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Executive Summary

Johnson & Johnson's McNeil subsidiary will seek an arrhythmia indication in the U.S. for the calcium channel blocker bepridil, Carter-Wallace Chairman and CEO Henry Hoyt, Jr., noted at the company's annual shareholders meeting July 19 in Wilmington, Delaware. McNeil is developing bepridil under a 1982 co-promotion agreement with Carter-Wallace. "We've never given up on bepridil," Hoyt remarked. Projecting a mid-1991 filing for bepridil, Hoyt stated: "We would hope now to get an NDA [approved] . . . for arrhythmia by 1993." Bepridil's clinical progress was sidetracked in 1985 when five deaths were reported in an arrhythmia trial with the calcium channel blocker. While McNeil said it has "no firm plans" about filing for the anti-arrhythmia indication, the company noted that it will supplement its currently pending angina NDA with a submission during the fourth quarter of this year. McNeil's NDA for bepridil has apparently been in limbo since 1986, when FDA's Cardio-Renal Drugs Advisory Committee voted not to recommend the drug for approval. Acknowledging bepridil's efficacy as an anti-anginal agent, the advisory committee cited safety concerns and requested data showing some advantage over currently marketed anti-anginal agents in order to justify approval ("The Pink Sheet" March 31, 1986, p. 3). However, one committee member did note that the clinical data in the NDA pointed to anti-arrhythmic properties. At the 1986 Carter-Wallace annual meeting, Hoyt indicated that bepridil's future would likely depend on a more restrictive labeling for angina ("The Pink Sheet" July 21, 1986, p. 12). Carter-Wallace obtained U.S. marketing rights to bepridil from the Dutch firm Organon, a subsidiary of Akzo. All U.S. development work is being performed by McNeil under a sublicensing agreement. When and if approved, the calcium channel blocker will be marketed by Carter-Wallace and McNeil under the brand names Bepadin and Vascor, respectively. Hoyt also reported on the clinical progress of four additional prescription drugs in the Carter-Wallace pipeline -- acrihellin, azelastine, felbamate and flupirtine. Nearest the NDA stage is the anti-allergy product azelastine, for which Hoyt projected a March 1989 filing. The company hopes to have azelastine on the market by the beginning of 1992. By that time, an NDA for felbamate will have been filed. Approval for the anti-epileptic agent is expected by mid-1993. However, Hoyt was less specific on the status of flupirtine, an oral non-narcotic analgesic. He noted that one major clinical trial is under review by the FDA, and that the agency has not yet indicated whether the study is adequate to demonstrate efficacy. "Until they do," the exec said, "I cannot give a date for the filing of an NDA." During fiscal 1988 (ended March 31), the company filed an IND for a flupirtine/ibuprofen combination product. Acrihellin, a cardiotonic agent for treatment of congestive heart failure, remains in Phase I, Hoyt told the meeting, at roughly the same level of development as reported by the company a year ago. All four products are licensed from the West German firm Asta Pharma AG, formerly known as Degussa. During the fiscal year, Carter-Wallace extended its agreement with Asta, scheduled to expire in 1989, for an additional 15 years. Under the terms of the collaboration, Carter-Wallace has the right to obtain U.S. marketing rights to all Asta Pharma prescription products with the exception of anticancer compounds. Carter-Wallace R&D spending increased about 21% in fiscal 1988 (ended March 31) to $ 33.2 mil., the company reported, making up just under 7% of total sales. Corporate volume rose 7% during the 12 months to $ 483.1 mil. Consumer products accounted for 53% of total sales in fiscal 1988, with health care products accounting for the rest. Net earnings were $ 37.8 mil., and increase of 17%. Of the firm's currently marketed prescription products, only one, Soma Compound, a muscle relaxant, has an active patent. The Carter-Wallace annual report for fiscal 1988 attributes the 8% increase in health care sales during the 12 months to price increases. "In the pharmaceutical line, unit sales have been unfavorable affected by generic competition," the annual report states. Specifically highlighted as achieving "strong sales gains" in fiscal 1988 was the cough/cold line, which includes Organidin expectorants and the Rynatan and Rynatuss decongestant brands. "New sales highs" were also reached by Maltsupex, a laxative product, the Soma line and Depen, a drug for severe rheumatoid arthritis, according to the annual report. Hoyt noted that the size of the Carter-Wallace detail force has remained stable over the last three years. One areas of unit sales growth for Carter-Wallace is the condom market, where the company's Trojan line has a 55% U.S. market share. Carter-Wallace purchased the condom business, Youngs Drug Products, in 1985 for $ 25 mil. According to one analyst's estimate, fiscal 1988 Trojan sales were approximately $ 70 mil., up from $ 50 mil. the previous year. Carter-Wallace is currently launching a Trojan line extension -- condoms containing a spermicide. Hoyt explained that at the time of acquisition, Youngs manufactured such a product. However, because of liability concerns, Carter-Wallace decided at that time to discontinue the product. The company has since reevaluated the spermicide, which contains the same active agent as other currently marketed spermicidal ointments, and decided to go ahead. Planning for a second condom manufacturing facility, to be located in Puerto Rico, is currently under way, according to the annual report. Asked to comment on the progress, Hoyt said he hoped to have the plant operational within two years. No agreement has yet been signed. "I don't think we'll build a facility as large as we would have a year ago," Hoyt remarked. "The condom market is leveling." He referred to Nielsen market research data that showed a 19% expansion of the U.S. condom market over the last 12 months, but only a 4% growth during the most recent two-month period. Barring a merger, the Hoyt family's presence on the Carter-Wallace board has been ensured for at least another generation. Scott Hoyt, 35, group product manager, was elected to the company's board, expanding to seven the number of directors. In that new position, he joins his father, Vice Chairman Charles Hoyt, and his uncle, Chairman Henry Hoyt. Helped in part by the creation of class B shares, the family now controls over 60% of the shareholder voting power. As a tightly held entity, Carter-Wallace has been able to pursue a strategy of long-term growth without fear of a hostile takeover. The company has an enviable balance sheet and traditionally retains a substantial portion of net earnings for corporate purposes. As of March 31, the firm had cash and marketable securities totaling almost $ 90 mil., and a quick ratio of 2.6 to one. Its retained earnings position increased from $ 241.6 mil. in fiscal 1987 to $ 264.7 mil. Carter-Wallace has never used debt to finance an acquisition. Asked if the company might make an acquisition in the next 12-18 months, Hoyt responded: "I would be very pleased if your prediction came true."

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