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Executive Summary

Rhone-Poulenc Rorer submitted its NDA for immediate-release diltiazem to FDA in April and plans to submit the NDA for a sustained-release form of the calcium channel blocker in September, Chairman and CEO Robert Cawthorn told a New York Society of Securities Analysts meeting on May 10. RPR believes its product will get the jump on generic diltiazem ANDA approvals by reaching the market before the expiration of Marion's Cardizem exclusivity in November 1992. Cawthorn forecast quick FDA approvals for the two Rhone-Poulenc Rorer diltiazem products. He predicted approval of the immediate-release form in the second quarter of 1992 and the sustained-release form by the third quarter of 1992. Asked why the company is forecasting such a short approval timeframe, Cawthorn said diltiazem is a "well known, well studied, widely used" drug on which a "lot of data" is available. More importantly, Cawthorn said, "we know, from talking to FDA, that they are quite interested in seeing somebody else come with a diltiazem product on the market." Noting "it may not be FDA's official mandate to encourage competition and try to reduce health care costs," Cawthorn said, "it is certainly an unofficial one." He reported that RPR has been "led to believe that we will get very capable and prompt review." Rorer's once-a-day product could conceivably beat Marion Merrell Dow's once-a-day dosage form of Cardizem to market. Marion Merrell Dow filed an NDA for its once-a-day product Cardizem QD, developed with Elan, in February. The company's currently approved sustained-release product, Cardizem SR, is approved for twice-daily use. The immediate-release form of Rhone-Poulenc Rorer's diltiazem is a Bolar-developed product to which the company has access under a joint developing and marketing agreement formed last summer ("The Pink Sheet" July 24, T&G-6). Rhone-Poulenc Rorer indicated in its recent proxy/prospectus for the merger that it does not believe that Bolar's role in the agreement, which was basically limited to providing a package of toxicology data, will have an adverse effect on the drug's approval stemming from the generic manufacturer's troubles with the agency. The integration of Rhone-Poulenc and Rorer is proceeding apace, Cawthorn reported to the securities analysts at the company's first presentation to the financial community in its restructured state. The agreement in principle was announced Jan. 18, the definitive agreement to merge was announced March 13 ("The Pink Sheet" March 19, p. 15) and the tender offer commenced three days later. Rorer shareholders agreed on May 4 to opt out of Pennsylania state anti-takeover legislation and Rhone-Poulenc's tender offer was closed. In late June or early July, Rorer shareholders will meet a second time to vote on the merger and the issuance of new Rorer stock in the form of contingent value rights (CVRs) designed to protect the value of Rorer shareholder equity. Discussing financial projections for the merged company through 1994, Cawthorn forecast a 13.4% compound annual sales growth rate and 30% annual compound growth in net income. Rhone-Poulenc Rorer expects sales to approach $6 bil. in 1994 and net income to top $700 mil. that year. The company also predicts that it will be able to reduce its nearly $2 bil. in debt to less than $800 mil. by 1994. Cawthorn said that synergies from the merger should have a full-year impact in 1991 of $180 mil., but will have little impact in the current year. The "key" to big savings in 1991 is how quickly the integration process occurs, Cawthorn said. The process began in late March under the direction of a new senior management team (see chart below). Since January, neither firm has been filling vacancies and both are examining plants and products that can be divested or redeployed, Cawthorn said. Cawthorn was challenged to explain why Rorer and Rhone-Poulenc should be considered differently from other recent pharmaceutical merger efforts that have proceeded less smoothly than initially projected, especially as the integration efforts have been extended to the lower echelons. "We've done it before with Revlon; we did it successfully and did it quickly," Cawthorn responded. He likened the challenge of meshing two separate corporate cultures and organizations as a "mission impossible," to be accomplished by "bending every effort to achieve it." The "critical mass" for Rhone-Poulenc's R&D efforts already has been set, according to Rorer Senior VP and President-Central Research James Tretter, PhD. Rhone-Poulenc Rorer will be able to bring 3,000 people to its R&D efforts worldwide and plans to allocate over $400 mil. to R&D investment. One goal of this newly restructured and globally unified group is to reduce NDA approval times to six years in the U.S. and five years overseas, Tretter told the analysts. The combined pipeline contains 29 products. Diltiazem, te cardioselective beta blocker Selecor (celiproplol), the low molecular weight heparin Clexane, the hyupnotic Imovane and the oral gastritis and ulcer drug De-Nol are five near-term projects, according to Tretter. The Rhone-Poulenc anti-infective pristinamycin, for serious infections and septicemias, is considered a "medium-term" project. The Selecor NDA has been pending at FDA since June 1987. The company is predicting an early 1991 launch date for the drug, which it considers a "niche" product. Tretter noted that Selecor will be the "20th or so" beta blocker; however, Rorer's Cawthorn told health care analysts in June 1989 that he would consider$100 mil. in sales a "very reasonable target" for Selecor. The product will be co-marketed by Upjohn. The sales threshold for an new chemical entity to be considered a viable development candidate has changed under the new company. At Rorer, the baseline sales prediction for development go-ahead was worldwide sales potential of $40-$50 mil., Cawthorn said during Q&A. At Rhone-Poulenc, the threshold was over $100 mil. sales, excluding the U.S. Now, Cawthorn said, the floor is "well in excess of $100 mil. in sales." Clexane (enoxaparin), a Rhone-Poulenc contribution to the pipeline, is currently marketed in Western Europe and had sales of about $58 mil. in 1989, according to Rhone-Poulenc. Launched in injectable form for post-surgery thrombosis prevention, Clexane is projected to be available in the U.S. in "the next several years," the analysts were told. Imovane (zopiclone) is from Rhone-Poulenc that will compete against Upjohn's Halcion in the oral hypnotic market. The drug has a short duration and is "far less addictive" than the Upjohn product, Tretter contended. Launched in 1987 in France, Imovane was recently introduced in the U.K. and Japan, and the company expects to launch the product in Germany, Spain, Italy and Canada before year-end. De-Nol, the company's fifth short-term drug project, is part of the product right exchange in the proposed strategic alliance between Rorer OTC brands and Procter & Gamble ("The Pink Sheet" March 19, p. 14). Colloidal bismuth subcitrate is currently in Phase III clinicals in the U.S. P&G licensed North American rights to the prescription cousin of Pepto-Bismol from the Dutch firm Gist-brocades N.V. in August 1988. Rhone-Poulenc Rorer's planned strategic alliance with P&G is currently undergoing "routine examination" by the Justice Department, Exec VP Randy Thurman acknowledged. Thurman acknowledged that Justice is currently looking into the deal which, among other things, would allow P&G to add the rights to the antacid product Maalox to its existing Pepto-Bismol franchise. However, Thurman predicted that the investigation would not present any obstacles to the agreement. The companies anticipate receiving a definitive answer on the deal from the government "next month," he said. Along with consummating the P&G alliance, the newly merged company's priorities include expanding its business in Japan, Thurman said. In addition to his title of corporate exec VP, Thurman is also group president for North America, Armour, Japan/Korea, Australia/New Zealand and worldwide industrial operations. Rorer already has a long-standing business presence in Japan, which is expected to contribute over $100 mil. in sales this year, Thurman pointed out. However, the merged company's goal is to generate $400 mil. in sales in Japan by 1995. In addition, Rhone-Poulenc Rorer is looking for its Japanese operations to account for 15%-20% of corporate profit at the end of the five-year period. Rhone-Poulenc Rorer Exec VP Jean-Jacques Bertrand, group president of Western and Eastern Europe, European OTCs and the lesser developed and emerging countries, said that the Eastern Bloc countries will be another "special focus" for the future. Bertrand pointed to the company's West German pharmaceutical and OTC subsidiary, Nattermann, as providing a portal to the new market of 70 mil. East Germans. He noted that Rhone-Poulenc "doubled" its East European sales in 1989 and that the new Rhone-Poulenc Rorer "would like to do it again this year." Bertrand declared that Rhone-Poulenc Rorer will not be "satisfied with our number two label" in Europe.

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