News of the Week departure for the company as it has been built and run by Hammer for 33 years. The restructuring will focus the company clearly on its primary oil, gas, and chemicals businesses. Together, they accounted for about 39% of sales and 83% of earnings in 1989. With 1989 chemical sales of more than $5 billion, Occidental ranked seventh on C&EN's list of top 100 chemical producers. Chemicals are by far the largest contributor to earnings, growing 228% over two years to more than $1 billion in 1989. The restructuring also aims to reduce long-term debt by at least $3 billion, and to improve the company's financial liquidity and cash flow by $600 million per year. The p l a n n e d 40% reduction in debt should save the company about $275 million in interest payments. The company's net income, which was $285 million in 1989, is expected to increase by about $200 million per year. To reduce its nearly $8 billion long-term debt, Occidental will sell off several nonstrategic assets. The company considers as a prime target its 51% interest in IBP, a $9.1 billion beef and pork processing company with 1989 earnings of $79 million. Exiting several unprofitable businesses—some of them often considered pet projects of Armand Hammer—also is expected to reduce costs and continuing losses. These include interests in a Chinese joint venture in the An Tai Bao coal mine, the Tengiz petrochemical project in the Soviet Union, oil shale R&D, cattle and horse breeding, land and hotel development, film production, and hybrid seed R&D. These changes, along with provisions for environmental costs, severance pay, and write-downs of certain overvalued oil and gas properties a n d idle coal m i n e s , will necessitate a $2 billion charge against fourth-quarter earnings. Although the company says it is committed to "maintaining a substantial presence" in its core businesses, it also indicates that certain assets may have to be sold to reach debt-reduction goals. In addition, Occidental is slashing 6
January 2 1 , 1991 C&EN
Irani: reshaping the firm its annual dividend rate to $1.00 per share. In 1989, it paid a dividend of $2.50 per share, well above its reported $1.03 earnings per share. The change should save at least $400 million. The new annual dividend is based on a policy that earnings will comfortably exceed the dividend—a target dividend being 50% of earnings per share. Stock analysts view the restructuring favorably. The announcement caused Occidental's stock price to rise slightly and to be among the most actively traded on the New York Stock Exchange. Standard & Poor's, the New York City-based credit-rating agency, upgraded its rating of the corporation's debt. Ann Thayer
FDA cuts drag review time nearly 5 months The Food & Drug Administration has achieved the shortest average review time for new drugs in a decade, according to a new report by the Pharmaceutical Manufacturers Association. FDA required an average review time of 27.7 months for new drugs that were approved in 1990, 4.8 months less than in 1989. Of 23 new chemical entities cleared by the agency in 1990, three were approved within 12 months and six were approved within 15 months of
having had a new drug application (NDA) submitted. According to PMA, one reason for the improvement in review time is increased use of computer-assisted NDAs. FDA's objective is for all NDAs to include an electronic submission by 1995. Six of the new drugs approved this year involved data submitted electronically. In addition, FDA has been making greater use of "NDA days"— face-to-face meetings of FDA review officials and drug company representatives to reduce review time for specific drugs. Two of the new drugs approved this year involved NDA days. F u r t h e r m o r e , PMA p o i n t s to FDA's success in increasing recruitment and retention of high-quality drug reviewers. The medical review staff at FDA has increased 35% in the past two years. However, despite the improved review time last year, the statutory standard is six-months. Thus, PMA says, further improvement in the time to review and approve new medicines is still needed. PMA is particularly concerned that only one genetically engineered drug was approved in 1990, bringing the total to 12. "FDA's current approval pace of these i m p o r t a n t b i o t e c h n o l o g y drugs clearly is not sufficient to avoid a monumental bottleneck in approvals over the next few years," says PMA president Gerald J. Mossinghoff. PMA predicts U.S. pharmaceutical companies will invest $9.2 billion in R&D in 1991, a 14% increase over their 1990 expenditures. Pharmaceutical R&D grew 11% in 1990 from the previous year. "This phenomenal growth comes at a time when other industries are reducing R&D expenditures," says Mossinghoff. According to a Battelle Institute study, U.S. industry as a whole will spend $75.9 billion of its own funds for R&D this year, only 2.2% more than in 1990. The latest data show that it now takes an average of 12 years to discover and develop a new drug, at an average cost of $231 million. Only about one of every 4000 compounds synthesized and tested in the laboratory becomes a marketable product. Stu Borman
