The Quigley Corporation

The Kells Building
621 Shady Retreat Road
Doylestown, Pennsylvania 18901-2071
U.S.A.
Telephone: (267) 880-1100
Fax: (267) 880-1153
Web site: http://www.quigleyco.com

Public Company
Incorporated: 1989
Employees: 59
Sales: $29.4 million (2002)
Stock Exchanges: NASDAQ
Ticker Symbol: QGLY
NAIC: 325411 Medicinal and Botanical Manufacturing

Operating out of Doylestown, Pennsylvania, The Quigley Corporation makes over-the-counter homeopathic remedies. It is best known for its Cold-Eeze product, a zinc gluconate glycine combination that is taken to lessen the duration and severity of the common cold. Cold-Eeze is available in lozenge, tablet, nasal, and sugarless forms. Although there have been several conflicting studies concerning its effectiveness, all of the failed studies, as of 1994, did not utilize the Cold-Eeze patented formula. Cold-Eeze has no less than five positive clinically proven studies to its credit and is now established in the marketplace. In an attempt at diversification, Quigley has become involved in the development of other health and wellness products, through a wholly owned subsidiary based in Utah. In 2001, The Quigley Corporation established a second wholly owned subsidiary called Quigley Pharma Inc. In keeping with the company's quest to remain in the all-natural medication arena, the new research and development company has filed for and been issued several new patents, based on all-natural ingredients. The company has conducted initial double-blind studies, targeting such conditions as diabetic peripheral neuropathy, radiation dermatitis, and influenza. The company is also in the process of filing an NDA with the FDA seeking permission to conduct Phase 111 clinical trials on its diabetic peripheral neuropathy topical application to establish the product as a prescription drug.

1970s Background and Company Origins

The Quigley Corporation was founded by Guy J. Quigley, who was born in Donegal, Ireland in 1941. He originally was involved in the thespian world, following the example of his father, a solo concert violinist, and his mother, an actress who performed on the Dublin and London stages. By college, however, Quigley switched his interest to business. He started a successful double-glazing window company in London, but in 1970 marriage took him to Zambia, Africa (formally Northern Rhodesia) where his wife was the sole heir destined to inherit a 100,000 acre-cattle ranch, founded by her American grandfather. He and his wife ran an adjacent 35,000 acre-spread, where he built the stock up to 10,000 head of cattle. Over the years, the timing proved unfortunate, as an independence movement was in the process of sweeping up neighboring Southern Rhodesia and all the liberation forces where housed in Zambia. Life in the independent Zambia became perilous for Europeans, who made residents of the host country an easy unarmed target. The ongoing liberation war eventually led to the establishment of present-day Zimbabwe. He stayed as long as he could, even making a business venture out of auctioneering and selling real estate of whites eager to flee the country. Quigley, his wife, and at that time their two daughters eventually moved back to London, where they were horrified to discovered that his wife's new stepmother had seized control of his wife's entire inheritance, leaving them only with the money Quigley had earned in cattle profits and deposited in European bank accounts.

With his wife's prompting, since her roots were American, Quigley next moved his family to Doylestown, a suburb of Philadelphia, Pennsylvania. There he launched a business producing resemblances of established French perfumes. When this business was acquired by a Canadian entity Quigley switched gears. In 1989 he formed The Quigley Corporation to become involved in the energy-bar business. What he marketed was an all-natural, easily digestible, high-energy product he named "Quigley's Alpha 1 Nurti-Bar." He and his close associate, Charles A. Phillips, worked out of a basement of a converted church in Doylestown, using second hand furniture. Despite his frugality, Quigley's new business was in a world of stiff competition and was not going anywhere. As he was self financing the entire operation, he managed to take the company public in 1991, selling 3 million shares at 15 cents apiece, netting $405,000. Nevertheless, he was forced him to empty his European accounts and ultimately sell his prized Rolls-Royces. His fortunes, however, would change one day when John Godfrey, an organic chemist who worked for Bristol Labs, Shell and Rorer, paid a visit, claiming he had a cure for the common cold in the form of a homemade zinc lozenge.

Focus on a Cold Remedy in the 1980s

Godfrey's zinc lozenge grew out of the discoveries of a Texan named George Eby, an urban planner by trade, who in 1979 was helping to nurse his daughter through leukemia. In order to keep her strong and able to fend off other illness, Eby fed her an array of vitamins and minerals. According to the lore surround the origins of Cold-Eeze, one night she was coming down with a cold, and because she was too weak to swallow a zinc pill, Eby simply allowed it to dissolve on her tongue. When the cold dissipated by morning, Eby sensed that he had stumbled upon something of importance and despite his lack of expertise in the medical field was able to arrange a clinical trial of zinc gluconate to treat colds. The results indicated that subjects taking zinc overcame their colds 64 percent faster than those who simply took placebos. The controversial results were published in a medical journal in 1984.

Godfrey came across the Eby-inspired zinc study and because his employers showed no interest, he began to devise different recipes in his home laboratory. An early lesson he learned was that too much zinc acted as an emetic and caused vomiting. Another issue was taste. Because of the heavy metallic taste of zinc, even when sweetened, most forms of zinc delivery relied on the common candy sweeteners of sorbitol, mannitol, and citric acid to act as a masking agent. But Godfrey believed that the reason zinc was effective on colds was because its ions bonded with cold virus particles, keeping them from settling in the nasal mucus membranes, and he wondered if the sweeteners might prevent this process. He then conducted an informal study, essentially a party, during which his guests sucked on zinc lozenges, which they spit out for analysis. Godfrey found no traces of zinc, thus verifying his theory. After some trial and effort, he settled on glycine as a proper substitute for candy sweeteners. Glycine was a basic amino acid that accounted for the sweetness found in meat. In 1987 Godfrey patented zinc gluconate glycine. He then mounted a clinical trial at Dartmouth College three years later. The results indicated that when subjects took zinc within a day of coming down with a cold, they exhibited 42 percent less cold symptoms.

Godfrey shared his product and studies with pharmaceutical firms, but they balked when he and his wife insisted on a performance clause, which would have required the company to actually produce a product. Their fear was that pharmaceuticals had an incentive to kill the idea, which threatened the billions of dollars the industry made each year on cold palliatives. There was also one more complication. A prospective manufacturer had to contend not only with Godfrey, who had the rights to the only palatable form of zinc, but also Eby, who held a patent on the use of zinc as a cold remedy.

When Godfrey turned to Quigley, because he basically had nowhere else to turn, he received very little encouragement. Quigley tried Godfrey's homemade zinc lozenges, which he describe as a culinary horror, "tasting like a ball of sawdust." Godfrey also showed Quigley his Dartmouth study, but Quigley said he would only be interested if the results were published somewhere. Godfrey left his office, Quigley forgot about him and his nasty tasting lozenges, but six months later turned up again at his office. This time he said the results of his study were about to be published and he left Quigley and Phillips a stack of documents for the partners to consider. Although neither man had a scientific background, they waded through the material and concluded that Godfrey had something worth pursuing. Because the corporation could not yet afford a lawyer, Quigley drew up a basic agreement for Godfrey to sign, offering a 3 percent royalty and a 2 percent consulting agreement. As for Eby, Quigley was prepared to pay a similar royalty should he ever sue. In time, Eby did sue and eventually settled for a 3 percent royalty.

Company Perspectives:

The Quigley Corporation is a progressive consumer products and ethical pharmaceutical company focused on improving the quality of life by developing and marketing safe and effective diversified natural health drug therapies and over-the-counter (OTC) medications.

Gaining Ground in the 1990s

After Quigley acquired the worldwide manufacturing and distribution rights to the zinc formulation, the company endured several leans years, as it prepared to market its zinc lozenge, which Quigley named and trademarked Cold-Eeze, while continuing to sell a meager number of nutri-bars. The company sent out free samples in hopes of getting free publicity and developing a word-of-mouth following, resulting in a few successes. Rodale Press listed Cold-Eeze in "Age Erasing for Men & Women," and in 1994 McCall's magazine printed Quigley's 800-number as part of an article titled, "How to Not Catch a Cold This Winter." To fuel interest further, as well as generate extra revenue, Quigley decided to price Cold-Eeze at $16.75 for a bag of 30 lozenges. Believing that he needed more scientific backing to properly market Cold-Eeze, Quigley approached the head of pediatrics at the Cleveland Clinic, Dr. Michael Macknin, who agreed to mount a double-blind study for free. In his career he had already disproved one cold cure, an Israeli-made inhaler of warm water vapor. This time, however, Macknin was surprised by the results of his study and became an enthusiastic backer of Cold-Eeze, so much so that in late 1994 he bought shares of stock in Quigley. When he announced the results, published in the Annals of Internal Medicine in July 1996, he was certain to hold up a bag of Cold-Eeze for the CNN crew covering the event. But negative publicity followed three weeks later when it was reported that Dr. Macknin had a financial interest in Quigley, although he maintained that he only purchased Quigley stock after his data had been gathered and that he had told his editors about his stock ownership before the results of the study were published. He then launched a second study of Cold-Eeze in the autumn of 1996.

Nevertheless, Macknin maintained his enthusiasm for the product in January 1997 when ABC's "20/20" program aired a report on the common cold, during which it declared Cold-Eeze to be the only effective product on the market. The "20/20" report only added fuel to a zinc craze that swept the country. Even before the show aired, the price of Quigley stock, which had been selling for less than a dollar six months earlier, soared to $37 a share. (By now, the company also had eased out of the nutri-bar business to focus all of its attention on Cold-Eeze.) With overnight success came problems. According to a Philadelphia Magazine article, "The day after the 20/20 report, however, a Barron's cover story asserted that some of the people involved in promoting Quigley stock were shady at best and mob-linked at worst." The stock fell to the teens. (The company's connections with those people never existed and was attributed to short selling of the stock in excess of one million shares.) Somebody released a damaging press release, on fake Quigley letterhead, and it actually ran on the Bloomberg wires, sending the value of the stock down even farther. "Someone," Guy Quigley warned darkly at the time, "is bent on the destruction of this company."

While the events surrounding Quigley stock were of interest to investors, in particular short-sellers, the general public was so enthused about Cold-Eeze that Quigley was unable to meet the surge in demand that began in the fall of 1996. The company tried to ramp up production but its manufacturers did not possess a metal die to stamp "Q" on each lozenge, as required by the FDA. The stamps, made in Italy, were delayed by weeks, while Quigley accumulated some $12 million in backorders. The shortage of Cold-Eeze spiked even greater interest in the product, as drug stores resorted to maintaining waiting lists and factory shipments were monitored by Internet groups. It was not until the spring of 1997 that Quigley was up to speed on production. But because customers stocked up for the following winter, which turned out to be mild, Quigley now faced a glut of inventory in the market, a situation that adversely impacted the price of its stock. Then, Macknin came out with his second study, this one targeting children, and the results were negative. Quigley disputed the methodology, claiming that a major portion of the subjects suffered from such ailments as asthma, bronchitis, and allergies. The company was kept in the dark during the peer review process, but ultimately the study was published in the Journal of the American Medical Association, in spite of last minute conversations by Quigley's general counsel with the editor of the publication. The company put on file an independent audit of the published study, showing that an overwhelming number of participants were totally ineligible to be in the study in the first place. This document was available upon request from the company.

Diversification in the Mid-1990s

Despite scientific doubt about the efficacy of Cold-Eeze, the product was established enough in the marketplace that other zinc products soon emerged (at least 40 since 1996 according to Quigley). These products, according to Quigley, relied on zinc-acetate, which the company considered to be vastly inferior to its zinc gluconate glycine formulation. The company took one competitor to court, Dynamic Health Products Inc., whose Cold-Rid product was judged to mimic the Cold-Eeze packaging. There was enough legitimate competition that arose, however, to hurt Quigley's zinc franchise. The company began to diversify in two ways. First, it offered different forms of Cold-Eeze: sugar-free, bubblegum, and menthol. More important, Quigley already had taken steps to branch out beyond Cold-Eeze and escape investor criticism that it was just a one-hit wonder. In August 1998, after three years of research and development, the company announced the introduction of Bodymate, a weight-loss lozenge that was supposed to prevent the body from converting food energy into fat. The hope was that Bodymate would generate revenues for Quigley during the spring and summer months, the off-season for Cold-Eeze. Another effort to address the seasonal nature of Cold-Eeze was to expand internationally, in order to sell into southern hemisphere countries that experienced the cold season on an opposite schedule.

In 2000 Quigley formed a subsidiary, Darius International, Inc., to introduce new products into the marketplace, such as Beta-Eeze, a dietary supplement to support a health immune system; Ultra-Eeze, a dietary supplement for bones and joint; Vita-Eeze, a dietary supplement that combined vitamins, minerals, and an anti-oxidant; Ardor, a natural libido enhancer; and Nic-0-Time Gum, a smoking substitute. Today this wholly owned subsidiary has diversified into health and wellness and is a growing successful venture retailing its products through a network marketing system. In 2001, Quigley established its Ethical Pharmaceutical Unit, which was named Quigley Pharma Inc., to expand beyond over-the-counter products and direct marketing and move into the prescription drug market. The company also bought a controlling interest in Caribbean Pacific Natural Products in 2000 and in 2003 had sold its interest in favor of a spin-off as an independent public company with a stock dividend to Quigley Corporation shareholders.

Key Dates:

1989:

The company is founded.

1991:

Quigley is taken public.

1992:

The rights for the zinc lozenge are acquired.

1996:

Positive clinical study results lead to sudden popularity of Cold-Eeze.

2000:

Darius International is formed.

2001:

Quigley Pharma Inc. is formed.

The need for diversification was clear, given the company's financial results. Revenues that totaled $500,000 in 1995 grew to $5 million in 1996 and at the height of the Cold-Eeze craze in 1997 skyrocketed to $70.2 million, with a net profit of nearly $21 million. In 1998, however, sales dropped to $34.3 million and net income to $6.8 million, a drop-off that management attributed to a mild winter, high inventory levels, and the emergence of new herbal cold treatments that cut into business. Revenues fell further in 1999, totaling $21.6 million and resulting in a loss of $4.2 million. Again, heavy competition was the chief reason, with not only herbal sales cutting into business but also, according to management, the sale of ineffective zinc remedies that were discontinued during the course of the year and dumped onto the market.

Outlook for the 21st Century

Revenues continued to erode at a significant rate in 2000, totaling just $15.5 million, leading to a loss of another $5.2 million. In 2001, The Quigley Corporation made progress toward regaining and maintaining profitability as well as launching Quigley Pharma. The financial picture improved somewhat in 2001, as revenues improved to $22.7 million and the company posted a negligible profit of $216,000, due primarily to the addition of sales from Darius and Caribbean Pacific Natural Products (discontinued the following year). Although net sales showed improvement in 2002, totaling $29.4 million, Quigley again posted a net loss of nearly $6.5 million. The poor economy was certainly a factor, but it was likely that the future health of Quigley was very much dependent on its ability to develop and market new over-the-counter homeopathic products that found acceptance with consumers. Nevertheless, zinc cold remedies represented the fastest growing segment in the Cough/Cold over-the-counter category in 2002. Cold-Eeze was restaged in new packaging, and streamlined advertising campaigns as well as new clinical results regarding adolescents helped Cold-Eeze to begin the process of gaining back lost market share. Whether or not sales could approach those in 1997 remained to be seen.

Principal Subsidiaries

Darius International, Inc.; Quigley Pharma Inc.

Principal Competitors

Matrixx Initiatives, Inc.; NutraMax Products, Inc.; Perrigo Company.

Further Reading

Alpert, Bill, "Research Questions Quigley's Miracle Pill—Barrons," Dow Jones Commodities Service, June 27, 1998.

Arroyo, Arnaldo, "Quigley Is Becoming More Than a One-Trick Pony," Equities, March/April 1999, p. 36.

"Cough-Drop Maker Catches Wall Street Chill," St. Louis Post-Dispatch, March 15, 1998, p. E1.

Gifford, Bill, "The Zinc Panther Strikes Again," Philadelphia Magazine, March 3, 1999.

Hollresier, Eric, "Quigley Turns to TV Shopping to Sell Lozenges," Philadelphia Business Journal, April 21, 1995, p. 6B.

—Ed Dinger