Summary of QUIGLEY CORP - Yahoo! Finance

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations

Forward-Looking Statements

In addition to historical information, this Report contains forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in these forward-looking statements. Factors that might cause such a difference include, but are not limited to, management of growth, competition, pricing pressures on the Company's products, industry growth and general economic conditions. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's opinions only as of the date hereof. The Company undertakes no obligation to revise or publicly release the results of any revision to these forward-looking statements.

Certain Risk Factors

The Quigley Corporation makes no representation that the United States Food and Drug Administration ("FDA") or any other regulatory agency will grant an Investigational New Drug ("IND") or take any other action to allow its formulations to be studied or/and for any granted IND to be marketed. Furthermore, no claim is made that potential medicine discussed herein is safe, effective, or approved by the FDA. Additionally, data that demonstrates activity or effectiveness in animals or in vitro tests do not necessarily mean such formula test compound, referenced herein, will be effective in humans. Safety and effectiveness in humans will have to be demonstrated by means of adequate and well controlled clinical studies before the clinical significance of the formula test compound is known. Readers should carefully review the risk factors described in other sections of the filing as well as in other documents the Company files from time to time with the Securities and Exchange Commission ("SEC").

Overview

The Company, headquartered in Doylestown, Pennsylvania, is a leading manufacturer, marketer and distributor of a diversified range of homeopathic and health products which comprise the Cold Remedy and Contract Manufacturing segments. The Company is also involved in the research and development of potential prescription products that comprise the Ethical Pharmaceutical segment.

The Company's primary business is the manufacture and distribution of cold remedy products to the consumer through the over-the-counter marketplace. One of the Company's key products in its Cold Remedy segment is Cold-Eeze†, a zinc gluconate glycine product proven in two double-blind clinical studies to reduce the duration and severity of the common cold symptoms by nearly half. Cold-Eeze† is an established product in the health care and cold remedy market. During the third quarter of 2007, the Company commenced shipping two new Cold-Eeze† brand extensions. These brand extensions are Organix™ Cough and Sore Throat Drops and Cold-Eeze † Immune Support Complex-10. Organix Cough and Sore Throat Drops is a proprietary product manufactured at the Company's certified organic manufacturing facility, the first facility of its kind to obtain USDA organic certification. Cold-Eeze† Immune Support Complex-10 competes in the growing immune boosting dietary supplement marketplace. During the third quarter of 2008, the Company commenced shipping the Kids-Eeze† Chest Relief product. Kids-EEZE† Chest Relief, http://www.kids-eeze.com, is a single-ingredient, allopathic expectorant with guaifenesin to help children, ages six and up, suffering from uncomfortable chest congestion. Kids-EEZE® Chest Relief provides an alternative to the many multi-symptom children's cold products that could potentially lead to overmedication.

The manufacturing entity, called Quigley Manufacturing Inc. ("QMI"), a wholly-owned subsidiary of the Company, manufactures the Cold-Eeze† lozenge product along with performing such operational tasks as warehousing and shipping the Company's Cold-Eeze† products. In addition, QMI, which is an FDA approved facility, produces a variety of hard and organic candy for sale to third party customers in addition to performing contract manufacturing activities for non-related entities.

The Cold-Remedy segment reported a decrease in net sales in the third quarter and year to date 2008 as compared to the same periods in 2007. The decrease in net sales resulted from the continuing effects of the least incidence of colds in the last eight years during the 2007/2008 cold season and changes to customers' buying habits during 2008 to date. The 2008 periods were assisted by sales of the Kids-EEZE† product introduced in the third quarter of 2008, along with the influence of the Cold-Eeze† price increase that commenced in July 2007.

The Contract Manufacturing segment reported comparable net sales in the 2008 and 2007 periods. The primary function of the manufacturing segment is the production, warehousing and shipping of Cold-Eeze† related products, however, sales to third party customers may reflect some incremental fluctuation.

On February 29, 2008, the Company sold Darius, the former Health and Wellness segment, to InnerLight Holdings, Inc., whose major shareholder is Mr. Kevin P. Brogan, the then president of Darius. The terms of the agreement included a cash purchase price of $1,000,000 by InnerLight Holdings, Inc., for the stock of Darius and its subsidiaries without guarantees, warranties or indemnifications. Darius marketed health and wellness products through its wholly-owned subsidiary, Innerlight Inc., which constituted the Health and Wellness segment of the Company. Losses from this segment prior to disposal resulted in reduced resources available for the research and development activities of the Pharma segment. Additionally, the divestiture of Darius will provide clarity to the Company's strategic plan to focus its future endeavors in a pharmaceutical entity with OTC products and a pipeline of potential formulations that may lead to prescription products. The sale of this former business segment is reported as discontinued operations.

In January 2001, the Company formed an Ethical Pharmaceutical segment, Quigley Pharma Inc. ("Pharma"), that is under the direction of its Executive Vice President and Chairman of its Medical Advisory Committee. Pharma was formed for the purpose of developing naturally derived prescription drugs. Pharma is currently undergoing research and development activity in compliance with regulatory requirements. The Company is in the initial stages of what may be a lengthy process to develop these patent applications into commercial products. The Company continues to invest significantly in ongoing research and development activities of this segment. Such investment amounted to $1,081,943 and $4,086,039 in the three and nine month periods ended September 30, 2008, respectively, compared to $2,163,187 and $5,161,966 in the comparative 2007 periods.

Future revenues, costs, margins, and profits will continue to be influenced by the Company's ability to maintain its manufacturing availability and capacity together with its marketing and distribution capabilities and the requirements associated with the development of Pharma's potential prescription drugs in order to continue to compete on a national and international level.

Cold-Remedy Products

In May 1992, the Company entered into an exclusive agreement for the worldwide representation, manufacturing and marketing of Cold-Eeze† products in the United States. Cold-Eeze†, the Company's primary cold remedy product, a zinc gluconate glycine formulation (ZIGG™), is an over-the-counter consumer product used to reduce the duration and severity of the common cold and is available in lozenge, sugar-free tablet and gum form. The Company has substantiated the effectiveness of Cold-Eeze† through a variety of studies. A randomized double-blind placebo-controlled study, conducted at Dartmouth College of Health Science, Hanover, New Hampshire, concluded that the lozenge formulation treatment, initiated within 48 hours of symptom onset, resulted in a significant reduction in the total duration of the common cold.

On May 22, 1992, "Zinc and the Common Cold, a Controlled Clinical Study," was published in England in the "Journal of International Medical Research," Volume 20, Number 3, Pages 234-246. According to this publication, (a) flavorings used in other Zinc lozenge products (citrate, tartrate, separate, orotate, picolinate, mannitol or sorbitol) render the Zinc inactive and unavailable to the patient's nasal passages, mouth and throat where cold symptoms have to be treated, (b) this patented formulation delivers approximately 93% of the active Zinc to the mucosal surfaces and (c) the patient has the same sequence of symptoms as in the absence of treatment but goes through the phases at an accelerated rate and with reduced symptom severity.

On July 15, 1996, results of a new randomized double-blind placebo-controlled study on the common cold, which commenced at the Cleveland Clinic Foundation on October 3, 1994, were published. The study called "Zinc Gluconate Lozenges for Treating the Common Cold" was completed and published in the Annals of Internal Medicine - Vol. 125 No. 2. Using a 13.3mg lozenge (almost half the strength of the lozenge used in the Dartmouth Study), the result still showed a 42% reduction in the duration of common cold symptoms.

In April 2002, the Company announced the statistical results of a retrospective clinical adolescent study at the Heritage School facility in Provo, Utah that suggests that Cold-Eeze† is also an effective means of preventing the common cold and statistically (a) lessens the number of colds an individual suffers per year, reducing the median from 1.5 to zero and (b) reduces the use of antibiotics for respiratory illnesses from 39.3% to 3.0% when Cold-Eeze† is administered as a first line treatment approach to the common cold.

In April 2002, the Company was assigned a Patent Application that was filed with the Patent Office of the United States Commerce Department for the use of Cold-Eeze† as a prophylactic for cold prevention. The new patent application follows the results of the adolescent study at the Heritage School facility.

In May 2003, the Company announced the findings of a prospective study, conducted at the Heritage School facility in Provo, Utah, in which 178 children, ages 12 to 18 years, were given Cold-Eeze† lozenges both symptomatically and prophylactically from October 5, 2001 to May 30, 2002. The study found a 54% reduction in the most frequently observed cold duration.

Those subjects not receiving treatment most frequently experienced symptom duration of 11 days compared with 5 days when Cold-Eeze† lozenges were administered, a reduction of 6 days.

The business of the Company is subject to federal and state laws and regulations adopted for the health and safety of users of the Company's products. Cold-Eeze® is a homeopathic remedy that is subject to regulations by various federal, state and local agencies, including the FDA and the Homeopathic Pharmacopoeia of the United States.

Contract Manufacturing

From October 1, 2004, this manufacturing entity, now called QMI, a wholly owned subsidiary of the Company, has continued to produce lozenge product along with performing such operational tasks as warehousing and shipping the Company's Cold-Eeze† products. In addition to that function, QMI produces a variety of hard and organic candy for sale to third party customers in addition to performing contract manufacturing activities for non-related entities. QMI is an FDA-approved facility.

Ethical Pharmaceutical

Pharma's current activity is the research and development of naturally-derived prescription drugs with the goal of improving the quality of life and health of those in need. Research and development will focus on the identification, isolation and direct use of active medicinal substances. One aspect of Pharma's research will focus on the potential synergistic benefits of combining isolated active constituents and whole plant components. The Company will search for new natural sources of medicinal substances from plants and fungi from around the world while also investigating the use of traditional and historic medicinals and therapeutics.

The pre-clinical development, clinical trials, product manufacturing and marketing of Pharma's potential new products are subject to federal and state regulation in the United States and other countries. Obtaining FDA regulatory approval for these pharmaceutical products can require substantial resources and take several years. The length of this process depends on the type, complexity and novelty of the product and the nature of the disease or other indications to be treated. If the Company cannot obtain regulatory approval of these new products in a timely manner or if the patents are not granted or if the patents are subsequently challenged, these possible events could have a material effect on the business and financial condition of the Company. The strength of the Company's patent position may be important to its long-term success. There can be no assurance that these patents and patent applications will effectively protect the Company's products from duplication by others. Additionally, the operations of the Company contribute to the current research and development expenditures of the Ethical Pharmaceutical segment. In addition to the funding from operations, the Company may in the short and long term raise capital through the issuance of equity securities or secure other financing resources to support such research. As research progresses on certain formulations, expenditures of the Pharma segment will require substantial financial support and would necessitate the consideration of other approaches such as, licensing or partnership arrangements that meet the Company's long term goals and objectives. Ultimately, should internal working capital or internal funding be insufficient, there is no guarantee that other financing resources will become available, thereby deferring future growth and development of certain formulations.

Patents and chronological summary of QR formulations, which may or may not be areas of current focus, are:

· A Patent (No. 6,555,573 B2) entitled "Method and Composition for the Topical Treatment of Diabetic Neuropathy." The patent extends through March 27, 2021.

· A Patent (No. 6,592,896 B2) entitled "Medicinal Composition and Method of Using It" (for Treatment of Sialorrhea and other Disorders) for a product to relieve sialorrhea (drooling) in patients suffering from Amyotrophic Lateral Sclerosis (ALS), otherwise known as Lou Gehrig's Disease. The patent extends through August 5, 2021.

· A Patent (No. 6,596,313 B2) entitled "Nutritional Supplement and Method of Using It" for a product to relieve sialorrhea (drooling) in patients suffering from Amyotrophic Lateral Sclerosis (ALS), otherwise known as Lou Gehrig's Disease. The patent extends through April 14, 2022.

· A Patent (No. 6,753,325 B2) entitled "Composition and Method for Prevention, Reduction and Treatment of Radiation Dermatitis," a composition for preventing, reducing or treating radiation dermatitis. The patent extends through November 5, 2021.

· A Patent (No. 6,827,945 B2) entitled "Nutritional Supplements and Method of Using Same" for a method for treating at least one symptom of arthritis. The patent extends through April 22, 2023.

· A Patent (No. 7,083,813 B2) entitled "Methods for The Treatment of Peripheral Neural and Vascular Ailments." The patent extends through August 4, 2023.

· A Patent (No. 7,166,435 B2) entitled "Compositions and Methods for Reducing the Tranmissivity of Illnesses." This patent will provide additional protection to an existing composition patent (number 6,592,896), which the Company received in July 2003 and will support on-going investigations and potential commercialization opportunities. The Company will be continuing its studies to test the effects of the referenced compound against avian flu and human influenza. The patent extends through November 5, 2021.

· A Patent (No. 7,175,987 B2) entitled "Compositions and Methods for The Treatment of Herpes." The patent extends through November 5, 2021.

· A Patent (No. 7,396,546 B2) entitled "Anti-Microbial Compositions and Methods of Using Same" The patent extends through August 6, 2021.

· A Patent (No. 7,399,783 B2) entitled "Methods for the Treatment of Scar Tissue." The patent extends through September 4, 2026.

· A Patent (No. 7,405,046 B2) entitled "Compositions and Methods for Treatment of Rhinovirus." The patent extends through August 6, 2021.

· A Patent (No. 7,410,659 B2) entitled "Methods for the Treatment of Peripheral Neural and Vascular Ailments." The patent extends through November 6, 2022.

· A Patent (No. 7,435,725 B2) entitled "Oral Compositions and Methods for Prevention, Reduction and Treatment of Radiation Injury." The patent extends through January 14, 2022.

· A Mexican Patent (No. 236311) entitled "Method and Composition for the Treatment of Diabetic Neuropathy." The patent extends through December 18, 2020.

· A Mexican Patent (No. 259329) entitled "Nutritional Supplements and Methods for Prevention, Reduction and Treatment of Radiation Injury" the patent extends through April 30, 2022.

· A New Zealand Patent (No. 533439) entitled "Methods for The Treatment of Peripheral Neural and Vascular Ailments." The patent extends through November 6, 2022.

· A New Zealand Patent (No. 526041) entitled "Method and Composition for the Treatment of Diabetic Neuropathy." The patent extends through December 18, 2021.

· A New Zealand Patent (No. 530187) entitled "Nutritional Supplements and Methods of Using Same." The patent extends through August 6, 2022.

· A New Zealand Patent (No. 537821) entitled "Anti-Microbial Compositions and Methods of Using Same." The patent extends through July 23, 2023.

· A New Zealand Patent (No. 532775) entitled "Topical Compositions and Methods for Treatment of Adverse Effects of Ionizing Radiation," The patent extends through November 6, 2022.

· An Australian Patent (No. 2002231095) entitled "Method and Composition for the Treatment of Diabetic Neuropathy." The patent extends through December 18, 2021.

· An Australian Patent (No. 2002352501) entitled "Method for The Treatment of Peripheral Neural and Vascular Ailments." The patent extends through November 5, 2022.

· An Australian Patent (No. 2002232464) entitled "Nutritional Supplements and Methods of Using Same." The patent extends through August 5, 2022.

· An Australian Patent (No. 2002365155) "Topical Compositions and Methods for Treatment of Adverse Effects of Ionizing Radiation," the patent extends through November 5, 2022.

· An Australian Patent (No. 2002309615) "Nutritional Supplements and Methods for Prevention, Reduction and Treatment of Radiation Injury" the patent extends through April 30, 2022.

· A South African Patent (No. 2003/4247) entitled "Methods and Composition for the Treatment of Diabetic Neuropathy." The patent extends through December 18, 2021.

· A South African Patent (No. 2004/3364) "Nutritional Supplements and Methods for Prevention, Reduction and Treatment of Radiation Injury" the patent extends through May 1, 2022.

· A South African Patent (No. 2003/9802) entitled "Nutritional Supplements and Methods of Using Same" for a method for treating at least one symptom of arthritis. The patent extends through August 5, 2022.

· A South African Patent (No. 2004/4614) entitled "Methods for The Treatment of Peripheral Neural and Vascular Ailments." The patent extends through November 5, 2022.

· A South African Patent (No. 2005/0517) entitled "Anti-Microbial Compositions & Methods for Using Same," the patent extends through July 23, 2023.

· A South African Patent (No. 2004/3365) "Topical Compositions and Methods for Treatment of Adverse Effects of Ionizing Radiation," the patent extends through November 5, 2022.

· An Israeli Patent (No. 159357) entitled "Nutritional Supplements and Methods of Using Same," the patent extends through August 6, 2022.

· An Indian Patent (No. 00004/MUMP/2004) entitled "A Nutritional Supplement." The patent extends through August 6, 2022.

QR-333 - In April 2002, the Company initiated a Proof of Concept Study in France for treatment of diabetic neuropathy, which was concluded in 2003. In April 2003, the Company announced that an independently monitored analysis of the Proof of Concept Study concluded that subjects using this formulation had 67% of their symptoms improve, suggesting efficacy. In March 2004, the Company announced that it had completed its first meeting at the FDA prior to submitting the Company's IND application for the relief of symptoms of diabetic symmetrical peripheral neuropathy. The FDA's pre-IND meeting programs are designed to provide sponsors with advance guidance and input on drug development programs. In September 2005, the Company announced that a preliminary report of its topical compound for the treatment of diabetic neuropathy was recently featured in the Journal of Diabetes and Its Complication. Authored by Dr. C. LeFante and Dr. P. Valensi, the article appeared in the June 1, 2005 issue, and included findings that showed the compound reduced the severity of numbness, and irritation from baseline values. In October 2005, the Company announced the results of pre-clinical toxicology studies that showed no irritation, photo toxicity, contact hypersensitivity or photo allergy when applied topically to hairless guinea pigs and another study that showed no difference in the dermal response of the compound or placebo when applied to Gottingen Minipigs. (Both animal models are suggested for the evaluation of topical drugs, by the FDA). In March 2006, the Company announced the filing of an IND application with the FDA for its topical compound for
the treatment of Diabetic Peripheral Neuropathy. This filing allowed the Company to begin human clinical trials following a 30-day review period. If no further comments were forthcoming from the FDA, studies with human subjects could commence pending the availability of study drug. This application included a compilation of all of the supporting development data and regulatory documentation required to file an IND application with the FDA. In April 2006, upon FDA approval for its IND, the Company announced its intent to commence human studies on its formulation.

The Company also announced that in anticipation of receiving this IND, it had previously held its investigators meeting to organize its multi-center Phase II
(b) trials. This would allow the Company to begin these trials as soon as study drug is available.

In May 2006, the Company announced that it had begun screening patients to start testing their investigational new drug QR-333 and patients suffering from diabetic peripheral neuropathy would be given doses in an escalating fashion to provide pharmacokinetics data.

In September 2006, the Company announced that the results from its human study, titled "Single Center, Dose Escalating, Safety, Tolerability, And Pharmacokinetics Study Of QR-333 In Subjects With Diabetic Peripheral Neuropathy", demonstrated that QR-333 can be administered safely to patients suffering from diabetic peripheral neuropathy and it would proceed to conducting Phase II (b) clinical trials. The essential CMC (Chemistry Manufacturing and Controls) stage would provide the Company with the necessary information needed to produce larger quantities of drug for the Phase II (b) trial involving approximately 180 patients.

The pharmacokinetics trial was the first study in the U.S. conducted under the FDA issued IND. The positive data showed that QR-333 is safe, it is not systemically absorbed and it is well tolerated after multiple doses. These findings are consistent with prior animal toxicity data and the human proof of concept study performed in France.

In November 2006, the Company announced that patient enrollment in a Phase II
(b) multi center clinical study of QR-333 for the treatment of symptomatic Diabetic Peripheral Neuropathy (DPN) had commenced. The Phase II (b) trial will evaluate the safety and efficacy of QR-333 applied three times daily compared to placebo-treated patients over 12 weeks. Efficacy will be determined by Symptom Assessment Scores, a Visual Analogy Scale (VAS), Quality of Life and Sleep Questionnaires. Safety will be determined by medical history, physical examination, vital signs, 12-lead ECG, laboratory tests and nerve conduction studies. The study will involve approximately 140 randomized male and female patients with Type 1 & 2 diabetes, as defined by the ADA (American Diabetes Association) and distal symmetric diabetic polyneuropathy.

The Study Chairman is Dr. Philip Raskin, Professor of Medicine University of Texas Southwestern Medical Center at Dallas Texas. The study protocol was approved by the FDA as a part of Quigley Pharma's IND submission and has been approved by the required Investigational Review Boards. The completion of the study is dependent upon enrollment rates that may affect the overall length of the study and the communication of its results.

In September 2007, the Company issued an update on a Phase II (b) Clinical Study of QR-333 on Diabetic Peripheral Neuropathy. The update on the study noted that over 100 subjects have been enrolled, 52 subjects have completed treatment and over 225 subjects have been screened for the Phase II (b) study designed to evaluate the safety and efficacy of the topical formulation on subjects with diabetic peripheral neuropathy. Subject screening and enrollment will continue to ensure an approximately 140 evaluable patient study population. Once enrolled, subject treatment time is 12 weeks. To date the in-progress safety profile for this study has been consistent with the findings from the favorable safety results of the previous human proof of concept study conducted in France. Subsequently, in March 2008, the Company indicated that the number of subjects increased in the study.

QR-336 - In April 2004, the Company announced the results of a preliminary, pre-clinical animal study which measured the effect of its proprietary patent applied for formulation against ionizing (nuclear) radiation. This study determined that parenteral (injection) administration of the study compound was protective against the effects of a lethal, whole body ionizing radiation dose in a mouse model. This compound is being investigated to potentially reduce the effects of radiation exposure on humans.

In April 2006, the Company announced that it signed an agreement with Dr. William H. McBride, the Vice Chair of Research, Department of Oncology at UCLA to help develop an appropriate animal model radio protective research program for QR-336 to comply with New Food and Drug Administration animal efficacy rules for radio-protective pharmacological compounds.

In October 2006, the Company announced that it had received significant data identifying 50 microliters as the least toxic and most effective radiation protection dose in mice when administered ip (intraperitoneal), po (by mouth) or sc (under the skin) prior to radiation exposure. These experiments were essential for providing the Company with data to optimize the formulation for efficacy and route of administration, which is required for filing under the FDA's "Animal Efficacy Rule".

QR-337 - In September 2003, the Company announced its intention to file for permission to study its patent pending potential treatment for psoriasis and . . .