SMITHKLINE Beecham is well placed to prosper in the more challenging

healthcare environment of the 1990s following a spate of acquisitions

last year. These included DPS, a US pharmacy benefit manager, and

Sterling Healthcare's over-the-counter medicines business.

The company is firmly focused on human healthcare and pharmaceutical

healthcare. It has a good product portfolio both in the prescription

market, and almost as important these days, in the over-the-counter

(OTC) medicine market.

The company exceeded City forecasts with pre-tax profits growth of 9%

to #1271m. A figure close to #1340m is expected for the current year.

Continued strong sales growth in some of the newer products coupled

with expansion of the OTC market and synergies from restructuring will

boost profitability in the years ahead. A one-off provision of #580m has

been made to cover restructuring of the group's supply chain over the

next three years.

Last year, the group's sales rose by 8% to just above #6000m with

acquisitions, in the second half, contributing 3% of the sales growth.

Chief executive Jan Leschly, said it was ''a very succesful year for SB

in financial and strategic terms''.

Sales of new drugs are more than offsetting the decline in the sales

of anti-ulcer treatment Tagamet since it came off patent in the US in

May. Tagamet sales have declined by $220m (#138m) in the US alone,

replaced by cheaper generic competition.

Since 1990, total new product sales of drugs such as the

anti-depressant Seroxat and the arthritis drug Relafen, has risen from

#17m to #811m with further strong future growth potential. The main

impact of Tagamet's patent expiry is expected to come through in

mid-1995.

The research and development of innovative products is crucial these

days if healthcare companies are to try to resist downward pressure on

their margins. SmithKline increased its R&D spend last year by almost

10% to #621m.

The company is well placed both internally and through its links with

external programmes, in areas such as biotechnology, to discover

potentially lucrative new chemical compounds.

The group's shopping spree last year inevitably put a strain on the

balance sheet with gearing at the year-end of 206%.

The sale of its animal health business for #927m will reduce gearing

to 99% but little further improvement is expected in 1995. However, no

more large acquisitions are envisaged within the next two years.

Interest cover was 24 times last year and is expected to drop to a still

healthy 10% in 1995.

SmithKline is high on the list of brokers' share recommendations

despite the fact that the stock outperformed its major UK pharmaceutical

rivals last year. Yesterday, the shares jumped 18p to 497p.