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FOUNTAIN PHARMACEUTICALS PLANS TO MARKET DERMATOLOGICAL LINE VIA RETAIL OUTLETS

This article was originally published in The Tan Sheet

Executive Summary

FOUNTAIN PHARMACEUTICALS PLANS TO MARKET DERMATOLOGICAL LINE VIA RETAIL OUTLETS beginning in April in a departure from the liposome R&D firm's previous business focus. The skin care line is formulated using Fountain's Lyphazome Solvent Dilution Microcarriers (SDMC) technology and includes Daylong Penetrating Sunscreen, available in SPF 8 and 20, Lyphazome Penetrating Moisturizer and Lyphazome High Concentration Moisturizer. Previously, Fountain had sold the products through telephone orders generated by magazine advertising. In addition, Fountain has marketed a line of sunscreens and moisturizers under the name Octazome through the Neiman Marcus department store chain. The line currently is available at five Neiman Marcus stores: two in Florida, two in California and one in Arizona. Based in Largo, Fla., Fountain Pharmaceuticals has developed a number of topical drug delivery systems and encapsulation technologies with the intention of outlicensing its technology for use in prescription and OTC products. However, the company's efforts to find R&D and marketing partners has been unsuccessful to date. In a recent prospectus, Fountain reported that it has conducted several first-phase R&D tests for prospective partners with "mixed" results and that "no second phase arrangements have yet materialized." In addition, uncertainty over the patentability of the company's technology also has hindered outlicensing efforts. "A company can retain stronger control over its destiny when it can develop, distribute and promote its own products under its own label," noted Fountain President and CEO John Walsh, a 22-year veteran at Merck who took over the helm of the liposome R&D firm in July. The stock offering presumes the exercise of outstanding warrants issued in earlier private placement transactions. If warrants are exercised, the proceeds of the offering will go toward "further product development and commercialization efforts, additional scientific research relative to applications of the company's technology, preclinical and clinical testing programs, manufacturing and marketing of the company's SDMCs formulations and products which incorporate these formulations, and for general corporate purposes," the prospectus states. During fiscal year 1992 (ended Sept. 30), Fountain reported revenues of $ 263,244 from product sales and $ 137,500 from third party R&D contracts but showed a net loss of $ 3.2 mil. The company had over $ 3.5 mil. in cash and securities at the end of 1992.

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