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WYETH AND AYERST TO MERGE UNDER LEADERSHIP OF WYETH's CANAVAN; NEW WYETH-AYERST LABS WILL HAVE SALES OF $2.5 MIL. AND SALES FORCE OF 1,750

Executive Summary

The consolidation of Wyeth and Ayerst management under former Wyeth President Bernard Canavan, MD, begins the process of the full intergration of American Home Product's ethical drug businesses. AHP announced the proposed merger of its two drug divisions into the newly formed Wyeth-Ayerst Laboratories on August 27. Wyeth managers were appointed to two of the three top positions announced. President of Wyeth since 1984, Canavan assumes the titles of chairman of Wyeth-Ayerst Labs and exec VP of the parent corporation, reporting to current AHP Chairman and President John Stafford. Heading pharmaceutical R&D as president of Wyeth-Ayerst Research is H.P.K. Agersborg, PhD, formerly head of R&D at Wyeth Labs. The ascendency of Wyeth execs is also reflected in the choice of the Wyeth-Ayerst name for the new business entity. AHP has been moving in the direction of consolidating its Rx drug businesses into a single organization for several years. In 1983, AHP formed a joint manufacturing operation in Puerto Rico called Ayerst-Wyeth Pharmaceutical Inc. At an analyst meeting in 1985, AHP's Stafford said the company was also considering a multi-division marketing approach for selected Rx products. Stafford indicated that AHP would assign major new products to both the Ayerst and Wyeth sales forces. The company has not been able to try that approach to date because of a lack of new product approvals. In January 1986, AHP folded its Ives Division (the product of a previous joint venture) into Wyeth. Similarly in early 1987, some Wyeth and Ayerst manufacturing operations were merged, and AHP began consolidating Wyeth and Ayerst international operations. AHP Elevates Canavan And Blount To Exec VP Level Reporting Directly To CEO Stafford Ayerst President Judson St. John will assume the title of president of Wyeth-Ayerst's domestic operations. Ray Osborne will continue as chairman of the international division of Wyeth-Ayerst. St. John, Agersborg and Osborne will all report to Canavan. AHP indicated that the integration of Wyeth and Ayerst management at lower levels was just getting underway. Other AHP management changes coinciding with the formation of Wyeth-Ayerst Labs include the promotion of the top financial officer, Robert Blount, to exec VP; the elevation of Stanley Barshay to senior VP responsible for Whitehall, Boyle-Midway and J. F. Murray; and the promotion of Albert Pessillo to senior VP in charge of Sherwood Medical, Fort Dodge Labs, Corometrics and AHP's generic drug business, Quantum. AHP is keeping Quantum separate from Wyeth and Ayerst. Canavan and Blount will share the number two management slots at AHP reporting directly to Stafford. AHP said that Wyeth-Ayerst's management and research activities will be based in Radnor, Penn., the headquarters of Wyeth; and Princeton, N.J., where Ayerst's R&D program was relocated in 1983. A major challenge facing management in integrating the two businesses will be focusing the efforts of the 1,750-person Wyeth-Ayerst detail force to cover the broad and occasionally overlapping product lines of the two businesses. Wyeth, for example, markets two relatively new antihypertensive products, the beta blocker Sectral and the alpha blocker Wytensin, which compete in the same market with Ayerst's key Inderal franchise. Although AHP has been moving in the direction of merging its drug divisions into one operation for several years, recent changes in Ayerst's position in the U.S. market support the strategy of full integration. For the last two years, Ayerst's 600-plus sales force has been fighting a holding action against the inroads of generic competition to the division's two biggest product lines, Inderal and Premarin. Prior to generic inroads, Inderal and Premarin sales in 1984 of $419 mil. and $109 mil., respectively, represented nearly 80% of Ayerst's total business. In addition, new products have cut into the marketshares of beta blockers, such as ACE inhibitors and calcium channel blockers, and traditional conjugated estrogens, such as Ciba-Geigy's transdermal product Estraderm. The Ayerst R&D pipeline has been slow to yield new products for marketing. Ultradol (etodolac), a potentially strong competitor in the NSAID market, has been caught in the NSAID logjam at FDA; an NDA for the drug has been at FDA for nearly five years. AHP has been predicting approval of the drug since 1985. Ayerst also suffered a major setback in late 1986 when its other major drug in the pipeline, the aldose reductase inhibitor Alredase (tolrestat), failed to make it through an FDA advisory panel. FDA's Endocrinologic & Metabolic Drugs Advisory committee voted not to recommend approval for Alredase in diabetic neuropathy pending the completion of additional studies. Although AHP's recent strategic focus has been on tightening up its pharmaceutical operations, the company has indicated that it is not adverse to adding new businesses if they fit within AHP's health care/consumer products concentration. In February, AHP made a failed bid to acquire Robins ("The Pink Sheet" Feb. 9, p. 3). The combined Wyeth-Ayerst unit will have worldwide sales of "approximately $2.5 bil.," AHP noted. AHP's Rx pharmaceutical sales in 1986 topped $2.1 bil. Through the first six months of 1987, AHP pharmaceutical sales were up 8.1% to $1.18 bil. "The principal reason for the merger is to provide greater focus on our drug discovery and marketing efforts," Stafford said. "By eliminating duplication of programs in the two existing divisions and by combining our resources we feel we will be able to develop our new compounds in less time and market them in a more coordinated fashion." Stafford said that AHP will continue to increase its R&D expenditures, which grew 4.7% in 1986 to $227 mil. However, "with a unified operation we expect to improve our success rate," he added. Wyeth-Ayerst Labs has "25 new chemical entities under active development," AHP reported, including a number at FDA. Among the NDAs pending at FDA are the non-narcotic analgesics Cindol (ciramadol) and Dalgan (dezocine), the alpha blocker Baratol (indoramin), the NSAID Durapro (oxaprozin), as well as Ultradol and Alredase.
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