Pharmacia & Upjohn


developed a sort of code to simplify matters at its meeting for analysts Thursday in New York. When an executive wanted to tell Wall Street that a drug in the pipeline was going to be a big seller, she would pause dramatically and say, "It's a 'Category C.'" If it was going to be a really, really big drug, it was a "Category D." This raises a question: At all those planning sessions to bring the meeting off perfectly, didn't anyone ever say, "Gee, guys, isn't that kinda backward? So, if it's a flop, it's, what, an 'A-plus'?"

The "new" Pharmacia & Upjohn presented itself Thursday as vital, invigorated and tough -- turned-around and ready to stay that way. Things are so good that no longer does 87% of its own sales force think company morale is "below average" or "one of the worst," as it did in 1997. Now three-quarters think morale is higher than those other guys'.

There's some credence to the nice report card. The company hit earnings targets for last year and will hit them again this quarter, making 42 cents a share, according to Fred Hassan, the aggressive and beloved (at least by the Street) CEO.


, a drug designed to prevent incontinence in the elderly, is dominating its competition so far, as is


, a glaucoma medicine. The company said it was comfortable with an earnings estimate of $1.80 a share for this year, which is 2 cents below the

First Call

number, but what's a penny or two among friends? After the meeting, the stock rose 1 3/8, or 2.4%, to close at 59 1/2 Thursday.

There is a bit of a disconnect, however. As one hedge fund manager, who was not involved in the stock, said recently, "It's a third-tier company with a first-rate CEO." Hassan is a former higher-up at

American Home Products


, and he projects the image of vim, even down to invoking the language of war when talking about the lifesaving pharmaceutical business.

The EPS projection will be 14% growth over 1998's $1.58 (before unusual items). That's a nice percentage, but it's not at the top of the class, and the company is coming off a small base. The company last year reported $830 million in net income before unusual items on $6.76 billion in revenue, up from the $739 million it earned on revenue of $6.59 billion the year earlier. It projected high-single-digit top-line growth for 1999.

So, the company is trading at about 33 times earnings. That's 2.4 times its projected earnings growth rate. In the old days, that was expensive. In this era of grade inflation, it's below average for the drug pushers. Analysts who like the stock think it's ripe for multiple expansion. Earnings are rising, goes the refrain, while earnings at other stronger growers, such as




Eli Lilly

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could be vulnerable.

Detrol is the key story for now. The incontinence drug's new prescriptions have been roughly flat since early October, according to a slide the company showed. Two months ago,



entered the market with

Ditropan XL

, but analysts said the competitor hasn't made significant inroads. The challenge is to build the market, and to that end, P&U is pouring money into television ads to persuade the average


user to switch to a pill. The company hopes that competing voices in the market will spur growth in the category. It's happened before, with everything from the statin class, used in lowering cholesterol, to the migraine market, so it should happen again, the company said.


drug analyst Jack Lamberton predicts Detrol will sell $440 million this year, which is a bullish estimate compared with the $125 million in last year's sales, made in around nine months. (Lamberton rates the company a buy, and HSBC has not done any banking for the company.) P&U said the sales in the "Detrol family" worldwide could be "category C or D." Translation: a $500 million-a-year to a more than $750 million-a-year drug. Worldwide. Eventually.

The other nicely growing drug is Xalatan, used to treat glaucoma. That had $332 million in sales last year, compared with $165 million a year earlier. The drug should grow to sell $408 million this year, says Lamberton, as it is launched in Japan. In case you're wondering, it's a "Category D," or expected to have more than $750 million a year in sales.

The company highlighted its emerging pipeline, which has some fancy items. It has a depression drug,


, which it expects to be approved this year in the U.S. Analysts asked a lot of questions about Prolift, but it's a twice-a-day medication and not in the same class as the selective serotonin reuptake inhibitors, like


. The company will soon announce a strong marketing partner with expertise in central nervous system disorders to help sell the drug, it said. Docs and patients like the multibillion-dollar inhibitors, so Prolift only earns a gentleman's "C," or a projection of $500 million to $750 million in annual sales.

The company will file for approval of the first in a new class of antibiotic drugs with a brand name of


this year. The drug is effective against resistant strains of bacteria, which is good for patients, but may mean that doctors hold off on its use to prevent it from losing its power. P&U graded Zyvox and its family a "D," saying it could reach sales of more than $1 billion a year.

All told, Wall Street is no longer giving the company an "F."