Analysts Upgrade SmithKline Beecham

SmithKline Beecham's financial results for the third quarter of 1994 revealed that sales of the company's new products are offsetting the downturn in sales of its antiulcerant Tagamet (cimetidine), which experienced a decline in sales of 76% in the third quarter since patent expiry (Marketletter October 24). In the USA, total pharmaceutical sales declined 4% as a result of the fall in prescription numbers of Tagamet. The company said that excluding the antiulcerant, US sales rose 31%.

Despite SB taking the brunt of a 76% drop in Tagamet sales in the third quarter in the USA and 56% worldwide, analysts at Barclays de Zoete Wedd Research say that their profit expectations have been reached and that the picture now at SB is positive. They have upgraded their recommendation for the company from hold to buy, based on the low level of risk now facing the company.

Tagamet's rapid decline means that the product will quickly become much less relevant to the stock. They believe that these circumstances now imply much greater confidence in forecasts for the current year and the years ahead. It is also noted that the product portfolio without Tagamet grew 21% worldwide and 31% in the USA.