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Executive Summary

Cetus (up 2-1/2 to 13-1/4) and Glaxo (up 1-3/4 to 17-5/8) helped boost the Pharmaceutical Component of the "F-D-C" Monthly Index of 0-T-C stocks 11.5% in July -- the component's largest monthly gain since January. Glaxo stock has climbed 5 points, or approximately 40%, since the beginning of the year. Glaxo's movement during the month was due largely to the approach of the third generation cephalosporin Fortaz (ceftazadimine) to market in the U.S. Rated a 1-A drug (representing an important therapeutic advance) by FDA, Fortaz was approved on July 18 and is expected to reach the market in early August. The drug will be the third major drug launch in the U.S. for Glaxo in three years following the introduction of Zantac and Zinacef in 1983 and 1984, respectively. Glaxo American Depository Receipts now carry Valuetine's top rating for timeliness. The investment survey's most recent monthly report cites Zantac's continued growth, the imminent introduction of Fortaz, and a weakening in the dollar as major pluses in Glaxo's favor. In addition, Valuetine notes that Glaxo's sale of its Vestric whslr. operations in the U.K. last March and the planned divestiture of its surgical equipment and hospital furniture businesses will improve the firm's margins and make the company "a purer drug stock." Cetus, up 23% in July, was among the three biotech stocks that led the Index in percentage gains during the month. Teva, up 75% on a 1-7/8 point advance to 4-3/8, and Biogen, up 30% on a 2-1/2 point gain to 9-3/4, posted the other large percentage increases. Patent approvals fueled the July gains of both Biogen and Letus. Biogen received U.S. patent approval for production and sale of recombinant alpha interferon, while Cetus received a composition of matter patent relating to its production process of interleukin-2 and beta interferon "muteins." Other Pharmaceutical/Diversified stocks showing point-or-more gains during July were Block (up 2-1/2to 38), Chattem (up 2-1/2to 20), and Scherer (up 2-1/8 to 13-1/4). In addition, Newport jumped 1-1/2 points to 11-1/2. Among the high-flying generic mfrs., LyphoMed (up 2 to 24-3/4) and Zenith (up 1-1/2 to 24-1/2) continued to climb. The top two gainers on the Index so far in 1985, Zenith has vaulted nearly 280% since Dec. 31, while LyphoMed is up 168%. On the other hand, generic mfrs. Mylan (down 2-1/2 to 21-1/2) and Par (down 1 to 19) each fell a little closer to earth. The market valuations of both Mylan and Par have more than doubled since the Senate's passage of the new ANDA/patent law last August. Overall, 20 stocks advanced, 17 declined and one remained unchanged on the 38-issue O-T-C Monthly Index. Although gains and losses were nearly split, the Index Composite added 6.9% to outpace the S&P 400, which edged upward only .3% during the month. Hardest hit were the Chain and Whslr. Components. Among the chains, both Begley (off 1-1/2 to 16) and Medicine Shoppe (down 1-1/4 to 23-1/4) slipped during the month. After gaining over six points in the previous two months on takeover speculation, drug whslr. Ketchum fell 3-7/8 to 18-5/8 in July. Other whslrs. losing ground were Moore Medical (down 2-3/8 to 16-1/4) and Bindley Western (down 1-7/8 to 11-3/4). Next to Ketchum, Viratek, off 16% on a three point loss to 15-1/4, showed the biggest percentage decline for the month. The ICN subsidiary was the subject of a July 29 Barron's article, which questioned whether ribavirin's market potential supports the small R&D firm's large market valuation. Chart omitted.

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