Head of SmithKline Drug Unit Resigns
The head of SmithKline Beckman’s U.S. pharmaceutical division has resigned--a move analysts attributed to the drug maker’s efforts to boost sagging profits.
Philadelphia-based SmithKline Beckman Corp. gave no reason for the resignation of James Cavanaugh, president of Smith Kline and French Laboratories-U.S. But analysts said SmithKline held Cavanaugh responsible for the 25.3% drop in second-quarter profits. Cavanaugh headed the unit since April, 1985.
Frederick Kyle, 55, senior vice president of the Smith Kline and French unit, will succeed Cavanaugh, the company said.
“The company has made a decision that the problems with its U.S. pharmaceutical operations are at Cavanaugh’s doorstep,” said Neil Sweig, analyst at Prudential-Bache Securities.
“I guess Cavanaugh has become the sacrificial lamb,” said another pharmaceutical analyst.
SmithKline has been plagued by sharply lower sales of its billion-dollar ulcer drug Tagamet and of its hypertension medication Dyazide. On Monday, the company reported that its second-quarter net earnings fell to $98.7 million from $132.1 million in the year-ago period. Sales in the company’s pharmaceutical business dropped 6.8% to $477.2 million, but the company’s total sales rose to $1.14 billion from $1.02 billion a year ago.
Tagamet sales in the quarter were about $257 million, off 12% from a year ago, said Barbara Ryan, analyst with Bear Stearns. Dyazide sales dropped to $23 million in the quarter. Before generic drugs began to make inroads against Dyazide, the drug had been bringing in about $400 million a year in sales, analysts said.
Cavanaugh, 51, joined SmithKline in 1977, and is credited with forming the company’s Bio-Science Laboratories unit, a large reference laboratory. Analysts said he was a capable executive with limited pharmaceutical experience prior to joining SmithKline.
Henry Wendt, SmithKline’s chairman and chief executive, said in a statement that Cavanaugh was a “major contributor who has had a significant impact on our eye care clinical laboratory and pharmaceutical businesses.”
Analysts said more resignations were expected as the company consolidates its worldwide pharmaceutical business into one entity, rather than three separate divisions.
