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SYNTEX MEDICAID REBATES ARE $10.5 MIL.: R&D UP 13% TO $100 MIL. IN SECOND QUARTER FY 1993; TEVA U.S. GENERIC DRUG SALES CLIMB 32% TO $136.6 MIL. IN 1992

Executive Summary

Syntex paid $10.5 mil. in rebates to state Medicaid agencies under OBRA '90 provisions in the second quarter of fiscal 1993 (ended Jan. 31). In the comparable quarter of FY 1992, the rebates totaled $11 mil., Syntex reported Feb. 26. U.S. pharmaceutical sales decreased 6.1% in the three-month period to $300.9 mil. from $320.3 mil. and fell 8.9% to $576.1 mil. in the first half of FY 1993 compared to the same period in the previous fiscal year. Syntex Chairman Paul Freiman noted that last year's second quarter sales were a record for the company, that wholesaler promotions meant the shift of some sales from the third to the second quarter and that the quarter saw the sell-in of injectable Toradol IM. "We believe sales in the second quarter of fiscal 1992 would have been lower than those in the fiscal 1993 second quarter were it not for these three events," Freiman said. Sales of the company's flagship products, the NSAIDs Naprosyn/Anaprox, declined by 16.6% to $156.3 mil. in the second quarter, and for the first half of FY 1993, sales for the brands were off 22.5% to $303.3 mil. Freiman attributed the continuing pressures on the brands to competition from other products and "wholesaler inventory reductions through last November." As the company previously reported, it shifted some sales support in January away from newer products and back to Naprosyn/Anaprox. Combined Toradol IM and oral U.S. sales in the three- and six- month periods were $62.7 mil. and $115.1 mil., increases of 60.8% and more than 102%, respectively. During the comparable periods of the previous fiscal year, Syntex did not market the oral formulation. Sales of oral Toradol totaled $31.6 mil. and $55.8 mil. in the quarter and the half. Of Syntex' "newer" products other than Toradol -- Cytovene (ganciclovir), Cardene (nicardipine), Synarel (nafarelin acetate) and Ticlid (ticlopidine) -- total sales generated worldwide in the quarter were $53.4 mil. For the six months, the four brands accounted for sales of $103.1 mil. Syntex boosted its R&D budget to $100.1 mil. in the second quarter, a 13.5% increase from the same period last year. Year-to- date, Syntex' budget outlay has been $197.5 mil. Discussing the company's higher R&D budget, Freiman commented that part of the increased outlays are going toward studies to demonstrate experimental compounds' "cost effectiveness to the total health care system. This is an important additional step that is necessary," the current Pharmaceutical Manufacturers Association chairman said, "in this increasingly cost-conscious health care environment." Syntex is also continuing its program to reduce the time, and presumably the cost, of drug development, Freiman noted. As a result of the company's cost reduction and restructuring announced late in 1992, selling, general and administrative expenses decreased 3.7% to $187.6 mil. in the quarter but are up through the first half 4.8% at $390.7 mil. Syntex' effective tax rate declined from 13% to 4% in the comparable quarters of FY 1992 and FY 1993. Due to the 13% increase in R&D outlays in the second quarter, Syntex operating income was 14.2% lower at $121.6 mil. Net income of $119.1 mil. was 2.1% lower than in the second quarter of FY 1992. Earnings were 75.2% lower for the half at $113 mil., taking into account the first quarter charge for restructuring of $180 mil. Consolidated sales in the second quarter and half were $505.5 mil. and $997.7 mil., down 3.5% and 2.7% from the respective periods of the earlier fiscal period. Teva Pharmaceutical U.S. generic drug sales through its Lemmon subsidiary rose 32% to $136.6 mil. in 1992, generating 35% of corporate sales, Teva reported March 1. Fourth quarter Lemmon sales rose 30% to $47.2 mil., accounting for 41% of consolidated Teva sales. Teva President and CEO Eli Hurvitz remarked on the growing importance of the U.S. generic market, noting that Lemmon had received 11 ANDA approvals in 1992, its first in more than two years. Seven of the products were on the market by year-end, accounting for 23% of Lemmon's total sales (or about $31.4 mil.) and 75% of Lemmon's sales increase for the year, as well as providing significant boosts to the company's profitability, Hurvitz noted.
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