View from City Road: Drug sales no help for ICI

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The Independent Online
THE question mark hanging over the timing, if not the fact, of Imperial Chemical Industries' proposed demerger made its annual update on its pharmaceuticals research and development more significant than usual. The demerger was firmly off the agenda at yesterday's meeting, but there was little in the discussion of the drug pipeline to make the climate for the split look any more propitious.

David Friend, chief executive officer of the pharmaceuticals division, said the group was refocusing its research effort, spread too thinly in the past, to concentrate on fewer projects which could produce clear commercial results - six projects were abandoned last year alone. But that cannot disguise the fact that research and development spending, which analysts had expected to be only slightly higher than last year's total of 14 per cent of sales, could creep up to 16 per cent.

That is partly because sales growth has stalled following the loss last year of the US patent for Tenormin, its heart drug. That achieved sales of dollars 1.15bn in 1991, but more than half of this has been lost to generic competition. ICI hopes sales will eventually stabilise at about dollars 500m, but it admits that sales dropped more quickly than forecast, its programme aimed at encouraging brand loyalty failed, and its own generic version was too highly priced to compete with rivals.

The drop in Tenormin's sales will wipe out the increases expected from its newer products: Zestril, also a heart drug; Zoladex, the cancer treatement; and Diprivan, the anaesthetic. This will stifle pharmaceutical growth this year and probably next. A return to above-average growth will depend on the performance of new drugs, such as Merrem, the antibiotic; Casodex, the prostrate cancer treatment, for which the estimated submission date has been delayed a year; and Accolate, for asthma. But these are unlikely to start contributing until 1994 at the earliest.

If the demerger goes ahead next year, ICI will be forced to sell to investors a company dominated by a pharmaceutical company whose progress has stalled, while having insufficient information on future performance. That alone is sufficient reason to defer it.