Adams Not Phlegmatic About Growth, Will Hawk Mr. Mucus Overseas in 2007

Adams Respiratory Therapeutics plans to expand into international sales through partnerships in fiscal 2007, according to an Aug. 24 analysts call.

Adams president and CEO Mike Valentino said the company is exploring opportunities for growth, including expanding the Mucinex business outside the United States.

"Up until this point we have not pursued this strategy because we have been so focused on establishing our U.S. business first," he said. It is more likely, "we would pursue this through a partnering strategy instead of building a U.S. infrastructure," he added.

"In fact, we've already been approached by several large companies interested in possibly partnering with us," he said.

Valentino said the market expansion for Mucinex would primarily be in Japan, South America, Europe and Canada.

"The regulatory picture is different of course, because we need to work with the various governments involved to get this into the market," he said.

However, the company already has 60 patents outside the U.S. "paving the way for that," he added.

Valentino also said the company would, "prefer to supply the products to a partner and let a partner who is fully geared up in the targeted markets get behind this product." Valentino added he "wouldn't rule out" a second tier company as opposed to a top tier company.

"At this stage, everything is open" he said.

Other fiscal 2007 plans include conducting a $70 mil. consumer advertising campaign.

The plan includes about $50 mil. to support "the core Mucinex brand, including the new Children's Mucinex line and approximately $20 mil. to support the newly acquired Delsym brand," the company said.

Valentino said consumers can expect to see an "aggressive marketing campaign supporting Delsym this fall."

Adams acquired the Delsym (dextromethorphan polistirex) brand, the only FDA approved OTC 12-hour cough suppressant, in May for $122 mil. (¹ (Also see "Adams Expands OTC Cough Market Presence With Delsym Acquisition" - Pink Sheet, 29 May, 2006.) p. 5).

Adams also expects to spend between $30 mil. and $35 mil. for product development projects. This includes spending in the range of $10 mil. to $15 mil. related to the U.S. development of prescription mucoregulator compound erdosteine, the firm said.

Adams also plans to spend about $20 mil. on other development projects, "including line extensions and products utilizing the company's patent-protected oral solid extended-release guaifenesin platform technology in combination with other respiratory ingredients."

Adams announced in April it would file an NDA before the end of the year for a product combining its extended-release guaifenesin with another respiratory ingredient, ² (Also see "Adams Develops New Guaifenesin Products As Mucinex Growth Continues" - Pink Sheet, 10 Apr, 2006.) p. 11).

With regards to fiscal year 2006 ended June 30, net sales increased 49% over 2005 to $239 mil., driven primarily by sales of the core Mucinex franchise.

Total net sales in the 2006 fiscal fourth quarter were $52.8 mil. Net sales of single ingredient Mucinex grew 9% in the quarter over the prior year fourth quarter, to $29.2 mil., Adams said.

Net income for fiscal 2006 increased nearly 59% from the prior year to $46 mil.

Net income for the fourth quarter ended June 30 increased approximately 47% to $6.35 mil.

Valentino also said the company expanded its annual production capacity to approximately $400 mil. by the end of the fourth quarter, "on the heels of our largest-ever production in the March quarter."

He said the company expects "production capacity to exceed $450 mil. by early in calendar year 2007, following the completion of capital projects already underway at the Fort Worth, Texas facility, and including the contract granulation capacity from Cardinal Health."

- Rebekah Moan