After a doubling of its market value during 1985, Marion (up 21-7/8 to 44-3/4) repeated the feat in the first six months of 1986. The top percentage gainer in 1985, Marion again led all "F-D-C" Index issues during the first six months of 1986 with a 95.6% price appreciation. The company is carrying a market valuation of $3.6 bil., almost nine times greater than its value in November 1982, the time of Cardizem's U.S. approval. With Cardizem now commanding a 36% share of the calcium channel blocker market, the company has put together 13 consecutive quarters of earnings growth in excess of 40%. In the most recent quarter, Marion reported a 54% net earnings increase to $13.7 mil. Sales of Cardizem, which should reach $180 mil. in fiscal 1986 are estimated by the ValueLine survey to reach $245 mil. in fiscal 1987. As dramatic as its performance was, however, Marion was simply one member of a very strong Pharmaceutical group during the first 26 weeks of the year. Seventeen of 18 companies posted gains, while seven increased their market value by 50%. Merck (up 36 to 104-1/2), the top point gainer, found renewed vigor as one of the industry's blue chip issues. Two drugs approved late in 1985 -- the broad spectrum antibiotic Primaxin and the ACE inhibitor Vasotec -- appeared to be the catalyst. Both have grabbed significant shares of their respective markets since being launched early in 1986, and Merck Chairman Roy Vagelos, MD, has predicted that worldwide Vasotec sales could reach $170 mil. this year. Merck's ACE line will be extended by the enalapril/diuretic combo product, Vaseretic, which was recently approved by FDA and should appear on the market soon. In addition, and entry into the H[2] anti-ulcer market appears close with Pepcid (famotidine), which was recommended for approval by an FDA advisory committee earlier in the year. Despite the Merck ACE competition, Squibb (up 33-1/2 to 113-1/2) seemed unaffected. Squibb reported that first quarter new Rxs for its ACE inhibitor Capoten and the combo product Capozide were over 100% higher than the first quarter of 1985. Capoten's U.S. sales totaled $123 mil. in 1985, making up roughly 20% of Squibb's total volume. Squibb also unveiled two new business ventures -- Squibb Marsam, a manufacturer and marketer of injectable generic drugs, and Princeton Pharmaceuticals -- to refine its marketing approaches to different sectors of the drug field. The latter was established this spring to focus a marketing effort on the beta blocker Corgard through a separate detail force. Squibb is also considering a move to sell its Charles of the Ritz cosmetics business, with annual sales of $432 mil. The Ritz fragrance Opium is Squibb's fourth largest product. Upjohn (up 27-7/8 to 94-5/8), after a year-long runup, has recently lost some of its luster. FDA reprimanded the firm recently for a press release which the agency said did not include balanced information on the safety and efficacy of the hair growth drug Regaine (minoxidil). However, minoxidil aside, the company has shown strong earnings growth in the first quarter of 1986, fueled by sales of the two central nervous system drugs, Halcion and Xanax. American Home Products (up 27-1/8 to 90) gained in the face of generic competition and capsule uncertainty in the OTC business. The company has executed agreements with Cal Biotech for a number of recombinant products and entered into the generic field through the purchase of Quantum Pharmics. The market also liked AHP's use of its cash to reduce the common float. The company recently announced that it would repurchase an additional 5 mil. of its own shares, for a total of 10 mil. shares purchased since the beginning of the year. Johnson & Johnson (up 20 to 72-5/8) took bad news gracefully. It moved out of the scanning and MRI businesses with the sale of Technicare and wealthered two storms in the drug business: a second tampering attack on Tylenol and subsequent product change; and relabeling for Suprol, its new NSAID. Overall, 44 of 46 stocks listed on the "F-D-C" Index advanced during the first six months of 1986, with over half gaining more than 30%. Indicative of the popularity of drug company stocks in the bull market, the Composite advanced 36.6%, over 12 percentages points more than the Dow Jones average, which moved up 22.4% to close at 1892.72 on June 30. As a group, the drug stocks outperformed the other Index components, climbing an impressive 49% in the 26-week period. After Marion Labs, the next largest percentage gainer was Erbamont (up 14-1/2 to 30-1/8), whose 93% rise could be attributed to buy recommendations by foreign exchanges. Robins (off 1/8 to 11-1/8), the Pharmaceutical Component's only declining issue, struggled under the burden of its Dalkon Shield related Chapter 11 reorganization. Generic drug stocks, latecomers to the 1986 market rally, were led by Bolar (up 13-7/8 to 31-3/8), with a 79% advance. Biocraft (up 5-5/8 to 19-1/4), Mylan (up 6-3/8 to 24-1/2) and Zenith (up 3-7/8 to 16-1/4) also posted significant gains. Chart omitted.
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