Quigley Corporation Reports Third Quarter Results; Continues To Invest For The Future In Pharmaceutical R&D
DOYLESTOWN, Pa., Oct. 26 /PRNewswire-FirstCall/ -- The Quigley Corporation today reported net sales of $11.5 million, for the third quarter ended September 30, 2006, compared to $15.3 million reported for the same period in 2005. For the nine-months ended September 30, 2006, net sales were $27.9 million compared to $35.9 million reported for the same period in 2005.
Net sales of the Company's Health and Wellness and Cold Remedy segments recorded declines in the third quarter of 2006 as compared to 2005 that averaged approximately $1.8 million each. For the nine-months ended September 30, 2006, the Health and Wellness and Cold Remedy segments recorded declines that averaged approximately $3.1 million each, and $1.7 million for the Contract Manufacturing segment.
Net sales declines for the third quarter and nine months ended September 30, 2006 for the Cold-Remedy segment as compared to the same periods in 2005 reflect sales of new flavors introduced during the third quarter of 2005 and include a continued shift in buying patterns by our customers. Also, weaker consumer purchases commencing January 1, 2006 through the start of the second quarter of 2006 resulted in higher than expected inventories of our customers, thereby affecting the Company's sales for the quarter and nine months ended September 30, 2006.
Despite these factors, IRI scanner data consumer consumption statistics for COLD-EEZE(R) in the Cough/Sore Throat Drop Category of Food, Drug and Mass for the 4 and 12 week periods ending September 10, 2006 (without Wal-Mart data) reflect trends that are up 2.5% and 3.6%, respectively, as compared to the same periods last year. Additionally, consumer consumption statistics for COLD-EEZE in the same category for the 24 week period ending September 10, 2006 (without Wal-Mart data) is down 2%.
The Company believes in the viability of the COLD-EEZE brand among the growing number of consumers who want Natural Common Cold remedies that demonstrate proven clinical efficacy and safety unlike other unproven natural remedies. Additionally, the Company will to continue to implement strategic plans to expand household penetration thereby generating greater market share and to increase sales of COLD-EEZE Cold Remedy products.
Net Sales declines of The Health and Wellness segment reflects the continued reduction in the number of active independent distributor representatives, which directly affects the segment's net sales. The focus for this segment includes continued corrective operating actions necessary to increase the number of active independent distributor representatives. These corrective actions include the Company investing and expanding its markets into Singapore and Taiwan; the recent appointment of a new president for this segment; and the anticipated resolution of litigation with the sponsor of the Company's product line in this segment.
The change in net sales of the Contract Manufacturing segment is attributed to an OTC company that utilized this segment's manufacturing capabilities in 2005 and discontinued its product in the marketplace in 2006, thereby reducing sales for this segment. While the primary purpose of the Contract Manufacturing segment is to manufacture COLD-EEZE, other contract manufacturing is performed for non-related third party entities to compensate for the necessary fixed costs associated with this segment.
Net income for the third quarter ended September 30, 2006 was $1.1 million, or $0.08 per share compared to net income of $3.0 million, or $0.23 per share, for the same period last year. Net loss for the nine-months ended September 30, 2006 was $3.0 million, or ($0.25) per share, compared to net income of $1.1 million, or $0.08 per share, for the same period last year.
The reduction in net profit for the third quarter ended September 30, 2006 is due to lower gross profits from the aforementioned related net sales declines in all operating segments of the Company.
The net loss increase for the nine-months ended September 30, 2006 reflects a reduction in gross profits from the related net sales decline in all operating segments of the Company, particularly the Cold Remedy segment, which has a substantially greater gross profit percentage and dollar margin and fewer fixed and directly variable costs than the other operating segments. In addition, increases in operating expenses for advertising, promotions, costs associated with insurance and legal fees relative to the lawsuits for the Company's discontinued nasal spray products also added to this net loss increase.
Gross profit percentages for the Cold Remedy and Health Wellness segments for 2006 remained relatively unchanged. Also, due to the lost revenues from a major OTC company that utilized the manufacturing abilities of the Contract Manufacturing segment, its gross profit percentage declined. As this segment already has a substantially lower gross profit margin then the other operating segments, reducing profitable manufacturing operations amplifies the inability to absorb the necessary fixed cost relative to manufacturing operations particularly at a time which is not during the cold remedy season, thereby reducing production.
No tax benefits to reduce losses are provided for the quarters and nine months ended September 30, 2006 and 2005, except for any limitations imposed by the federal alternative minimum taxes or for compliance with state tax regulations, since the Company is in a net operating loss carry-forward position.
The Company is committed to continue its research and to develop potential ethical pharmaceutical drugs as part of an ongoing effort to generate future growth to bring current compounds to market, especially development that includes furthering human studies on QR-333, an Investigational New Drug for the treatment of Diabetic Peripheral Neuropathy, thereby capitalizing on the growth potential of Quigley Pharma, a wholly-owned Ethical Pharmaceutical subsidiary.
A redesigned Quigley Pharma web site was recently launched to better inform investors of ongoing research and development efforts, and engage potential strategic pharmaceutical partners by offering information regarding Quigley Pharma's naturally derived compounds.
The following is a summary of major ethical pharmaceutical events that occurred during the third quarter of 2006:
Diabetic Neuropathy -- QR-333: A second patent was granted covering peripheral neural and vascular complaints for Quigley Pharma's Compound QR-333, formulated for Diabetic Neuropathy. This adds another degree of intellectual property support to its lead investigational new drug QR-333.
The Company filed the patent application based upon observations that subjects participating in the Proof of Concept Study conducted in France using the compound had further improvements over and above the existing protocol. A significant observation led the Company to conclude that the topical application of the QR-333 compound may have led to improved peripheral circulation.
Subsequently an immediate data search evaluating the active ingredients indicated that they indeed could have the potential to impact upon the human circulation system as vasodilators. This important new information provided the rationale for the Company to file a separate patent application to protect its intellectual property and allow it to study this further therapeutic benefit.
In addition, the results from its human study, titled "Single Center, Dose Escalating, Safety, Tolerability, And Pharmacokinetics Study Of QR-333 In Subjects With Diabetic Peripheral Neuropathy," demonstrated that QR-333 can be administered safely to patients suffering from diabetic peripheral neuropathy.
Systemic Radiation -- QR-336: Significant data was obtained identifying 50 microliters as the least toxic and most effective radiation protection dose in mice when administered ip (intraperitoneal), po (by mouth) or sc (under the skin) prior to radiation exposure. These experiments were essential for providing the company with data to optimize the formulation for efficacy and route of administration, which is required for filing under the FDA "Animal Efficacy Rule."
The tests were conducted by Dr. William H. McBride, Vice Chair of Research, Department of Oncology at UCLA to help develop an appropriate animal model radio protective research program for QR-336 to comply with New Food and Drug Administration animal efficacy rules for radio-protective pharmacological compounds. QR-336 is a naturally derived radio protective compound designed to address the lethal effects of ionizing radiation.
Avian Flu Compound -- QR-441(a): Quigley Pharma obtained positive results that support its continued progress in developing the natural broad spectrum anti-viral QR-441(a) for use in preventing the spread of avian flu in poultry stocks. The results of the healthy chicken medical feed study confirm that food or water dose forms provide an opportunity for potential commercialization if the compound demonstrates efficacy within these dose forms.
The Company is investigating QR-441(a) as a potential first response agent in safeguarding perimeter zones around a possible Avian Flu outbreak in the United States. The Company plans to conduct challenge studies in chickens infected with avian H5N1 virus. A compound such as QR-441 (a) may provide the poultry industry and government agencies an additional method to safeguard our nation's food supply.
Cachexia Treatment Compound -- QR-443: Positive results were obtained for the QR-443 compound for the treatment of Cachexia, a debilitating and life threatening muscle wasting condition. The results of an animal study found a 75% efficacy rate in the treatment of mice with this condition.
Ocular and Genital Herpes -- QR-444: Studies have been ongoing, evaluating the antiviral efficacy and toxicity of the naturally-derived compound on various viruses causing ocular diseases. The studies are being conducted at The Campbell Ophthalmic Microbiology Laboratory at the University of Pittsburgh. In recently pre-clinical studies, the antiviral formulation demonstrated potent antiviral activity against Ocular and Genital Herpes, indicating a new research and development path for the versatile compound.
The studies were designed to determine the in vitro inhibitory activity of the compound vs. two ocular isolates of Herpes Simplex Virus - 1 (HSV-1) and 2 non-ocular isolates of Herpes Simplex Virus -2 (HSV-2). The pre-clinical studies of this compound demonstrated reproducible antiviral activity against an ocular isolate of HSV-1. It also demonstrated similar activity against a second ocular isolate of HSV-1 and multiple genital isolates of HSV-2.
The Quigley Corporation makes no representation that the US Food and Drug Administration or any other regulatory agency will allow this Investigational New Drug to be marketed. Furthermore, no claim is made that potential medicine discussed herein is safe, effective, or approved by the Food and Drug Administration. Additionally, data that demonstrates activity or effectiveness in animals or in vitro tests do not necessarily mean the formula test compound; referenced herein will be effective in humans. Safety and effectiveness in humans will have to be demonstrated by means of adequate and well-controlled clinical studies before the clinical significance of the formula test compound is known. Readers should carefully review the risk factors described in filings the Company files from time to time with the Securities and Exchange Commission.
About The Quigley Corporation
The Quigley Corporation is a diversified natural health medical science company. Its Cold Remedy segment is a leading marketer and manufacturer of the COLD-EEZE(R) family of lozenges, gums and sugar free tablets clinically proven to cut the common cold nearly in half. COLD-EEZE customers include leading national wholesalers and distributors, as well as independent and chain food, drug and mass merchandise stores and pharmacies. The Quigley Corporation has several wholly owned subsidiaries. Darius International markets health and wellness products through its wholly owned subsidiary, InnerLight Inc. Quigley Manufacturing Inc. consists of two FDA approved facilities to manufacture COLD-EEZE(R) lozenges as well as fulfill other contract manufacturing opportunities. Quigley Pharma Inc. (http://www.QuigleyPharma.com) conducts research in order to develop and commercialize a pipeline of patented botanical and naturally derived prescription drugs.
Certain statements in this press release are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and involve known and unknown risk, uncertainties and other factors that may cause the Company's actual performance or achievements to be materially different from the results, performance or achievements expressed or implied by the forward-looking statement. Factors that impact such forward-looking statements include, among others, changes in worldwide general economic conditions, changes in interest rates, government regulations, and worldwide competition.
CONTACT: George J. Longo Carl Hymans Vice President, CFO G.S. Schwartz & Co. (215) 345-0919 (212) 725-4500 email@example.com Consolidated Statements of Operations (Unaudited) The following represents condensed financial data (in thousands) except per share data: Three-Months Three-Months Nine-Months Nine-Months Ended Ended Ended Ended September 30, September 30, September 30, September 30, 2006 2005 2006 2005 ($) ($) ($) ($) Net Sales 11,481 15,320 27,929 35,917 Gross profit 6,260 8,294 13,882 17,031 Sales & marketing expenses 1,283 1,452 4,796 4,354 Administrative expenses 3,195 2,898 10,001 8,879 Research & development 892 1,030 2,534 2,939 Income taxes (benefit) - - 89 - Net income (loss) 1,079 2,999 (2,994) 1,054 Diluted income (loss) per share: Net income (loss) $0.08 $0.23 ($0.25) $0.08 Diluted weighted average common shares outstanding: 13,242,127 13,316,660 12,163,858 13,285,422 Consolidated Balance Sheets (Unaudited)
The following represents condensed financial data (in thousands) at September 30, 2006 and December 31, 2005:
2006 2005 ($) ($) Cash & cash equivalents 13,597 16,885 Accounts receivable, net 6,701 7,880 Inventory 5,042 3,900 Total current assets 26,208 30,248 Total assets 31,341 35,976 Total current liabilities 7,372 9,566 Long-term debt - 1,036 Total stockholders' equity 23,909 25,320The Quigley Corporation
CONTACT: George J. Longo, Vice President, CFO of The Quigley Corporation,+1-215-345-0919; or Carl Hymans of G.S. Schwartz & Co., +1-212-725-4500,firstname.lastname@example.org