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Info supplied to me by Benchman:
April 5, 1999
Battle looms for Duramed
Marketing new drug now company's focus
Richard Curtis Courier Staff Reporter
The stock market has rapidly tempered the wild enthusiasm it showed for
Duramed Pharmaceuticals Inc. on March 25, the day after the local
drugmaker had earned FDA approval to market its conjugated estrogens
product, Cenestin, as a brand drug.
And that muted zeal has not been lost on Duramed Chairman and CEO Thomas
Arington.
"We got to where we wanted to get for the last 10-and-a-half years,"
Arington said of the FDA approval for Cenestin, which is prescribed for
symptoms of menopause such as hot flashes. "It was well worth the
effort. But we have a lot of work to do. Now we have to launch the
product."
For one day, however, Duramed was the belle of the stock-market ball.
The company's stock opened March 25 at $15.75 per share, more than
double the closing price of $7 per share the day before (the FDA
announcement came late on March 24, after the stock market closed).
During the course of March 25, Duramed shares traded at a volume of
almost 23 million shares, well above the 18 million shares Duramed has
outstanding. Though the listed volume of an over-the-counter stock like
Duramed is double the actual number of shares traded (both the purchase
and sale are counted separately), the volume still meant a net total of
two-thirds of the shares changed hands that day. And the trading volume
was more than 100 times Duramed's average daily volume during the
previous month.
But while Duramed hit a high of $17 per share that day, the stock has
steadily declined since, closing at $9.44 per share five days later.
Local stock brokers say the message is clear.
"There was initial euphoria, but that's been tempered drastically," said
Louis Ginocchio, downtown branch manager at brokerage firm A.G. Edwards
& Sons Inc. "You can see what the market is saying: 'Now Duramed has a
product, but who's going to buy it?' When you're going after a market as
big as conjugated estrogens and a competitor as big as American Home
Products, you're going against tough competition."
American Home Products is the parent company of Wyeth Ayerst
Laboratories, which makes Premarin, the $1.6 billion-a-year leader in
the conjugated estrogens market.
In May 1997, Duramed's stock plunged from $11 to $3 per share after the
FDA decided to not approve Cenestin as a generic equivalent to Premarin,
one of the most widely prescribed drugs in the country.
And Duramed has been losing money. It posted a net loss of $8.9 million
in 1998.
"Now Cenestin will be an alternative to Premarin, not a substitute,"
Ginocchio said. "That means pharmacists won't be able to substitute
Cenestin for Premarin without a prescription from a doctor. While I hope
Duramed succeeds with Cenestin, I think there's going to be great
resistance from physicians to change from a product like Premarin, which
has proven to be safe and effective."
Still, Duramed believes it can hit $100 million in Cenestin sales within
18 months of its launch. Since the FDA approval, Duramed has been busily
beginning that quest.
On March 30, Duramed finalized a marketing agreement with a Dublin,
Ohio-based wholesale drug distributor, Cardinal MarketFORCE, a division
of Cardinal Health Inc., an $18 billion company.
Under terms of the three-year agreement, Duramed will pay Cardinal a set
fee per month to recruit, train and manage a brand sales force for
Cenestin.
"From a financial point of view, the Cardinal agreement gives us control
over the long term. Three years down the road, that will be our sales
force," Arington said.
Meanwhile, Arington said Duramed is readying the launch of a national
advertising campaign for Cenestin. The ad campaign, which Arington
described as a "major-league brand effort," is being created by RAR
Gillespie, an ad agency in Princeton, N.J., which focuses on the
pharmaceutical industry.
Arington said the company fully expects to recover the $4 million in
Cenestin inventory it wrote off after the FDA rejected its generic
application in 1997.
"I like that kind of cost-of goods," Arington said.
Meanwhile, Arington personally jumped into the company's stock market
spotlight early the week of March 29.
"I couldn't begin to tell you how many calls and faxes we've gotten,"
Arington said.
Though he did not provide details, Arington said he exercised 500,000
options he holds "after the price went down" from its March 25 high. Of
the shares Arington optioned, he sold 110,000 shares to cover taxes on
the total option transaction. He still owns about 1.7 million shares.
While Arington is far from cashing out, local investment advisers are
warning clients to approach Duramed with caution.
"The risk hasn't gone away because Duramed got approval for Cenestin,"
said Terry Kelly, a principal with money management firm Osborn & Kelly
Inc. "This company still has to prove it can erase its deficit and
deliver positive earnings.
CRDoug |
