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MOORE MEDICAL DRUG SALES WERE 79.6% OF FIRST HALF 1985 VOLUME

Executive Summary

MOORE MEDICAL DRUG SALES WERE 79.6% OF FIRST HALF 1985 VOLUME, the whslr. reported in a recent preliminary prospectus outlining a 600,000-share common stock offering. Brand name and generic pharmaceuticals, as a percentage of company sales, have increased over 15% since 1980. For the six months ended June 29, drug sales were $55.4 mil., followed by medical and surgical supplies at $10.3 mil., or 14.9% of sales. Total first half sales were $69.6 mil., a 23.6% rise over 1984. Moore's current focus on medical/surgical products (which in 1980 accounted for less than 10% of sales) and pharmaceuticals has been at the expense of the health or $3.8 mil. "In 1981, the company decided to focus on brand name and generic pharmaceuticals and medical and surgical supplies and to de-emphasize non-medical products such as health and beauty aids," Moore explained. "As a result, sales of brand name and generic pharmaceuticals and medical and surgical supplies increased from 73% of net sales in 1980 to 95% of net sales during the six months ended June 29, 1985." Moore's marketing strategy focuses on direct mail, specifically catalogs, and telemarketing to solicit orders. The firm circulates an 80-page catalog to independent and chain drug store customers twice each month, and a 240-page reference catalog to its trade and professional customers three times each year. "The company expects to develop additional catalogs. for other specialized segments of the professional health care market," the prospectus notes. The New Britain, Conn.-based whslr. distributes more than 10,000 items, which include over 1,700 generic pharmaceuticals under its Moore label and Valumed trademark, to approximately 45,000 customer accounts, according to the prospectus. Roughly 50% of the firm's sales are to customers located in the Northeast. The company said that it neither has long-term agreements with any of its 700 suppliers, none of which provides more than 10% of products sold, nor does it have any exclusive rights for a territorial area. Assuming all 600,000 shares are subscribed to, the offering will increase the number of shares outstanding by nearly 29% to 2.7 mil., and raise $9.9 mil., based on the proposed maximum offering price of $16.50 per share. The company indicated that the proceeds would be applied to the reduction of the firm's outstanding bank debt, which is over $13 mil. Last January, the company incurred roughly $5.4 mil. in debt to finance a repurchase of nearly 600,000 shares of its common stock on the open market. The prospectus also notes that Moore Medical, and the company's current and former presidents were three of 21 defendants named in a diversion suit filed by H&BA mfr. Shulton Inc. in New Jersey federal court. "The complaint alleges that certain Shulton employees who had illicit interest in the transaction entered into a fraudulent scheme with such former suppliers in order to enable them to purchase Shulton merchandise at reduced prices by misrepresenting that it was intended for export," the prospectus states. Discovery has not yet commenced.

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