SmithKline May Spin Off Health Care Units, Including 2 Here

SmithKline Beckman Corp., which stunned Wall Street last week when its president abruptly resigned, is considering spinning off its profitable health-care units, including two in Orange County, Chairman Henry Wendt said Thursday.

“We have a commitment to unlock the value of our health-care businesses for the benefit of shareholders,” Wendt told reporters after a meeting with securities analysts.

“We are going to unlock and unbundle the potential value of these units by making them more separate and more visible,” Wendt told the analysts. He said the moves must be “managed and controlled carefully and with discipline” but provided no further details on the plans.

SmithKline’s shares closed down $1 at $51.625 on the New York Stock Exchange.

Wendt targeted the company’s Irvine-based Allergan Inc. eye-care division and its SmithKline Bio-Science Laboratory network of testing laboratories, as well as Beckman Instruments in Fullerton, for a partial sale. The Beckman subsidiary was partially spun off last year to a generally cool reception from Wall Street. SmithKline, based in Philadelphia, sold 17% of Beckman to the public and hinted at other spinoffs.

Allergan makes eye-care and skin-care products and employs 2,700 people in Southern California, according to the company. Sales rose 37% last year, to $756 million. An Allergan spokesman said again Thursday that Allergan has not been told whether part or all of the company will be sold to the public.

Beckman Instruments employs 3,500 in the region in the manufacture of medical instruments. Sales were $770 million last year, up 11%.

Bio-Science is headquartered outside Philadelphia but employs 1,500 and operates a big laboratory in Van Nuys. The unit had sales of $675 million last year, up 57%.

Wendt said he “shouldered the blame” for the drop in U.S. drug sales and acknowledged that SmithKline has not yet solved its strategic problem of excessive dependency on its anti-ulcer drug Tagamet.

SmithKline, the nation’s eighth-largest drug company, has been striving to restore investor confidence due to declining sales of Tagamet.

Last year, Tagamet sales, which account for half of SmithKline’s total drug sales, dropped to $1.02 billion from $1.13 billion in 1987. In the United States, Tagamet sales fell 24.4% to $499 million.

The company has been a persistently rumored takeover target since it first announced a drop in Tagamet sales last June.

Last week, President George Ebright resigned over differences regarding the future direction of the company, and some analysts said Ebright balked at Wendt’s plans to give greater autonomy to the company’s individual divisions.

The resignation sparked speculation that SmithKline could be sold or would be forced to spin off additional units.

PaineWebber analyst Ron Nordmann said after Thursday’s meeting that “management has held its plan for the future close to the vest,” but added that investors should be reasonably reassured that the company’s business is basically solid.

But Neil Sweig, of Prudential Bache, said the meeting held no surprises, and added: “Fundamentally the company in 1989 is weak and the stock will be significantly weakened.”

SmithKline’s rise and fall have been closely tied to Tagamet. For a number of years after it was introduced in 1976, Tagamet was the biggest-selling prescription drug of all time and vaulted SmithKline into a multibillion-dollar company.

However, with other drug companies making inroads into the lucrative anti-ulcer market, SmithKline has been scrambling, without success, to find another blockbuster drug.

John Chappell, president of Smith Kline & French Laboratories, SmithKline’s drug division, said Thursday that new strategies for Tagamet include expanding its usage to non-ulcer ailments like heartburn. He also said the company would move aggressively to win regulatory approval for an over-the-counter form of Tagamet before its patent expires in 1994.

SmithKline has already taken several steps to address its problems apart from the partial sale of Beckman Instruments, including sharply reducing its headquarters staff, eliminating 1,600 positions company-wide and taking a $292.6-million charge against its third-quarter earnings for restructuring.

Last year, the company earned $229.2 million, including the third-quarter restructuring charge, compared to $570.1 million earned in 1987. Sales rose to $4.75 billion from $4.33 billion.

Times staff writer Michael Flagg in Orange County contributed to this report.