"But the lead author of the Cleveland Clinic zinc study, Dr. Michael
Macknin, warns that testimonials ``approach being worthless,'' when it comes to a
self-limited illness like the cold, where symptoms are remarkably subjective and can
resolve by themselves after a day"."
Cure for the Common Cold? As Quigley shares soar, questions arise about medical studies,
shady associates
Bill Alpert
ith much of America covered in snow and seemingly half the folks in the
Northeast sniffling on these blustery winter days, it may be appropriate that one of
the hottest stocks trading on the NASD's bulletin board is Quigley Corp., a little
outfit that offers a cure for the common cold. In just the past seven months, Quigley
shares have risen from 62 cents to as high as $37, making for a gain of nearly
6,000%. Almost half of that gain came in the past week, giving the tiny
Doylestown, Pa., company a market value of about $250 million.
Quigley's shares began to surge last summer after the company's product, a zinc
lozenge called Cold-Eeze, was found to shorten the duration of cold symptoms by
42% for patients who took it. Those findings, in a study performed by the
Cleveland Clinic Foundation in Ohio, were followed by laudatory stories on Good
Morning America and CNN, as well as in USA Today and a host of local
newspapers.
The ensuing demand from the nation's sneezers has been phenomenal. Walgreen's
and Revco have ordered millions of dollars' worth of Quigley's lozenges, and for
the most part they are being forced to wait while Quigley ramps up production.
The gush of orders is a long-awaited tonic for Quigley, which for the fiscal year
ended September posted a loss of $694,000 on revenues of $1.05 million. And
even those scanty sales were a leap above the previous year, in which Quigley
reported a loss of $150,000 on revenues of $502,000.
As you might expect, Quigley's ``breakthrough'' has inspired considerable
controversy. Noted common-cold researchers question the validity of the
Cleveland study, as well as a study done several years earlier at Dartmouth
College. Investors who sold Quigley shares short, noting that a considerable
number of people connected to Quigley have less-than-pristine Wall Street
histories, have been clobbered. Yet Barron's research indicates that a chilling
number of those involved in boosting Quigley shares have been censured, barred or
jailed by securities authorities for stock fraud.
The more jaded of Quigley's backers argue that it matters not that the company's
science or its associations may be questionable. The fact is, the public right now is
beating down the doors to get Quigley's zinc lozenges, and that can't help but send
Quigley's profits skyward.
Whatever Quigley's zinc pills have done for cold sufferers, they have made a happy
man of the company's founder, one Guy Quigley. His shares in the company are
now valued at about $40 million. Quigley had one of his first entrepreneurial
adventures in the 1970s in Northern Rhodesia, now known as Zambia. Quigley
says he helped black herdsmen market their beef, gaining them a bigger share of a
market that was dominated by white ranchers.
When revolution drove him to seek safety in the U.S., Quigley says he then became
the first to import ``resemblance perfumes,'' the highfalutin' term for
reasonably-priced knockoffs of famous fragrances. In 1989, he started Quigley
Corp., with the goal of marketing health-food snacks called GQ Alpha I nutri-bars.
He hired as his operations chief Chuck Phillips, a one-time gemcutter who had also
spent several years in Africa until civil war forced him back to the States.
But the young company learned that profits, and even sales for that matter, were
hard to come by. Despite endorsements by paid advisers like Benihana
Restaurants' founder Rocky Aoki, NFL veteran Joe Klecko and the world's best
``one-club'' golfer (who broke par with only a 5 iron), Quigley's sales were just
$36,000 as recently as the year ended September 1993. The firm lost $220,000.
``We were up against stiff competition that we couldn't override,'' says Quigley.
``We didn't have the advertising dollars.''
The company had hardly any dollars. The two men drew no salaries, and after a
1991 public offering of 15-cent units, the firm used stock, stock options and
warrants to pay for advertising, legal services, rent and sales representation.
But in '92, Quigley cut a licensing deal with some researchers with a patent on zinc
lozenges for treating symptoms of the common cold. Chemist John Godfrey and his
wife, Nancy, had helped conduct a study with 73 people at the Dartmouth College
Health Service. Their report, in a European medical journal, said that by sucking on
the zinc lozenges, cold sufferers ended their symptoms 42% sooner.
The public has gone wild for Guy Quigley's cold
remedy, maybe too wild.
In July 1996, the medical journal Annals of
Internal Medicine published results of
another study of Quigley's zinc remedy, this
one performed at the Cleveland Clinic.
Somewhat larger than the earlier Dartmouth
study, and better controlled, the Cleveland
Clinic research showed the same dramatic
impact on colds, with the zinc takers freed of cold symptoms 42% faster than
placebo takers.
That's when the press whirlwind picked up Quigley, his company and his stock.
Purchase orders have piled up. On Dec. 26, Quigley had $7.5 million of
outstanding purchase orders, according to the firm's 10K report. Just five days
later, purchase orders had topped $11 million, according to a press release in
which the firm predicted December-quarter revenues of $3.9 million and finally
some earnings, to the tune of $1.8 million, or 30 cents a share.
As Quigley shares have kept rising, the market makers who've shorted them have
been sledgehammered. One of the biggest hammerers was Jerry Rosen, an
Aventura, Fla., trader for a Los Angeles firm, J. Alexander. An aggressive buyer of
the shares, Rosen frequently called traders that he thought were short Quigley,
delivering Wall Street's version of trash talk. ``I hope your cattle die,'' he told a
Texas market maker. ``I hope you get hoof-and-mouth disease!'' Rosen taunted
another short-seller: ``Get everybody you want to start shorting the stock. But
when you start shorting a stock that has a cure for the cold, man, good luck, you're
on your own!''
Personal experience and testimonials can ensure strong demand for
non-prescription remedies like antihistamines or Cold-Eeze, whether or not the
products work. But the lead author of the Cleveland Clinic zinc study, Dr. Michael
Macknin, warns that testimonials ``approach being worthless,'' when it comes to a
self-limited illness like the cold, where symptoms are remarkably subjective and can
resolve by themselves after a day.
Quigley's Internet ,World Wide Web page, to be found at www.quigleyco.com,
says the reported medical studies on Quigley's zinc lozenges completely meet the
stringent criteria of scientific proof of the scientific community. Yet Macknin is less
sure. ``We only studied 100 patients, during a one-month period of time, in one
location, in one institution,'' says Macknin, who chairs the Clinic's pediatrics
department. ``What if the one virus going around the Cleveland Clinic that month
was unusually susceptible to zinc?''
Although half of all colds are caused by a rhinovirus, over 200 different viruses can
bring on a cold. Unlike other cold studies, the Cleveland trial didn't test subjects to
identify viruses, nor did it measure improvement objectively, by weighing tissues,
for instance.
That said, Macknin says his statistical analysis shows that odds are less than one in
1,000 that the large reduction in cold symptoms of his zinc recipients resulted from
chance and not the zinc. Macknin was surprised at such strong results, because a
series of earlier zinc studies had found that zinc had no effect on colds.
The leader of the most rigorous of those studies was Dr. Jack Gwaltney, head of
epidemiology and virology at the University of Virginia Health Sciences Center.
And Gwaltney has major criticisms of the Cleveland study's design. Gwaltney
doubts the Cleveland subjects were successfully kept in the dark as to whether they
got the zinc lozenge or a calcium lactate placebo. Unlike earlier zinc studies, the
Cleveland researchers didn't do pilot studies to ensure their placebo seemed similar
to the real zinc lozenges. Indeed, Macknin's team reported that their placebo tasted
less astringent and bitter than the zinc product, and had less of an aftertaste. The
placebo group also lodged significantly fewer reports of nausea and bad taste.
Zinc patients who saw through the masking might report that they felt better, even if
objective measures would have showed otherwise. Dr. Robert Betts, a cold
researcher at the University of Rochester, notes that a profound ``placebo effect''
led patients in other studies who thought they'd gotten Vitamin C to report sharp
improvement in their colds, even though they'd gotten a placebo.
And statistical claims showing 1,000-to-1 odds against getting a result like the
Cleveland study, based on chance alone, notes Gwaltney, don't address the
question of whether the patients saw through the blinding and biased their reports.
Barron's own research into various business associates that have helped Quigley
Corp. in the public markets also raises questions of chance association. Guy
Quigley concedes meeting with Raphael D. Bloom, a disbarred stockbroker who
already had a 20-year history of disciplinary sanctions before he was convicted in
1989 of mail fraud, stock fraud and perjury for manipulating the stock of a car
dealership, along with a Chicago organized crime figure, Sam Sarcinelli. Quigley
says that Bloom introduced Quigley Corp. to a firm Quigley hired as its financial
and public-relations adviser, a Florida outfit called Diversified Corporate
Consulting Group.
``Bloom never received one penny from us,'' says Quigley, an answer that's echoed
by Bloom himself from the office near Wall Street where he now works as a
financial consultant and the operator of an employment agency.
Diversified Corporate Consulting, however, is interesting in its own right, because
its managing member was William A. Calvo III, a securities lawyer disbarred in
Florida, New York and the federal courts after the SEC won a suit charging him
with aiding and abetting a scheme that employed sham loans to complete a stock
offering. Calvo also did securities lawyering for the convicted swindler James
Anthony Laiacona.
For Quigley, Calvo's firm recruited the financial public-relations firm Carousel
Consultants, of Kingston, N.Y. Carousel is staffed by a former stockbroker,
Joseph Radcliffe, and his son Michael. After a career at notorious brokerage firms
like Blinder Robinson, Greentree Securities and Prestige Investors-where he
partnered up with raging Quigley bull trader Jerry Rosen - Joe Radcliffe started a
public company called Madison Sports & Entertainment. Madison earned
attention, but never profits, claiming interests in snowboard companies and boxing.
Now, Madison's stock is one of a dozen whose trading is the subject of a federal
grand jury inquiry in South Florida.
For some reason, Pennsylvania-based Quigley has used as its outside auditor
Nachum Blumenfrucht, of East 22nd St., Brooklyn, N.Y. Blumenfrucht was the
auditor for the notorious stock promoter Phil Abramo.
Quigley Corp.'s securities lawyer in its first years as a public company was Abramo
securities lawyer, Barbara R. Mittman, who practiced with now banned lawyer
Edward Grushko, well known by regulators for his work with Calvo client
Laiacona, as well as convicted stock swindlers like Thomas Quinn, Arnold Kimmes
and Benjamin Sprecher.
Quigley denies he knew of these people's records when he fell in with them, and he
adds that he's dropped Diversified and Carousel.
With Quigley shares trading around $31 on Friday, short-sellers were complaining
that the stock was being squeezed higher by bullish market-makers who were
refusing to let short-sellers buy shares to cover their losses.
But don't expect Quigley's stock to levitate forever. On Friday morning the Miami
office of the SEC sent out letters asking market-makers for all their records on
trading in Quigley shares.
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