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Biotech / Medical : RXSD Rexall Sundown
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To: thegifman who wrote (288)8/9/1999 6:15:00 PM
From: RWReeves  Read Replies (1) of 327
 
You raise an interesting explanation for the price decline.

All new products have dramatic price decreases as supply increases and the novelty wears off. St. John's is no different from Melatonin, or any of the other new fads. I recall some years ago it was Witch Hazel for migraines. But last time I looked there are several hundred "nutriceuticals", vitamin and dietary supplements and the margins on these are pretty high, down from astronomical. For example, Centrum is a huge cash cow brand for Lederle.

You might also look at PURW, which is the largest US wholesale manaufacturer of nutriceuticals and dietary supplements. Also trading at a modest P/E given it's growth, it's stock price has remained relatively strong during the decline in RXSD. I would expect to see similar drops if a margin squeeze were really underway.

I think the real competition was expected to come from chain store house brands. Even still you see people very, very loyal to brands they are familiar with. In the health and beauty aids group, you generally see tiny conversion from even the most aggressive promotions and sampling.

In summary I believe RXSD has a franchise and a very valuable one to a suitor. I don't mind holding this company at all, even during downdrafts.

I think you may be right about the Cellulite claims being an FTC issue if there are no therapeutic benefits claimed. IMO RXSD got overblown as an internet play and on the strength of the Cellulite product, but this died down as quickly as it came- clearly a fad. I was pleased to sell about half my long term RXSD at 18-20 for short term gains and buy it back at 12-14.

RWR
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