Blockbuster Drugs Becoming Bigger Sources of Pharmaceutical Industry Profits, NationsBanc Montgomery Securities Analyst Tells Investors.

SAN FRANCISCO--(BUSINESS WIRE)--Sept. 23, 1998--Blockbuster drugs -- those generating $1 billion or more per year in U.S. sales -- will be increasingly important drivers of earnings growth for pharmaceutical companies, a NationsBanc Montgomery Securities industry analyst told investors.

"When these new products hit, they become 20 to 30 percent of a company's total sales," said the analyst, Leonard S. Yaffe, M.D. "Investors watching potential blockbuster drugs should get into the stocks beginning in the year before market introduction," said Yaffe, a pharmaceutical industry analyst for NationsBanc Montgomery Securities.

Yaffe made his remarks at the 28th Annual NationsBanc Montgomery Securities Investment Conference, which is running this week in San Francisco. The conference, which is the firm's largest to date, features 245 companies with a combined market capitalization of $1.6 trillion making presentations to more than 1,900 portfolio managers. These managers represent 280 different institutions with a combined $3.5 trillion in assets under management.

Yaffe said the definition of a "blockbuster" drug is one that treats a chronic condition, comes with fewer side effects and can generate significant ongoing prescription volumes. Past blockbusters generated $1 billion in annual U.S. sales, but Yaffe believes that the next generation of blockbusters will generate twice that amount of annual U.S. sales and upwards of $4 billion in sales worldwide.

Pharmaceutical companies are under increasing pressure to generate blockbuster products because of pricing pressure from managed care, increasing numbers of lower-cost generic alternatives, rising research and development spending and saturated therapeutic categories.

Recent examples of blockbusters are Pfizer's Viagra for impotence and Warner-Lambert's Lipitor, a cholesterol reducer co-promoted with Pfizer.

Looking ahead, Yaffe identified one product now in clinical trials that should qualify as a blockbuster if it receives regulatory approval: Celebra, a COX-2 inhibitor for the treatment of arthritis. Yaffe said it is likely to capture the majority of market share among arthritis treatments and will probably beat competing products to market by three to nine months.

The FDA's Arthritis Advisory Committee is scheduled to meet in early December and Yaffe believes Celebra could be on the agenda, with a potential market introduction in early 1999. Monsanto's Celebra will be co-promoted with Pfizer.

Yaffe, who follows the major pharmaceutical companies, named Eli Lilly and Company and Pfizer as top picks.

NationsBanc Montgomery Securities LLC (NMS), a subsidiary of NationsBank Corp., is a full-service investment bank and brokerage firm with approximately $900 million of regulatory capital. The company provides research, trading and issuance in the equity and fixed-income markets (high yield, emerging markets, high grade and mortgage-backed markets).

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NMS is a registered broker-dealer with the Securities and Exchange Commission and is a member of the National Association of Securities Dealers and the New York Stock Exchange. NMS employs more than 2,700 investment professionals.