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PHARMACIA REALIZES 1988 HIGHWATER MARK IN CHILLY NOVEMBER MARKET

Executive Summary

Pharmacia's 2-5/8 point November price jump to 22-3/4 capped a three month runup of more than five points, or 31%, and left Pharmacia stock at a yearly high going into December. The stock's price in the U.S. has certainly been helped by a strong market in Sweden, where Pharmacia is based. In addition, Pharmacia's announcement to acquire Electro-Nucleonics, a Texas-based clinical chemistry and immunodiagnostics firm that had been distributing Pharmacia's allergy test line in the U.S. was warmly received by the "Street." Pharmacia, which already owned 20% of Electro-Nucleonics, made an offer Nov. 21 to purchase the remaining 80% of the company for $13.50 a share, or about $50 mil. Pharmacia was prepared to scrap its distribution agreement should the offer not be accepted. The Electro-Nucleonics board maintained that the offer was too low ("The Pink Sheet" Nov. 28, T&G-8). However, on Nov. 30, the two firms announced a definitive merger agreement at $14.75 per share, or a total of about $55 mil. The acquisition effectively expands Pharmacia's diagnostic distribution network in the U.S. and will push the Swedish firm's U.S. business over the $300 mil. mark annually. Outside of Alco Health Services (up 4-7/8 to 28-3/8), which has approved a plan to go private via a $31 a share buyout, Pharmacia was the only issue among the 55 over-the-counter stocks tracked by the "F-D-C" Monthly Index to gain at least a point in November. The Pharmaceutical Component retreated over 7% as 27 of its 32 issues lost ground during the month. Overall, drug related stocks, as measured by the Index Composite, retreated 1.5% in November. The Composite's move reflected the performance of the Dow Jones average and the S&P 400, which declined 1.6% and 1.9%, respectively. The month's major casualty was Diversified issue Centocor (down 6 to 14-1/4), which lost about 30% of its market valuation. Giving the Street jitters was the biotech firm's decision to use earnings from its profitable diagnostic division to support pharmaceutical R&D. As a result, Centocor's earnings declined dramatically in the third quarter. In addition, the company told analysts early in the month that it did not plan to file new pharmaceutical product registration applications with FDA before mid-1989 at the earliest. These products include two imaging agents, Fibroscint and Centoxin and the antiplatelet antibody CentoRx. The company said it expects breakeven operations for the fourth quarter of 1988.
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