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JONES MEDICAL BRANCHES INTO OTC/VITAMIN BUSINESS WITH PURCHASE OF BRONSON

This article was originally published in The Tan Sheet

Executive Summary

JONES MEDICAL BRANCHES INTO OTC/VITAMIN BUSINESS WITH PURCHASE OF BRONSON Pharmaceutical, a La Canada, Calif.-based direct response marketer, for $ 10.5 mil. A 33-year-old privately held catalog business, Bronson's OTC and nutritional product line generated sales of $ 15.4 mil. in 1992, up over 10% from 1991. The deal closed on March 24. Bronson markets a line of 150 products to a network of 400,000 customers by catalog. To a lesser extent, the company also sells its product line through retail outlets, primarily health food stores. Bronson's product line includes a broad array of supplements with differing nutritional components targeted at different age and gender groups. The company markets a men's formula line, a women's formula line, a prenatal line, a pediatric line, and a geriatric line, as well as single ingredient vitamins and minerals. In addition, Bronson's catalogs include amino acid products, fiber products, cosmetics, pet products and a personal care line. The company's OTCs are sold as essentially private label equivalents to different name brand products. Bronson Pharmaceuticals will continue as a free-standing, wholly owned subsidiary of its new parent. Bronson's management team of CEO Michael Irwin and President Raymond Hensley are expected to remain with the company following the merger, Jones Medical said. In a March 22 press release announcing the deal, Jones Medical noted that the merger will provide some opportunities for improved efficiencies in the area of manufacturing. The company pointed out that it "has the capability to manufacture the majority of Bronson's products which will greatly enhance gross margins." Bronson does not manufacture any of its products. Founded in 1981, St. Louis-based Jones Medical has pursued an acquisition strategy that has focused on niche prescription and ethical products targeted primarily at the hospital and medical specialty markets. Bronson Pharmaceuticals is Jones Medical's eleventh acquisition in 12 years and the company's second in 1993. In February, JMED announced the acquisition of the Derma System professional skin care line from Tsumura Medical ("The Tan Sheet" March 8, p. 12). Sales of the Derma System products have exceeded $ 2.4 mil annually for several years with 75% gross margin, Jones Medical said. The two 1993 acquisitions indicate a move toward a more consumer-oriented product line. Prior to 1993, the company's only consumer product line was MD Pharmaceutical, a vitamin line marketed solely to military commissaries. Although the Bronson acquisition brings Jones Medical closer to consumer marketing, the company indicated that it has no current plans to expand this business further into the retail trade. The latest acquisition could push 1993 sales beyond $ 40 mil and 1994 sales to $ 50 mil., Jones Medical predicted. JMED reported 1992 sales of $ 24.1 mil., up 17.3% from the year before, accompanied by a 13.3% increase in net income to $ 3.7 mil. Jones Medical also noted that its ability "to pay cash for a growing profitable company will allow the acquisition of Bronson Pharmaceuticals to be immediately additive to our bottom line."

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