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Show OH -i I. U.x . II U I'.. "-"' UPDATING THE DRUG INDUSTRY This year foreign currency exchange losses are having an adverse impact on many of the leading drug companies, with most of them engaged in substantial sub-stantial overseas business. During the second quarter of this year earnings comparisons with the similar year-earlier year-earlier period were unfavorable in many instances. For example, such drug industry stalwarts as Merck, Schering-Plough, and Upjohn all reported lower results, and many others saw only minor gains. Hence, full-year profits for the majority of important pharmaceutical firms are not likely to show much if any progress. Despite the fact this is an "off" year for many of the major drug companies, however, the industry outlook for the remainder of the decade is especially bright. Two of the chief positive factors are (1) an expected increase in the flow of new products because of the probably relaxation of the government's govern-ment's regulatory requirements; and (2) novel areas of drug research such as genetic engineering which should result in some revolutionary developments. FDA TO THE RESCUE? For at least the past two decades, U.S. drug producers have complained that stringent government regulations have created costly and unnecessary barriers to new product innovation. But this situation may soon take a turn for the better. Both the new Secretary of Health and Human Services and the head of the Food and Drug Administration Ad-ministration have gone on record as favoring the elimination of the lag in new drug introductions through more expeditious drug reviews, extension of patent life, reduction of paperwork, etc. If some, or possibly all, of the proposed changes are instituted, it should be a big boon to the domestic drug industry and lead to faster commercial release of many new and potentially life-saving medicines. A spokesman for the FDA recently stated that further steps to speed up its drug clearing procedures may be taken as early as next springs. OTHER POSITIVE FACTORS There are many other pluses for the drug industry in addition to the anticipated an-ticipated aid from Washington.. For instance, high living standards, continued con-tinued strong emphasis on better health and nutrition, and broader medical insurance coverage. Alsbihe rapidly increasing number of seniorxitizens, further substantial expansion overseas, continuing high industry profit margins, and a sharply increased market for new and potentially poten-tially promising products should all prove extremely beneficial to the drug industry in the years ahead. The majority of large phamaceutical companies are using advances in molecular biology (genetic research, gene splicing, etc.) and computer science to concentrate their research on drugs that have a wide potential application. At the present time the greatest efforts ef-forts are being aimed at developing drugs to treat heart disease, arthritis, hypertension or high blood pressure, and the numerous aches and pains associated with advancing age. BABSON'S INVESTMENT POSITION Because of the excellent intermediate-to-longer range outlook for the pharmaceutical field, the Research Department of Babson's Reports currently advises holding the common stocks of all the leading firms for their further growth potential. Most of them are priced considerably below their earlier highs, and their price-earnings ratios appear to be quite reasonable. For those wishing to purchase drug securities, the Babson Research Staff feels that American Home Products, Sterling Drug, and Upjohn represent especially good values at their present depressed prices. It is expected that they will perform well in coming years. All three of these companies have several promising new pharmaceutical items as well as established product lines. |