In Focus

Retin-A: Bringing the Truth about Alpharma to a Head

Anyone frequenting the Chicks boards over the last year has undoubtedly viewed some chirping about a certain anti-acne, anti-wrinkle cream called Retin-A. Now, while our Head Hen complained of redness and peeling, two other Chicks and I who had taken the time to get past the rough period were enjoying its results.

For the past 10 years I've become entirely too familiar with bouts of Adult Acne. A team function inundated with beautiful women and clear complexions gets me a Mt. Vesuvius caliber growth dead center on my chin. Family pictures at a professional photographer's studio? The Himalayas, right between my eyes. I'm thinking "I'm thirty, I have two children, is this really necessary?"

For awhile I tried OrthoTricyclen pills and although they seemed to curtail the outbreaks, during one particular week of every month, I'd still get a visitor or two in the T-Zone. Finally, I hit the dermatologist's office and asked for help. She smiled and listened sympathetically to my story, all the while drawing pictures of my current outbreak on a piece of paper. Then without hesitation, she gave me a prescription for Retin-A (Tretinoin). Knowing all the horror stories of "redness and peeling" from other users, I pleaded with her to give me something else. She simply patted me on the back, ushered me out the door and said "Be patient, give it 6-8 weeks and the redness will stop; in 8 months you'll look completely different." There I was, already resembling a map of the Andes, getting ready to become even more volcanic...

To make a long story short, it will be 8 weeks this Friday and I look remarkably different already. Friends can't seem to say enough and my four year old tells me, "Mommy, you look so much better without all those bumps!"

I was impressed with the results, but being a Chick, I wanted to know more! The business behind the beauty. This particular product is manufactured by a company called ALPHARMA (ALO, NASDAQ). I noticed right off the bat that ALO has a female CEO, Ingrid Wiike (Kinda cool, since there aren't too many Chick CEO's), who has been with the company for 16 years, has 2 degrees in pharmaceutical science AND was elected Woman of the Year in Norway. (I wonder if she's ever experienced adult acne?) Now I was really curious about the company so I jumped right in to their numbers.

GM: 46%

NM: 5%

Cash: >1.5X Debt 7.8, Uh-oh...

Flowie: 2.2, Not Good...

My heart sank. How could this be? After all Retin-A and I had been through I wasn't ready to abandon Alpharma. I needed to dig deeper. In the interest of Keeping It Simple Sister (Chicks Dozen Rule #2), I asked myself...is this something I could explain to someone else? And I heard myself answer, "Easy! How about some before and after pictures?" Determined to persevere, I jumped on the user friendly Hoover's Online and brought up what looked like the answer to my questions, entitled "Alpharma Announces Record Full Year and 4th Quarter Results" (PR Newswire - February 23, 2000)

Summarily the article points out that revenue was up, operating income grew, and net income increased substantially in 1999 from 1998 and explained that was due in part to the acquisition of Cox Pharmaceuticals in May of 1998. The exciting part of ALO is the notable growth in the 4th Quarter. The report goes on to state that the "incremental impact of 1999 acquisitions in the 4th Quarter accounted for about half of the dollar increase in revenue." ALO's desire to look toward the future makes them a very attractive candidate. And directly related to my skin regiment, "APLHARMA is the largest manufacturer of generic liquid and topical pharmaceuticals in the United States" (Hoover's) making them a leader in that market. (BTW, this happens to answer the Dozen's 4th criterion, as well as my prayers.) Some other interesting tidbits... in unfinished dose generic pharmaceuticals ALO is the largest manufacturer of liquid and topical creams and ointments in the US. (Which makes them LEADERS in their field against their COMPETITORS J & J and Perrigo... Chicks' Dozen numbers 4 and 3, respectively.)

Here's where the bad news comes in, folks. Alpharma employees in Brazil were found to be creating fraudulent invoices over a period of 6 quarters. These false documents caused a net reduction in revenue of $7 million or six cents/share. On top of that, as of October 31, ALO announced that although they would be meeting analysts' expectations, it would fail to meet its own 25% targeted growth. Some analysts then downgraded Alpharma from "strong buy" to "buy."

The company, albeit not perfect on paper, and not one the Chick's would purchase TODAY, is a good company to watch. Its current price of $39.31 puts it closer to its 52 week high than its 52 week low, so it's not a "blue light special" but a sale is a sale.

We'll keep an eye on ALPHARMA and review it again after its next quarterly report. In the meantime, I'll continue to enjoy the effects of my new-found friend and hope to soon be reporting on "The Psychological Benefits of Being Carded Over 30."

Until then...