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Executive Summary

Roberts Pharmaceutical, after a series of announcements in the first half of the year, posted a 50% gain in July to lead "F-D-C" OTC Index stocks, climbing 5 points to close the month at 15. Roberts, which acquired an OTC line from Upjohn last October, more than doubled in value during the first quarter of 1991, closing at 10-7/8 at the end of March. The stock, however, languished through the next three months as the market softened, despite a series of announcements by the company. In May, Roberts announced it had licensed the Phase III anti-cancer drug anagrelide from Bristol-Myers Squibb. In June, the company completed a 2 mil. share public offering, netting over $ 20 mil. As July began, the company announced the Canadian approval of Amatine (midodrine) for treatment of orthostatic hypotension. An NDA for the drug is pending in the U.S. In July, investors discovered the stock, as it posted steady increases through the month. On July 12, Dean Witter analyst Jerome Brimeyer initiated coverage with a "buy" rating, citing the company's licensing and development approach as a timely strategy to take advantage of larger companies' lack of interest in small but valuable products. The company fueled investor optimism with two July acquisitions: Roberts licensed three products from Johnson & Johnson * Merck on July 18 and, on July 25, signed a letter of intent to acquire Alpharetta, Georgia-based W. E. Hauck, a pharmaceutical company with over $ 4 mil. in sales. Roberts led the revitalized Pharmaceutical group on the "F-D- C" Index, which posted its first monthly gain since March. The 38 pharmaceutical companies tracked by "F-D-C" were up a combined 14.1%, with 23 issues advancing, 11 declining, and four unchanged. The diversified component of the index climbed 16%, with nine issues advancing and two declining. Both components outpaced the broader Dow Jones and S&P 500 Indexes, which were up 4.1% and 4.5% in July, respectively. Amgen, after steadily declining from April to June, roared back in July, posting a 30-1/8 point gain to close at 148. The stock jumped 25.6% for the month in spite of a July 1 court ruling ordering Amgen to pay J&J $ 164 mil. in damages relating to the two companies' joint development agreement for EPO. Investors shrugged off the news, and, secure that the worst was over, focused on the continued sales growth of EPO and G-CSF. Data from the Phase III trial of G-CSF was published in The New England Journal of Medicine July 18, and the company announced the same day that the product had generated sales of $ 86 mil. through June. The two most significant events in the biotech industry during July were greeted negatively. Xoma, which was up 1-1/2 to 26 through July 15, the day opening arguments were heard in its patent infringement case against Centocor, dropped 2-1/4 by month's end to close at 23-3/4. Centocor, however, fared little better: the stock started July at 31-3/4, rose to 37-1/4 by July 15, only to fall to 34-1/4 by month's end. Chiron and Cetus each had posted solid gains prior to the July 22 announcement that the two firms would merge. Chiron had jumped 17.4% from 51-3/4 to 60- 3/4; Cetus had risen a more modest 10.3%, from 16-1/4 to 17-7/8. In the week following the merger announcement, both stocks plunged, closing on July 29 at 52-3/4 and 15, respectively. The two stocks rallied somewhat in the last week of July to 55-7/8 and 15-5/8, respectively, in response to positive reviews of the merger in the business press and from analysts. Chart omitted.

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