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MERCK SALES TOP $5 BIL. IN 1987, VASOTEC IS COMPANY's ACE IN-THE-HOLE; TAGAMET LIFTS SMITHKLINE DRUG SALES TO OVER $2 BIL., BUT DYAZIDE IS FLAT

Executive Summary

Vasotec became Merck's top-selling product in 1987 and was one of several newer products that helped push the company's total volume over the $5 bil. mark for the 12 months. "Sales growth for the year [up 23% to $5.1 bil.], a company record, was led by new products," Merck Chairman Roy Vagelos commented. Other recent launches beside the ACE inhibitor include the H[2] antagoinst Pepcid, the anti-infectives Primaxin and Noroxin and the cholesterol-lowering agent Mevacor. The newer higher-margin products also moved the company's bottom line toward the $1 bil. mark. Net earnings improved 34%, from $676 mil. in 1986 to $906 mil. "Income growth and improved earnings margins resulted from unit volume gains, a better product mix, a lower effective tax rate, the continuation of cost controls and productivity improvements, as well as the favorable effect of exchange," Vagelos added. Just over half, or 51% of Merck's sales took place outside the U.S., up from 49% in 1986. The company reported that stronger foreign currencies relative to the U.S. dollar contributed to the yearly sales growth, adding six percentage points. Merck noted that unit volume gains were registered by both domestic and foreign operations. For the fourth quarter, Merck reported a 21% increase in sales to $1.4 bil. Net earnings jumped 39% to $232 mil. from $172 mil. a year ago. At the end of the quarter, Merck received FDA approval for its second generation ACE product, Prinivil, which will be comarketed by Stuart under the Zestril brand. SmithKline reported that while sales of Tagamet increased 12% in 1987, Dyazide remained flat, "partially reflecting the impact of generic competition in the fourth quarter." Overall ethical pharmaceutical volume was up 14% for the 12 months to $2.2 bil. "Our ethical pharmaceuticals business registered steady gains throughout the year," SmithKline Chairman Henry Wendt noted. "New products and new indications aided our performance in Europe and Japan." For the fourth quarter of 1987, ethical drug sales were $595 mil., an increase of 13% over the corresponding 1986 period. While, SmithKline's total sales during the last three months of 1987 climbed nearly 15% to $1.2 bil., the company's net income dropped about 4%, from $147 mil. in the fourth quarter of 1986 to $141.9 mil. For the year, net earnings rose nearly 10% to $570 mil. Corporate volume was up almost 16% to $4.3 bil. for the 12 months. The company reported that operating income increased 11% in 1987 to $877 mil. after adjusting 1986 results for unusual Contac relaunch expenses. "That figure is right on target with objectives we announced at the beginning of 1987 and a strong indication of our continuing progress," Wendt remarked. "I'm pleased to say that operating income was up in all of our major businesses and that income grew faster than sales in our Diagnostic/Analytical and Eye and Skin Care Groups. Beckman Instruments was a major contributor to those results. Sales of consumer health care products rose 33% in the fourth quarter to $50 mil., 7% for the year to $185 mil., SmithKline noted. Eye and skin care sales passed the $500 mil. mark in 1987, rising 28% to $554 mil. Fourth-quarter sales of eye and skin care products were up 18% at $165 mil. Sales of diagnostic and analytical products increased 16% to $309 mil. during the three months and 14% for all of 1987 to $1.1 bil. Also announcing year-end results, Schering-Plough reported a 20% increase in its worldwide pharmaceutical business. U.S. ethical sales, paced by the Proventil line of asthma products and the antifungal/anti-inflammatory combo Lotrisone, rose 17%. International pharmaceutical sales were up 23%, led by the prostatic cancer drug Eulexin and Netromycin, an aminoglycoside antibiotic. Schering reported an overall 13% increase in corporate volume during 1987 to $2.7 bil. Net income was $316 mil., 19% higher than in 1986. "Excluding the effect of the divestiture of the international Dr. Scholl's business in August 1987, sales growth in the fourth quarter and full year was 16% and 15%, respectively," the company said, noting that the sale of the unit resulted in an overall decline in consumer product volume worldwide. Despite the divestiture, which cost Schering an estimated five percentage points in sales growth, total fourth-quarter revenues increased 11% to $664 mil. Net income was up 26% for the three months to just over $75 mil., compared to $60 mil. in the fourth quarter of 1986. Chart omitted.
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