John and A.J.: For a few years CNXS was engaged in a patent battle with Acutek, a private company that claimed a patent on a somewhat similar product. A few months ago they settled their dispute, with the terms essentially being to call off the lawyers, and let each company sell products based on their own patents. As you would expect, CNXS feels that the Acutek design is inferior, but I am agnostic on that point, not yet having seen one myself.
Acutek has worked out a deal with Schering Plough to bring out a product called "Afrin Clear Passage", or some name like that, and it should make its first appearance on store shelves within the next month or two, priced about the same as BRNS.
Although usually the existence of a competitive product would be a negative, I don't think that will be the case here. The main reason is that BRNS is an incredibly profitable product for the retailers. The big boxes (30 count for the classic opaque BRNS and 24 for the somewhat less stupid looking "Near Clear" version) lists for $11.99, but major chains in my area like CVS and Walgreens sell it for between $12.99 and $13.69 and I've seen it at local pharmacies for a buck or so more. BRNS is one of the largest selling products in its category, so the retailer is getting both volume and margin from it. They love it, and will not take away an inch of shelf space from BRNS to make room for the Afrin product. Something else will be elbowed aside.
In addition, the great profitability of the product to the retailers means that if someone came along and tried to interest them in a product that would do the same job only at a much lower price, the chains' buyers would kick them out of the office in record time.
Schering typically spends a lot on advertising when it introduces a new product. What I believe may happen is that advertising of the Afrin product may bring new buyers into the store, but when they get there, who will have all the shelf space? CNXS.
In addition the Afrin product is being positioned for relief of stuffed up noses from a cold or flu, whereas CNXS is increasingly going after the snoring market, a much better market because satisfied users will need 365 strips per year, not just a dozen or two.
The only other product that the company has that looks like much to me is Banish, a spray to get rid of the smell of tobacco smoke on your hair and clothing. I got a bottle and gave it to some smokers I know and they all reported that it works as advertised. It will only be a successful product, IMO, when it can get distribution in convenience stores and smoke shops. CNXS's distributional strength, unfortunately, is in health and beauty aid chains, where the product is too hard to find. The company is working to correct that weakness. |
