Master of the Pill

One of the most dramatic new products to appear in recent years has been the oral contraceptive. First marketed five years ago, "the pill" is now made by seven U.S. companies under such trade names as Enovid (the first oral contraceptive, made by G. D. Searle & Co.), Norlestrin (Parke, Davis & Co.), and C-Quens (Eli Lilly & Co.). Sales of all oral contraceptives in the U.S., which were $46 million in 1964, rose to about $65 million in 1965 and are expected to hit $90 million this year.

Of all the drug companies making the pill, the most spectacular is a small firm that is both very profitable and much misunderstood: Syntex Corp. Syntex's common stock, which is being split two-for-one this week, is the most heavily traded issue on the American Stock Exchange, in 1965 rose in price more than any other stock on the exchange (from 64 3/8 to 219 5/8). Syntex is incorporated in Panama, operates largely in Mexico and sells mostly in the U.S. It is a leader in the field of steroid hormones, which includes the birth-control pills and is one of the fastest-growing segments of the drug industry.

From the Yam. Syntex's own oral contraceptive, Norinyl, holds a relatively small share of the market, but Syntex also supplies the pill's basic compound to three other major pill makers: Eli Lilly, Johnson & Johnson, and Parke, Davis. Though the pill has made Syntex famous, 59% of the company's sales and half its profits come from other drug products. These include other hormones used to treat skin inflammations and the ingredients of cortisone, a major drug for treatment of arthritic diseases.

The pill's hormones are derived mostly from a chemical called diosgenin, which until 1945 was obtainable only in small quantities from tropical plants. Then Dr. George Rosenkranz, at that time a Syntex research chemist, found that the Mexican yam, or barbasco root, yielded much larger amounts of diosgenin. In 1951 Syntex's Dr. Carl Djerassi first synthesized from it female sex hormones that women could swallow. Later it was discovered that the hormones were effective as an oral contraceptive. Syntex then began selling the compound to other drug firms, later introduced its own pill. Both Syntex and Searle now obtain their diosgenin from Mexican yams, which grow wild in the jungles. Rosenkranz, now Syntex's president, has continued the company's research in hormones and nucleic acids, the basic substances of living cells.

Benefiting from Research. Because Syntex's stock has been so volatile, some Wall Streeters have been skeptical of the firm's future once the pill boom lags. But only about 20% of the U.S. women who could use the pills now do so, and most of the overseas market has barely been tapped. Moreover, Syntex's research in hormones and nucleic acids is right where major new-drug discoveries are most likely to come. Even now, Syntex is benefiting from its research. Its earnings in the latest quarter jumped 236% (to $5.9 million) and sales climbed 125% (to $15.1 million) from a year earlier. Syntex expects sales in its current fiscal year, ending next July, to reach $55 million to $60 million, earnings to rise to about $19 million. All this is highly pleasing to its largest stockholders, Investment Bankers Charles and Herbert Allen. They bought 33% of Syntex's stock in 1958 from Ogden Corp., which they then controlled, for about $800,000. They still hold 21%, worth $192 million.

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