INDUSTRY & BUSINESS

Business Sands Are Shifting Outlook is good, DCAT hears, but growth patterns are changing; drug industry faces scrutiny

CHEMICAL AND DRUG firms can look for a good \ ca r ahead, but not one without problems. That's the word two industry executives passed along to the Drug, Chemical, and Allied Trades section of the New York Board of Trade.

Esso Standard Oil vice president O. V. Tracy's crystal ball shows sales of chemicals and allied products hitting slightly over $25 billion in 1959, up from the S23..5 billion mark around which the> \ e hovered during the past two vears.

as thc> were 10 or 20 years ago." he warns. "They are not going to get easier

O . V. Tracy " . . . caught up with ourselves"

Merck president John T. Connor is equally optimistic about the pharma­ceutical industry. Without pinpointing a specific figure, Connor sees sales ris­ing again this year, "particularly from foreign operations." Drug producers - .«• i l l K o n n r o n r r t n r n r\ C ^ D ^ n d C U t ΟΏ W O I ' I d

economic and political conditions, Connor believes, as their foreign sales come closer each year to an average of one third of total revenue. Connor sees research outlays also taking "an­other leap forward" to a level of about S190 million, while Tracy pegs total chemical industry research and de­velopment budgets in the neighbor­hood of S560 million.

• Trouble Spots Ahead . Tracy adds some strong words of caution for the industry. Not every chemical com­pany will share equally in the growth ahead. "Things are not as easy today

f i » n n r r tomorrow*. Now we have to become accustomed to the rough roads of reality."

A number of problems are affecting industry growth patterns, Tracy notes. Among them:

• Competition from companies en­tering the chemical business for the first time.

• Overcapacity resulting from steady expansion over the past decade.

• Increased foreign competition as new European plants move into high gear.

But there is still another factor which Tracy feels is not yet fully appreciated: The complexion of the industry and its market patterns are shifting. De­veloping new products and replacing I K U U U t l I 1 I U I V . 1 1 U 1 0 , » l « . i » .jjr n · . * » ^ v » * . ^ ».«.,. - ^

enabled chemical production to grow* at a better than average rate. But. says Tracy: "We must realize that the dramatic growth patterns we enjoyed in the past are now* starting to slow down. Demand for chemical products in certain areas has already started to level out, and now more nearly paral­lels the growth of consumer products. This is quite a switch. W e have caught u p with ourselves in many fields."

Tracy also makes a suggestion. "Many of us have been concentrating too long and too hard on established areas of application. Let's look around and find some new* areas. There are manv human needs which have not yet been satisfied."

• Firms Under Scrutiny. Merck's Connor sees 1959 as "the year die pub­lic comes to call" on the pharmaceuti­cal industry. "We will hold open house for the Washington representa­tives of the public, who have developed an enormous curiosity about how we conduct our business." Specifically, he notes, the Federal Trade Commis­sion has started hearings in charges against six broad-spectrum antibiotics producers. Five Salk vaccine manu­facturers soon will be on trial for al­leged antitrust violations. Senator

Kefauver probably will hold hearings on drug prices and profits. Congress­man Fountain may probe into the Na­tional Institutes of Health's program in general, and the Health, Education and Welfare patent policy in particu­lar. And "as the c roud collects around our house and the television cameras move in, we can be sure that we will find ourselves entertaining several other gentlemen with an occupational fondness for the warm glow of klieg lights."

How should pharmaceutical produc-eis face- these probes? "Meet them with friendliness and with facts/ ' is Connor's prescription. "If we wring our hands and talk about how unfair everyone is being, we will convince no one that we have the public in­terest well in mind. We can sain . . .

J. T. Connor ".. . warm glow of klieg lights"

from some constructive self-examina­tion. W e can also gain by being forced to do a thorough job of getting across to the public a clear, accurate, and com­plete picture of our function. We have not yet done enough accounting to the publie* for our total performance as an economic institution.'

Connor suggests that the industry start with competition in tening its side of the story. Sixteen companies divide two thirds of the pharmaceuti­cal industry's sales, he claims. This is considerably more firms than account for the same proportion of sales in steel, automobiles, or aluminum. The largest ethical pharmaceutical company, moreover, accounts for less than l()r/c of the total U. S. market. And in some respects, he adds, " the toughest competition we face is from companies abroad." •

3 0 C & E N FEB. 9, 1959

INDUSTRY & b U S I N u i J

C & E N CHEMICAL PRICES vs . ALL WHOLESALE €O^M@SS?SE§ PRICE INDEXES, 1947-1949 = 100 Source: U. S. Depf. of Commerce.

1356 1957 1958

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