RHONE-POULENC DRUG STRATEGY INCLUDES "EVENTUAL" U.S. EXPANSION

RHONE-POULENC DRUG STRATEGY INCLUDES "EVENTUAL" U.S. EXPANSION, the French chemical/diversified company reported in a recent filing with the Securities & Exchange Commission covering a planned public offering. "Eventual expansion into key geographical markets such as the U.S. and Japan is . . . targeted, but the cost of entry into these markets is relatively high," the registration statement notes. Rhone-Poulenc observed that it has "historically adopted a policy of licensing, rather than direct sales, of its ethical pharmaceuticals" in the U.S. The company's major product lines are distributed in the U.S. by Searle (Flagyl), SmithKline (prochlorperazine) and American Home Products (Orudis, Sectral and Phenergan). These licensing agreements combined with the recent acquisitions of two bulk pharmaceutical businesses in the U.S., U.S. Ethicals and Purification Engineering, Rhone-Poulenc noted, "give the company a small foothold in the U.S. market." In addition, the French firm already has its own research and registration facility in Mon-mouth Junction, N.J. for "future products." However, before expansion into new markets, Rhone-Poulenc reported that its first priority in the health care area is to "supplement internal growth with selective acquisitions" in geographic therapeutic areas where the company has already established a strong position. Geographically, Rhone-Poulenc cited Europe, Africa and South America. Drug markets with potential for expansion, Rhone-Poulenc said, are infectious diseases, cardiovasculars, anti-rheumatics, vaccines, analgesic bulk chemicals and vitamins. In addition, Rhone-Poulenc said it plans to invest in research to develop new chemical entities and in OTC pharmaceuticals. In 1986, the nonsteroidal anti-inflammatory Orudis (ketaprofen) surpassed Flagyl (metronidazole) as Rhone-Poulenc's topselling Rx product worldwide. The previous year, Flagyl had accounted for 19% of the company's over $1.2 bil. in pharmaceutical sales, or approximately $240 mil. Rhone-Poulenc's other leading Rx product areas in 1985 were the cardiovascular agents, Sermion (nicergoline) and Sectral (acebutolol), which together had worldwide sales of roughly $225 mil., serums and vaccines, with sales of approximately $150 mil., psychotropics, led by Stemetil (prochlorperazine), with sales of about $135 mil., and the anti-infectious agents, Josacine (josamycine) and Rovamycine (spiramycine), with combined 1985 sales of roughly $75 mil. Reflecting Rhone-Poulenc's aggressive acquisition program in recent years, nearly one-third of the company's pharmaceutical business is now being derived from businesses acquired since 1983. That year Rhone-Poulenc acquired the French drug firm Pharmuka, which contributed sales of approximately $120 mil. in 1985. In 1986, Rhone-Poulenc accelerated its acquisition program with four international acquisitions that, combined, generated sales of approximately $280 mil. Rhone-Poulenc's largest drug acquisition in 1986, by far, was the West German firm A. Natterman & Cie GmbH with annual sales over $200 mil. Rhone-Poulenc also made three other drug acquisitions with sales in the $20-$30 mil. range, including Upjohn Brazil, the Italian firm Roger Bellon Schoum S.p.a., and Gerot, based in Austria.