This Dazzling Performer May Do An Encore

Investors are constantly scouting for undiscovered "wonder stocks" that ultimately soar to great heights -- something like Ivax, the fast-growing health care company whose stock has zoomed from 6 to 45 in just a year. BUSINESS WEEK reported in June, 1990, that Ivax, then at 11, was favored by some daring pros. Now that Ivax has rocketed sevenfold in so short a time, is it all over for the stock? Far from it, say some money managers who have been accumulating shares. For openers, it will split 3-for-2 on or about Nov. 15. That will broaden its appeal for small investors and trigger more buying, says one New York money manager.

More important is the commitment of Chairman and CEO Phil Frost to expand Ivax, whose market cap has swelled to $1.7 billion, into a fully integrated global pharmaceutical company focusing mainly on generic drugs. He and his management team came from Key Pharmaceuticals, which they built up and then sold in 1986 to Schering-Plough for more than $800 million.

Veteran health care analyst Ron Nordmann of PaineWebber is high on Frost and his company. He figures that even though Ivax is relatively small, with 1990 worldwide revenues of $142 million, it has in its pipeline new products -- including drugs to treat Alzheimer's disease, AIDS, and rheumatoid arthritis -- that will boost revenues to nearly $1 billion in 1994.

DOUBLE YOUR PLEASURE. And despite its already amazing growth, Nordmann argues that Ivax could be a $100 stock in three years. He estimates that a company that is likely to increase earnings at almost 100% annually starting this year should easily command a price-earnings ratio of 25. He expects the company to earn $1.25 a share in 1992, vs. 40~ in 1991, with $2.50 on the horizon for 1993 and about $4 in 1994.

In line with Frost's plans for Ivax, whispers are that its specialty-chemicals division will soon be spun off to shareholders or sold, perhaps to Union Carbide. Ivax and Carbide already jointly own an Ivax unit in Britain. Ivax's chemical division makes a broad line of products for the aerospace, semiconductor, automotive, and textile industries and is said to be worth more than $100 million. Frost will then concentrate on the other two divisions -- pharmaceuticals, which includes internally developed and licensed drugs, and the Diamedex unit, which makes diagnostic test kits for clinics and laboratories. Frost declined comment on the future of the chemical unit.

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