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LEMMON’s NINE 1992 ANDAs ARE BEARING FRUIT FOR TEVA STOCK, UP 4-3/8 IN AUGUST

Executive Summary

Although investors remained skittish toward pharmaceutical stocks in August, Teva Pharmaceutical Industries got some "Lemmon aid" in the form of ANDA approvals (nine products to date in 1992) from its U.S. generics subsidiary, Lemmon. Israeli generic maker Teva (up 4-3/8 to 27-5/8) was by far the biggest gainer among the 64 pharmaceutical issues tracked by the "F-D-C" Monthly O-T-C Index. Lemmon started off the month with the announcement that it had received FDA approval July 31 for the first generic version of Merck's Dolobid (diflunisal) 500 mg and 250 mg tablets ("The Pink Sheet" Aug. 3, In Brief). The nonsteroidal anti-inflammatory drug is a $100 mil.-plus product for Merck (see T&G-1). The Teva subsidiary ended the month with an ANDA approval for carbidopa-levodopa (Sinemet). Other approvals for the firm in 1992 include the first generic albuterol sulfate syrup and the first prescription generic version of Sandoz' Tavist. Lemmon's string of approvals began in late December with fluocinonide ointment. Although Teva has not posted consistent month-to-month gains for 1992, it is the only drug stock on the Index with a nearly 50% increase in valuation since the end of 1991, when it stood at 18- 7/8. Furman Selz analyst Jerry Treppel issued a report in March noting that "investors have now begun to focus on Lemmon and on the potential of the U.S. generic business, an investment thesis that is beginning to pan out." Lemmon said it had 26 ANDAs pending at FDA as of Sept. 4. In a June 26 report, Shearson Lehman analyst Juan Noble highlighted the fact that Lemmon "was never tainted by the generic drug scandals" and has pending ANDAs for versions of major drugs going off patent by 1995. Noble placed Teva in the "high risk" category, noting that "the company's near-term growth prospects will hinge in large measure on an accelerating rate of FDA marketing approvals for generic pharmaceuticals." Lemmon's $73 mil. in 1991 sales represented about 23% of Teva's consolidated revenues. Teva was one of only six pharmaceutical issues on the Index to post an increase in August as the "Street" soured on healthcare. A total of 53 O-T-C drug stocks suffered declines, with 39 dropping more than 10% in value. Among the big losers were Genzyme down 11- 3/4 to 40-1/4; Chiron off 7-3/8 to 49-1/2; and Synergen down 6-5/8 to 43-5/8. Immunex was ahead for the second consecutive month (up 3-3/4 to 37-3/4) but is still 21-1/2 points shy of its 1991 closing price. Of the 15 analysts following Immunex, eight issued neutral ratings in August while five rated the stock either a "strong buy" or "buy," according to Zacks Investment Research. Although Immunex appears to be benefiting from the July 23 settlement of a marketing dispute with former GM-CSF partner Hoechst, an Aug. 27 Alex. Brown report describes the Leukine agreement as "too little too late to combat Amgen's commanding lead" with Neupogen.
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