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SMITHKLINE BEECHAM Rx SALES UP 5% IN FIRST QUARTER; OTHER DRUG MAJORS ALSO REPORT SLOWER SALES THAN EARNINGS GROWTH; MMD BUCKS TREND WITH 21% SALES GAIN

Executive Summary

SmithKline Beecham's pharmaceutical sales increased 5% at comparable rates of exchange to reach $1.2 bil. during the first quarter of 1992, the company reported April 23. Sales of the company's leading product, the anti-ulcer medication Tagamet, increased 9% in the U.S. and were up 2% worldwide. The company's three fastest growing products worldwide were the recombinant hepatitis B vaccine Energix-B (up 89%) and the antibiotics Bactroban (up 37%) and Timentin (up 46%). SB's number two product worldwide, the antibiotic Augmentin, experienced a sales decline in the U.S., the company noted. "Reduced wholesaler purchases affected ex-factory purchases when compared to the first quarter of 1991 which saw exceptionally heavy inventory build-up," SB said. While U.S. sales declined, "underlying strength remains, as illustrated by the continued increase in its market share during the quarter," SB said. Worldwide, Augmentin sales grew 3%. Operating income from the pharmaceutical business outstripped sales growth, increasing 11% to $377 mil., the company said. SB added that recent launches of the nonsteroidal anti-inflammatory drug Relafen and the cholesterol-lowering agent Zocor (under a comarketing deal with Merck) have been "encouraging." Consumer Brands sales were up 4% worldwide to $557 mil., and operating profit from that sector increased 5% to $76 mil. SB noted that worldwide sales of the OTC antacid Tums increased 14%, and the product "now holds a record 45% market share in the U.S." SmithKline Beecham's consolidated sales for the quarter rose 9% to $2.1 bil. Net earnings grew over 12% to $311 mil. SB's experience of earnings growth surpassing sales growth was common in first quarter reports from pharmaceutical majors. Johnson & Johnson, Lilly, Rhone-Poulenc Rorer, Schering-Plough and Warner-Lambert all reported substantially sharper increases in earnings than in sales, as drug firms are apparently turning to operating efficiencies to make up for less pricing flexibility. Marion Merrell Dow, however, bucked the trend towards slower sales growth. First quarter MMD sales jumped 21% to $779 mil. Earnings kept pace, increasing 22% to $170 mil. MMD's Cardizem calcium channel blocker family posted an 18% sales gain with $233 mil. in total sales. MMD's two recent line extensions, Cardizem injectable and once-a-day Cardizem CD "added to the success of this key brand." The company added that a direct-to-consumer ad campaign for Cardizem CD will "contribute significantly to the sales growth of this important product in the second quarter and beyond." The company's Seldane antihistamine franchise posted a 30% sales increase for the quarter. MMD's new line extension, the decongestant combo Seldane D, contributed $28 mil. in sales. The original Seldane product had sales of $178 mil. for the quarter. The nicotine transdermal patch Nicoderm generated sales of $55 mil. in its first quarter on the market, MMD reported. The older nicotine chewing gum Nicorette contributed sales of $22 mil. Carafate sales declined 14% to $47 mil. in the anti-ulcer market. MMD attributed the decline for the off-patent product (which is still free from generic competition) to "wholesale buying patterns which produced higher first-quarter sales a year ago, as well as a highly competitive U.S. market." Immunex reported that sales of its granulocyte-macrophage colony stimulating factor Leukine for the first quarter were $3.4 mil., compared to $3.3 mil. in the first quarter of 1991 and $9.8 mil. in the fourth quarter of 1991. Immunex has filed suit against GM-CSF copromoter Hoechst-Roussel (which markets the product as Prokine) alleging breach of contract. Immunex posted a loss for the quarter of $2.8 mil.

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