Zeneca sees shares dip despite surge in sales

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Zeneca, the drugs group, saw its shares slide yesterday despite announcing a 14 per cent surge in sales to pounds 4.1bn for the first nine months of the year. The whole pharmaceuticals sector was hit by fears that the Democrats will emerge victorious from next week's US election and revive President Clinton's healthcare reforms, putting price caps on drugs.

Zeneca fell 38.5p to pounds 17.11, Glaxo Wellcome sank 15.5p to 970.5p and SmithKline Beecham was off 19.5p at 763.5p. But investors' sentiment over Zeneca, the former pharmaceuticals arm of chemicals giant ICI, was further damaged by disappointment in some quarters over the deceleration in sales growth since the half year figures to June.

In pharmaceuticals, which represents 44 per cent of the business, turnover of pounds 1.8bn reflected a 14 per cent advance over the same period of 1995, a 1 percentage point deceleration from the 15 per cent growth recorded in the first half.

One analyst highlighted special factors which rendered the comparisons unfavourable. Sales of Zestril, Zeneca's biggest-selling drug, used in the treatment of high blood pressure and heart failure, had been running ahead of expectations in the first six months as suppliers re-stocked.

The third quarter had seen some de-stocking, he estimated. Another factor was that the unusually protracted growing season in the US last year had not been repeated. The boost to sales of Zeneca's agrochemicals in 1995 had not therefore been evident in this year's third quarter. The analyst estimated sales growth in this sector of close to 20 per cent last time had crashed to nearer 4 per cent in the July to September quarter of 1996.

The group reported agrochemicals sales up 14 per cent to pounds 1.39bn in the nine months, or 11 per cent in local currency terms. Seeds, now part of a joint venture with Royal Vanderhave of Holland, saw turnover jump 21 per cent to pounds 117m, an 18 per cent rise in local currencies.

Zeneca said the sales performance for the whole of 1996 was likely to be broadly in line with that of the first three quarters. However, the group gave warning that pricing pressures had continued in Japan and some European markets. Analysts said the Japanese government, which traditionally cuts the publicly funded drugs bill every second year, had attempted to pre-empt the normal attempts by the industry to recover the cuts by bringing forward the announcement of next year's 3.5 per cent reduction.

Meanwhile, governments in Europe had also been bearing down on the rates at which they reimbursed drug companies.

Investment Column, page 21