambivalent market for biotech stocks, Genentech (up 4 to 50) joined Hybritech on the gain-side, rebounding from its 5-1/2 point loss in March. An announcement that govt. distributed natural human growth hormone appeared to be contaminated by a rare but fatal virus prompted speculation that Genentech's rDNA-derived human growth hormone might be rushed through approval in order to meet possible shortages of the hormone. On the Whslr. Component, gains by Spectro (up 4-1/4 to 19-3/4), Owens & Minor (up 4 to 18-3/4) and Bindley Western (up 1-1/2 to 24-3/4) helped buoy the component against declines by FoxMeyer (off 1-3/8 to 26-5/8) and Ketchum (down 1-1/8 to 15-7/8). Spectro announced a merger agreement with McKesson. Chart omitted.

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