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MARION MERRELL DOW COMBINED OTC ANNUAL SALES ARE OVER $ 130 MIL. IN U.S.; MERRELL DOW EUROPEAN SALES ARE $ 415 MIL. IN 1988; JAPAN BUSINESS NEAR $ 120 MIL.

Executive Summary

Marion and Merrell Dow's combined OTC business in the U.S. will be over $ 130 mil., based on Marion's fiscal 1989 results and Merrell Dow's 1988 sales. Marion's Consumer Products Division had sales of $ 61.3 mil. in fiscal 1989 ended June 30. The firm estimates that all but about 1% of sales were domestic. Approximately $ 70 mil. of Merrell Dow's 1988 revenues in the U.S. were derived from OTC sales, according to a July 21 mailing to Marion shareholders. Marion's OTC line includes the Os-Cal calcium supplement, Gaviscon antacid and Throat Discs lozenges. Merrell Dow products include the Cepacol oral hygiene line, Novahistine cough/cold/allergy line and Citrucel laxative. Merrell Dow's OTC business, Lakeside Labs, will get responsibility for Marion's consumer products lines following the planned merger of the two firms, announced July 18 ("The Pink Sheet" July 24, p. 24). Merrell Dow brings a substantial international business to the merger. About 40% of 1988 revenues were contributed by the company's European operations. Four European countries accounted for nearly 25% of 1988 sales -- Italy ($ 124 mil.), France ($ 82 mil.), W. Germany ($ 45 mil.) and the U.K. ($ 35 mil.) More than 10%, or about $ 118 mil., were from the firm's operations in Japan. In a discussion of Merrell Dow financial results for the second quarter ended June 30, the mailing to Marion shareholders predicts that sales will be down 7% to $ 324 mil. Merrell Dow expects to release its results for the second quarter in early September. The company is projecting 1989 sales growth near 10% and annual sales of $ 1.27 bil. The firm notes that its prediction "assumes the commencement of commercial sales of Seldane-D [terfenadine/pseudoephedrine] in the third quarter of 1989." An NDA for the combination product is pending at FDA. For the first quarter of 1989, combined sales of Seldane, Lorelco and Nicorette increased by $ 24 mil., Merrell Dow said. Sales of Seldane alone grew 45%, including a 30% increase in unit volume. In 1988, Seldane sales rose 41% (to approximately $ 323 mil.) and represented 28% of total sales, according to the firm. Marion had been looking for a buyer since August 1988, according to a separate July 21 shareholder mailing from the firm. Marion reported that it hired Shearson Lehman in August 1988 to identify "opportunities for the sale of the company" and to act as financial advisor. According to the offer statement, Merrell Dow President David Sharrock first approached Marion President Fred Lyons in "early 1988" regarding a business combination, although at that time, no discussion ensued. Six months later, Merrell Dow Corporate Business Director James Moore proposed to Lyons that the two firms "consider entering a joint venture involving over-the-counter products and granting Merrell Dow a right of first refusal with respect to (ITALICS)Carafate." However, it was not until April 1989, when Shearson Leahman contacted Dow about a combination and in subsequent meeting over the next three months, that the final merger plan was put together.
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