ZENITH WILL MOVE INTO GENERIC INJECTABLE PRODUCT LINE

Executive Summary

ZENITH WILL MOVE INTO GENERIC INJECTABLE PRODUCT LINE in the second half of 1986, following the purchase of sterile product manufacturing facilities from Smith Labs. The agreement-in-principle was announced in May 15 press release. Details of the deal were not disclosed. "The purchase of these facilities will enable Zenith to expand significantly its pharmaceutical product line to include a line of injectable products," Zenith President and CEO James Leonard stated. "We anticipate that the purchase will be concluded in the near future and that Zenith will commence operations at the facilities during the third quarter of 1986." Wall Street reacted favorably to the acquisition; Zenith stock closed at 30-5/8 on May 15, up 2-7/8. The stock closed at 31-3/4 on May 23. Smith Labs explained its decision to sell its Rosemont, Illinois plant as a move to cut operating expenses and generate cash. In its last fiscal year, which ended Oct. 31, Smith reported a net loss of $2.1 mil. after posting earnings of $5.7 mil. the previous year. During the same period, sales dropped 36% to $14.6 mil. Smith's fiscal 1985 performance reflected a 55% decline in sales of its principal product, Chymodiactin (chymopapain for injection), which has been under competitive pressure from Baxter's Discase chymopapain product. In addition, physician concerns with the adverse reaction profile of chemonucleolysis has inhibited chymopapain sales. Smith Labs said it has at least a two-year supply of Chymodiactin. The product has a shelf life of approximately two years. The company indicated that in the future it might consider a contract production agreement with either Zenith or one of its foreign licensees.