JMED from Barron's 6/7/99: Jones Prescribes A Payout Increase(yes, extremely positive, thanks cog)
By SHIRLEY A. LAZO
The pharmaceutical industry, by and large, has a healthy long-term track record of earnings growth. That goes, too, for Jones Pharma, which doesn't manufacture drugs of the blockbuster variety, but instead offers a line of niche-oriented, specialty prescription medicines. Formerly known as Jones Medical Industries, Jones Pharma, founded in 1981, has an uninterrupted 17-year history of record sales and profits. It's also cash-rich and debt-free. Dividends were initiated in 1989, and on Tuesday Jones boosted its quarterly common payout for the 10th year in a row.
The new payout will be 3.5 cents a share, up from three cents. Disbursement is slated for July 1 to investors of record June 15. Chairman and CEO Dennis M. Jones commented that "it is gratifying to be able to continue rewarding our shareholders with quarterly cash dividends as the company continues to prosper and grow. Our cash dividend sets us apart from our peer group as the only company that pays a dividend. I believe this is reflective of Jones Pharma's appreciation for its shareholders." Institutions own around 60% of the roughly 28 million common shares outstanding. The stock split 2-for-1 in 1991 and 3-for-2 twice in 1996.
St. Louis-based Jones' strategy has been to build a portfolio of growing products via the acquisition of under-promoted, FDA-approved pharmaceuticals from other drug makers. That allows Jones to minimize the risks associated with new-drug development and the lengthy and costly FDA approval process. Some 60% of sales come from products Jones manufactures itself, with the remainder produced for the company by third parties.
Endocrine pharmaceuticals made up 56% or so of Jones' 1998 sales. Key products include Levoxyl, Tapazole, Cytomel and Triostat -- all for treating various thyroid disorders. Jones bought the latter pair of drugs from SmithKline Beecham two years ago for $22.8 million in cash. Triostat is being studied for additional use with organ transplants and cardiac procedures.
The second-largest product category, accounting for around 35% of sales, is critical-care pharmaceuticals. The main labels here are Thrombin-JMI, a topical hemostat used to stop bleeding during surgery, and Brevital Sodium, an intravenous anesthetic for both major and minor surgery. By the way, Jones is expected to be the sole supplier of therapeutic thrombin sometime next year; right now, it's obligated by contract to supply the drug to Johnson & Johnson through most of 2000. Veterinary drugs comprise the balance of Jones' product roster.
Overall sales this year are estimated to climb around 25% from 1998's $103 million. As for profits, analysts, according to a canvassing by First Call, think Jones will earn in the neighborhood of $1.45 a share this year and $1.74 next, versus 1998's $1.16.
Traded on Nasdaq, Jones shares change hands in the neighborhood of their final 1998 price of 36 1/2, which was 4.6% below their year-earlier level. BancBoston Robertson Stephens managing director and senior pharmaceutical analyst Donald Ellis recently reiterated his "buy" rating on Jones and his 12-month $54 price target, mainly because of a shortage of topical thrombin.
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