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AMERICAN HOME PRODUCTS MAY TAKE MULTI-DIVISION MARKETING APPROACH TO SELECTED NEW PRODUCTS, PRESIDENT STAFFORD SAYS; COMBINED U.S. DETAIL FORCE APPROACHES 2,000

Executive Summary

American Home Products (AHP) is considering the use of the combined marketing forces of its three Rx divisions in the U.S behind "high potential" new products emerging from the pipeline, AHP President John Stafford said at a company-sponsored meeting with analysts in New York City on June 4. "We intend to take maximum advantage of our substantial marketing clout whenever we have a new product with high potential," Stafford stated. "At the present time we are exploring the possibililty of multi-divisional marketing of certain of our more interesting new products in selected markets." The combined total U.S. marketing force of AHP's three Rx divisions -- Wyeth, Ayerst, and Ives -- at approximataely 2,000 represents the largest U.S. ethical detail force under one corporate umbrella. Of the approximately two dozen developmental compounds discussed at the analysts meeting, AHP highlighted three drugs in the pipeline as having "the potential for very significant sales" -- - Ultradol (etodolac), Alredase (tolrestat), Ceractin (vinpocetine) (see related story on p. 10). According to AHP management, Wyeth has the largest sales force of the three divisions both in the U.S. and overall, followed next by Ayerst, and Ives. Wyeth has a detail force of approximately 1,025 in the U.S. and 2,450 abroad for a total of approximately 3,475, AHP said. In the past year-and-a-half Ayerst has expanded its sales force by nearly 30% to 690 in the U.S. Ives' licensed products are detailed by approximately 300 in the U.S. alone. Of AHP's health care product sales of $2.58 bil. in 1984, Wyeth accounted for over half with $1.3 bil., split approximately 50-50 between the U.S. and overseas markets. Wyeth's major product segments were oral contraceptives, with $321 mil. in sales, infant formula, with $308 mil. revenues, and Ativan, which contributed $200 mil. sales ("The Pink Sheet" April 15, p. 14). Wyeth President Bernard Canavan, MD, said that during the first quarter of 1985 Wyeth led all drug companies in new Rxs written in the U.S. Canavan credited "market share increases resulting from expansion in the oral contraceptive market, the continued growth of Wytensin and an increase in Phenergan syrup and antibiotic Rxs" due to the heavy cold and flu season. * Discussing Wyeth's recently launched products, Canavan, reported that in its twentieth week on the market, Triphasil has "achieved nearly 5% of all new Rxs written for oral contraceptives and 21% of all new Rxs written for phasic oral contraceptives." As a result, Canavan said, Wyeth's share of the U.S. oral contraceptive market "is currently 30% of the total market." Canavan noted that Wyeth's other recently introduced product, Wytensin, has been "on target" into 1984 with sales of $15.1 mil., up 86%. He predicted sales would "approach $25 mil." in 1985. Meanwhile Ayerst now ranks ninth in U.S. pharmaceutical sales, seventh in drug store sales and fourth in government sales, Ayerst President Judson St. John asserted. His division showed sales of $683 mil. in 1984, with nearly $420 mil. coming from its Inderal line. Ayerst is now in the midst of an anti-generic marketing effort in order to minimize Inderal market share losses once generic propranolol products reaches the market, St. John reported ("The Pink Sheet" June 10, p. 4). Ives sales turned down slightly in 1984 to $95 mil, off 3%, due to a modest decline in Isordil sales. In other comments on the company's strategy for the future, Stafford said that AHP is actively investigating acquisition opportunities. "With our strong balance sheet and cash balance approaching $1 bil. we're prepared to grow by acquisition if the opportunity arises," Stafford declared. AHP Chairman John Culligan added: "We continually review financial data on companies in the health care industry, exploring the possibility of making an acquistion." Elaborating further, Culligan said that AHP would "prefer to accept the dilution of earning inherent in the early years after a business combination if we can reasonably predict when the dilution ends and the positive contribution begins." He said that AHP would be willing to go outside the health care area for an acquistion "if there is a good fit with our other businesses." Outside of its over $3 bil. health care business, AHP also operates food, candy and household products businesses, which together contributed sales of nearly $1.6 bil. in 1984. Asked during Q&A if AHP's "critical mass" in the U.S. pharmaceutical market would preclude a drug acquisition in this country, Culligan replied: "I don't think we would be excluded from making any acquisition in the U.S . . . We are looking both in the U.S. and overseas." In March, AHP's plant in Puerto Rico went into operation. As a result, Culligan observed, AHP's annual effective tax rate declined from 44% in 1984 to 41.5% during the first quarter of 1985. AHP is currently shipping all Inderal, Ativan, and "most" oral contraceptive products from Puerto Rico. Discussing the potential impact on AHP of the administration's new tax proposal, which recommends repeal of Sec. 936 income based tax credits, Stafford said the company would be "a net winner" if the proposal were to pass as originally published. "The most significant benefit would come from the reduction in the statutory rate from 46% to 33%," Stafford noted. "Based on 1984 taxes, this change alone would save us in excess of $100 mil." In addition, Stafford estimated that the dividend reduction provision in the proposal would save AHP "almost $15 mil." based on the company's 1985 projected dividend payout. However, on the down-side, Stafford said that the proposal's revision of the tax law covering foreign tax credits would add $30-40 mil. to AHP's taxes. "On an overall basis, [AHP] would stand to benefit by some $75 mil. to $100 mil. annually," Stafford said. He indicated that the firm would plow back most of these tax savings into R&D and promotional expenditures "and other investments for the future."
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