New Leads in the Case: Tylenol Man

The FBI says it has "new leads" in the 1982 unsolved murders of the seven people who swallowed Tylenol capsules that had been adulterated with cyanide, which have led them back to a man who was in the middle of the case but dismissed as a suspect in the killings. And now sources familiar with the original case are speaking to ABC News.

On Wednesday, officials raided the Cambridge, Mass., home of James Lewis, 62, who spent 12 years in prison for sending $1 million extortion letters to Johnson and Johnson, the makers of Tylenol, as well as a nearby storage facility. Agents left late in the evening with boxes of evidence and a large Apple desktop monitor.

Rosen told ABC News that her relatives have been told by the FBI there is new scientific evidence linking Lewis to the crime, thanks to advanced scientific testing now possible.

"There were a lot of people who believed what was available in terms of evidence pointed towards him," former Johnson and Johnson Senior Executive Wayne Nelson told ABC News.

"But that was the extent, it wasn't enough to convict or even prosecute," said Nelson. 

Lewis, dubbed the "Tylenol Man," admitted writing the extortion letters at the time but has always denied poisoning the capsules. He has since maintained his innocence on his website and on a local cable access program. He was released from prison in 1995 and moved to Boston

Business Description

GENERAL
     We are a leading and growing provider of marketing communications services
to the healthcare industry. According to Med Ad News, we are the world's largest
independent healthcare marketing communications organization and the second
largest overall, based on 1998 revenues. We provide many of the largest
pharmaceutical companies with a broad range of specialized services designed to
build and maintain leadership positions for their products and services. We
believe that our broad service offerings and extensive healthcare expertise
provide clients with high quality, variable cost solutions to meet the full
range of their marketing communications objectives.
     The first Nelson Group company was founded in 1987 to provide professional
selling services to pharmaceutical companies. In 1989, we acquired two
healthcare marketing services firms engaged in healthcare advertising and
medical education services. Since that time we have grown and diversified
primarily through the establishment of new operating units around individuals
with significant experience in the healthcare industry. Management of our
individual operating units includes former pharmaceutical company senior
executives, medical professionals, senior advertising and public relations
executives from both consumer and healthcare agencies and a former Commissioner
of the FDA.
INDUSTRY
     Pharmaceutical companies and other healthcare providers are increasing
spending devoted to promotion of their products. According to IMS Health
Incorporated, pharmaceutical manufacturers spent approximately $4.6 billion in
the U.S. promoting their products to professionals during the 12 months ended
September 30, 1998. This represents an increase of 17.8% over the prior year. Of
the $4.6 billion, approximately $4.1 billion was spent on personal on-site
selling (detailing) to office and hospital-based physicians, and approximately
$0.5 billion was spent on advertising in medical journals. In 1998, over $1.2
billion was also spent on direct-to-consumer advertising. We believe that this
promotional spending will continue to increase and that the portion going to
outside providers such as Nelson will grow due to a number of factors, including
the following:
     Growth in the Prescription Drug Market.  Promotional spending by
pharmaceutical companies is driven by growth in the overall prescription drug
market. According to IMS Health Incorporated, U.S. pharmaceutical sales rose to
approximately $99.5 billion in 1998 from approximately $89.6 billion in 1997. We
believe that this trend toward increased use of drug therapies is attributable
to a number of factors including an aging population, a greater number and
increased effectiveness of pharmaceutical products and the lower cost of drug
therapy relative to other medical procedures. As these trends continue, we
believe that marketing communications spending will continue to grow.
     Introduction of New Products.  Marketing communications expenditures in the
pharmaceutical industry are also directly linked to the number of new products
being introduced. The Pharmaceutical Research and Manufacturers of America, an
industry trade group, estimates that the pharmaceutical industry has tripled its
research and development budget during the past 10 years, spending an estimated
$21 billion on research and development in 1998. In addition, in 1998 and 1997,
the FDA approved 95 and 126 original new drug applications, compared to 79 in
1994. At the same time, the FDA's expedited review and approval procedures have
shortened median approval times to 12 months in 1998 from 19 months in 1994. We
believe that effective marketing communications services are a critical
component in clients' efforts to achieve maximum market penetration of new
products and prolong the life cycle of existing products.
     Cost Containment Pressures in the Healthcare Industry.  As a result of
certain changes affecting the healthcare industry, including increased
competition and the proliferation of managed care, pharmaceutical companies and
other healthcare providers are under pressure to
deliver a greater volume of products and services at reduced costs. These
pressures are contributing to an increased focus on reducing fixed operating
costs and improving productivity. As a result, pharmaceutical companies are
seeking to employ third party providers for a variety of services including
personal selling services. According to PMSI Scott-Levin, Inc., a leading
industry source, contract sales organizations provide nearly 7,000 part-time and
full-time representatives to 20 of the 40 companies tracked. As a result, we
believe that the market for personal selling services, in which third party
sales personnel act as the client's sales force, has grown to more than $350
million in 1998 from less than $20 million in 1988.
     Growing Role of Consumers and Patients.  As consumers and patients become
more directly involved in their selection of healthcare products and services,
pharmaceutical companies and other providers have sought to increase the level
of information available to consumers and patients and to influence their
decision-making process. According to Competitive Media Reporting, in 1998
pharmaceutical companies spent more than $1.2 billion on direct-to-consumer
advertising, an increase of approximately 20% from the prior year. In 1997, the
FDA modified its guidelines governing the content of direct-to-consumer
advertising. We believe that this has led to an increase in direct-to-consumer
advertising. Additionally, consumer product companies have increased promotion
of the health benefits of their food and cosmetic products. We believe that
pharmaceutical companies will continue to invest in direct-to-consumer
advertising with increased emphasis on targeted marketing aimed at patients.
BUSINESS STRATEGY
     Key elements of our business strategy include:
     Focus on Healthcare Industry.  We believe that our focus on providing
marketing communications services to clients in the healthcare industry
represents a significant competitive advantage over traditional marketing
services companies and enables us to deliver a higher quality of service to our
clients. In addition to the extensive healthcare experience of our management,
we maintain an employee base of individuals with an in-depth understanding of
therapeutic applications and medical products, many of whom have experience
working for major pharmaceutical companies. Such expertise is essential given
the technical nature of pharmaceutical and other medical products and the
specialized requirements of physicians, managed care organizations and other
participants in the healthcare delivery system. This healthcare focus has also
enabled us to capitalize on the benefits of scale, particularly with respect to
our professional selling activities.
     Broadest Range of Services.  We believe that we provide the most
comprehensive range of services currently available from any marketing
communications company focusing on the healthcare industry. As part of our
strategy, we are continuously increasing our range of services to address the
growing communications requirements of the healthcare industry. In 1990, we
became the first organization in the U.S. to offer both personal selling and
healthcare advertising services. Since that time, we have augmented this
combination by offering:
     - medical education services aimed at healthcare professionals and
       consumers;
     - public relations services to promote clients' products in times of
       opportunity and crisis;
     - healthcare consulting services to assist pharmaceutical companies in
       influencing consumers, physicians and regulatory agencies in their
       drug-related decision-making;
     - database marketing services using database technology to develop
       marketing campaigns aimed at specific product categories and market
       segments;
     - targeted marketing services focused on the Hispanic market;
     - patient recruitment services to accelerate full enrollment in scheduled
       clinical trials;
     - sales force recruitment and training services to assist clients in
       recruiting and training internal sales force personnel;
     - behavioral modification services to improve patient compliance and
       loyalty, thereby reducing costs;
     - contract medical organization services providing in-office dissemination
       of medical information and telephone responses to physicians' questions
       about drugs;
     - teleservices aimed at healthcare professionals and consumers/patients.
     We believe that the breadth of our service offerings differentiates us from
competitors and offers opportunities to cross-sell additional services and to
provide an integrated package of services.
     Recruitment of Industry Leaders.  We have expanded primarily through the
formation of new operating units around executives who possess significant
experience in the healthcare industry. These men and women include former
pharmaceutical company executives, medical professionals, advertising executives
from both consumer and healthcare agencies and a former Commissioner of the FDA.
Nelson benefits from the expertise and creativity of these executives and
believes that their contacts within the industry are a significant asset in
developing and maintaining client relationships.
     Decentralized, Entrepreneurial Structure.  We provide our services through
four networks comprised of multiple operating units. Each unit is headed by an
executive who exercises considerable autonomy in matters of everyday operation.
We believe that this structure facilitates the attraction and retention of
management personnel. It also helps in the acquisition and integration of
acquired companies. By coupling this structure with an incentive compensation
program based partially on individual operating unit performance, we believe
that we combine the entrepreneurial initiative and responsiveness of a small
company with the resources and capabilities of an integrated, full service firm.
GROWTH STRATEGY
     We seek to expand and enhance our business and our position as the leading
independent provider of marketing communications services to the healthcare
industry through the following growth strategies:
     Increase Revenues from Existing Clients.  We believe there is a significant
opportunity to increase revenues from our existing base of 154 clients, which
included the 10 largest pharmaceutical companies in the world in 1998, and 27 of
the top 50, based on 1997 revenues. Specifically, we target opportunities to
capture an increasing share of our clients' outsourced marketing, advertising
and personal sales activities, and to cross-sell our other services, including
consulting, medical education and public relations services which we believe
will comprise an increasing portion of pharmaceutical companies' marketing
expenditures. For example, in 1992 we began providing public relations services
to Johnson & Johnson's Janssen Pharmaceutica division. During 1998, 16 of our
operating units were providing a broad range of services to Janssen
Pharmaceutica including professional and direct-to-consumer advertising, medical
education and public relations. Similarly, the number of our operating units
providing services to SmithKline Beecham, our first client, has grown from one
in 1988 to seven in 1998. The strength of our client relationships has enabled
us to generate a high degree of recurring revenue with approximately 72.0% of
our 1998 revenue generated by clients served in 1995.
     Expand Client Base.  We target new clients within the pharmaceutical
industry as well as other healthcare providers. We also believe that consumer
product companies, which have been increasingly promoting the health benefits of
many of their products, due partly to changes in FDA guidelines, are a further
source of new clients. For example, in 1997, we successfully
implemented a campaign for Kellogg Company promoting the benefits of wheat bran
in cereal. We believe we have a competitive advantage in competing for these
various types of new clients because of our breadth of service offerings and
expertise and reputation for quality service with clients in the pharmaceutical
industry.
     Expand Service Offerings.  We regularly seek opportunities to provide new
services. For example, in the last 12 months we have expanded our medical
marketing services by introducing specialized forms of medical communications,
including in-office dissemination of medical information and telephone responses
to physicians' questions about drugs. We have recently expanded our professional
selling service offerings by adding both full-time representatives and
syndicated representatives (who make a single visit on behalf of multiple
clients) as additional options to our personal selling business. Creating
additional value-added services increases average account size, exploits new
revenue opportunities and strengthens our position as a leader in providing a
broad spectrum of services.
     Pursue Strategic Acquisitions.  We are continually seeking acquisition
opportunities that will expand our client base, augment our existing service
offerings or enable us to deliver new services. We believe that there are a
substantial number of attractive acquisition candidates in many of our existing
service areas due to the fragmented nature of the various service markets in
which we operate. In July 1998, we acquired The Medical Phone Company in order
to augment our telemarketing services. We have recently acquired the assets of
Lipton Communications Group, Inc. to enhance our capabilities in offering
targeted marketing services aimed at the Hispanic market. See "-- Recent
Acquisitions." We believe that our decentralized structure and entrepreneurial
managerial approach make us an attractive acquiror for potential acquisition
targets.
     Increase International Presence.  We currently operate internationally
through our offices in London and Brussels and maintain cross-referral
relationships with Pan Advertising Limited, a U.K. medical advertising company,
Publicis-Vital Werbeagentur GmbH, a German medical advertising company, and
Pharma International, Inc., a Japanese medical advertising firm. We believe that
strengthening our international capabilities will enhance our ability to compete
for business from large multinational pharmaceutical companies and to launch
global marketing and sales efforts. Recently, we have focused on expanding our
presence in Europe. We strengthened our existing relationship with Pan
Advertising Limited by acquiring 9% of its outstanding capital stock.
Additionally, we acquired a 60% interest in Monkey Communication S.P.R.L., a
Belgian medical marketing company. See "-- Recent Acquisitions."
     Capitalize on Direct-to-Consumer/Patient Market.  We seek to capitalize on
the growth of direct-to-consumer marketing expenditures of the pharmaceutical
industry by:
     - increasing our clients' awareness of the potential of a
      direct-to-consumer marketing strategy;
     - helping our clients identify products that we believe are well suited for
      direct-to-consumer marketing campaigns; and
     - developing and implementing such campaigns through both traditional and
      new forms of media.
For example, when Hoechst Marion Roussel was faced with the expiration of its
patent on Cardizem, a popular cardiac drug, we created a highly effective and
integrated direct-to-consumer relationship marketing campaign. The campaign
combined print and television advertisements, a quarterly newsletter about good
health and good living and personalized letters that encouraged patients to
speak to their doctors about switching to the more cost-effective once-daily
Cardizem CD formulation.
ORGANIZATIONAL STRUCTURE
     Nelson is organized into four networks comprised of multiple operating
units. We provide medical marketing services through three networks: NCI
Network, a full-service advertising and marketing network; Diversified
Companies, a mixture of specialized advertising, marketing, medical education
and consulting practices; and SCIENS Worldwide Network, a full-service
advertising and marketing network with a strong focus on public relations and
medical education. We provide professional selling services through our fourth
network, Nelson Professional Sales, a personal selling, sales force recruitment
and training, peer influence and teleservices network.
SERVICES
     We provide many of the largest pharmaceutical companies with a broad range
of specialized and diversified services designed to build and maintain
leadership positions for their products and services.
Medical Marketing Services
     Professional and Consumer Advertising.  Our professional and consumer
advertising services include strategic planning and creation, production and
placement of a variety of marketing materials including:
     - materials for direct mailing and detailing to healthcare professionals;
     - advertisements in print and electronic media;
     - displays and interactive kiosks for use in hospitals and at professional
      conventions;
     - reminder promotional items; and
     - explanatory literature for distribution with drug samples.
     We operate three full-service studios that provide design work and
electronic production services including computer graphics and multimedia
presentations. We target our marketing programs to physicians, pharmacists,
nurses and other healthcare professionals and directly to patients and other
consumers.
     We seek to execute direct-to-consumer marketing programs through a
combination of print and electronic media advertising and on-going direct
marketing. The programs include the establishment and advertisement of toll-free
numbers for the purpose of compiling and managing a patient database. The
database is then used for follow-up telephone, mail and electronic marketing
efforts to the target group, tracking compliance and fulfillment and promoting
healthcare initiatives.
     Medical Education.  We believe that we are one of the largest U.S. medical
education suppliers specializing in designing and developing medical education
programs aimed at professionals, patients and consumers. We design strategic
communications programs to educate healthcare professionals, government and
managed care organizations, patients and consumers. These programs include
accredited continuing medical education programs (which physicians and other
healthcare professionals are required to complete as part of their ongoing
license requirements), workshops, conferences, roundtable discussions, expert
panels and symposia on various healthcare related topics. We customize these
programs to fit a client's strategic objectives and use a variety of media,
including interactive video conferences. Our programs are also used by medical
institutions in their education offerings. Programs aimed at consumers include
patient information brochures, videos and outreach programs to educate consumers
about medical conditions and products.
     Public Relations.  Our public relations services include:
     -  media and community relations;
     -  event and crisis management;
     -  public policy planning;
     -  issues management; and
     -  public opinion research services.
     We have implemented multiple media campaigns with national broadcast and
print coverage. We believe that, as a result of our significant experience and
contacts with both the professional trade and general consumer media, we are
well-positioned to use these media to publicize our clients' products and
services. On behalf of Johnson & Johnson, we developed and implemented a
multi-faceted program for the introduction of Propulsid, a prescription
heartburn medication. The program included preparation and dissemination of
pre-launch publication pieces, strategic alliances with professional
associations including the American Gastroenterological Association and the
American College of Gastroenterology and a national media relations campaign.
The program delivered broadcast coverage on the CBS Evening News and ABC World
News Tonight and print coverage in publications such as The New York Times, The
Chicago Tribune and USA Today.
     Consulting.  Our consulting services include:
     -  advice on prescription-to-over-the-counter switches;
     -  developing or improving clinical management programs;
     -  providing regulatory guidance;
     -  strategic and tactical planning for product development and marketing;
        and
     -  extending patent protection.
     We believe that our NCI Consulting unit is one of the largest healthcare
consulting firms in the U.S. specializing in prescription-to-over-the-counter
switches. In the past four years, NCI Consulting was involved with nine
completed prescription-to-over-the-counter switches. Our involvement in the
initial stages of the prescription-to-over-the-counter conversion process
provides an important conduit for cross-selling our other services.
     Patient Recruitment.  We work with our pharmaceutical company clients and,
in some cases, clinical research organizations to reduce overall clinical
development costs by accelerating patient recruitment for participation in
clinical trials. To attract patients, we design and implement integrated
programs using:
     -  targeted media campaigns;
     -  print and electronic advertising;
     -  physician referrals; and
     -  seminars.
     We also operate a centralized patient information and qualification service
to pre-screen patients for trial eligibility and provide pre-qualified leads in
certain therapeutic areas. In 1997, we assisted 33 clinical sites in enrolling
760 subjects within a four-month period for participation in an Alzheimer's
disease study. We initiated a targeted media relations campaign for each site,
and placed customized television, radio and print advertisements. We received
more than 1,700 study inquiries and forwarded more than 1,500 pre-qualified
leads to study sites.
     Targeted Marketing.  We provide clients with a range of services focused on
the Hispanic market through Bienestar/LCG, a domestic full-service agency
targeting Spanish-speaking consumers and medical professionals. These services
include:
     -  consumer and professional advertising;
     -  medical and patient education;
     -  direct mail;
     -  teleservices;
     -  public relations; and
     -  promotional materials for public venues.
     Bienestar/LCG can support marketing campaigns in the U.S. and throughout
Latin America.
     Database Marketing.  We use database technology to support direct marketing
campaigns aimed at specific product categories and market segments. We maintain
databases for our clients with information on more than one million individuals.
These databases are compiled mainly through calls received via toll free numbers
advertised in connection with consumer and patient directed marketing campaigns.
We then use the databases for a variety of marketing goals, including compliance
initiatives and brand loyalty programs, distribution of samples and follow-up
promotional activities. Our database marketing programs can be used effectively
in conjunction with our consumer advertising campaigns. For example, our
Cardizem campaign included quarterly newsletters, educational videos and other
materials.
Professional Selling Services -- Nelson Professional Sales
     Personal Selling (detailing).  We are one of the leading personal selling
organizations in the U.S. specializing exclusively in healthcare. Pharmaceutical
detailing is a form of selling that involves a presentation to a physician or
other medical professional by a field representative, during which the benefits
of a drug are discussed and product literature and samples are provided to the
medical professional. Products detailed by us include both prescription and
over-the-counter drugs and other healthcare products. We have approximately
1,000 detailing representatives who complete approximately 1,000,000 calls per
year to a wide range of medical professionals on behalf of clients.
     Our detailing capabilities increase our clients' flexibility in selecting
the extent and cost of promoting products as well as their level of involvement
in managing the sales effort. We believe that use of our external detailing
personnel is considerably less expensive to our pharmaceutical clients than
using their internal sales staff, with comparable success rates. In addition,
use of our outsourced detailing services enables clients to meet the temporary
demands of active cycles while limiting layoffs of internal sales forces during
product lulls.
     We employ a full-time staff of six national sales managers and 71 district
managers. We believe that our use of full-time versus part-time management
increases the quality of service provided to clients and improves recruitment of
sales personnel. Our detailing sales forces can be made up of representatives
working on a flexible part-time ("flextime") basis or on a full-time basis. A
sales force can also be either dedicated to one product or syndicated. A
syndicated sales force targets the same professionals on behalf of two or more
clients, which allows the clients to share the cost of detailing. Currently, the
majority of our detailing representatives work on a flextime and dedicated
basis. We seek to hire individuals with pharmaceutical sales or scientific
backgrounds. Each field representative undergoes specialized training in order
to familiarize himself or herself with the products being detailed.
     We seek to utilize the most advanced technology in delivering our services.
To this end, we have equipped our sales force with hand-held computers that will
perform call and sample reporting and electronically record signatures of the
doctors being visited.
     Peer Influence.  We organize and conduct peer-to-peer meetings in which
eight to 20 healthcare professionals, primarily physicians, meet to discuss a
particular drug in the context of the wider therapeutic area in which it
competes. Such meetings are chaired by a full-time moderator who is employed by
us and trained to involve participants fully. The meetings are followed by
interactive discussions. Our clients sponsor these meetings in order to convey
information concerning their products to physicians. The meetings are
particularly useful in connection with new product launches, highly technical
products and products that compete in crowded markets.
     Teleservices.  We believe that we are one of the few teleservices suppliers
in the U.S. focused solely on healthcare. We create, manage and conduct
telephone-based detailing of healthcare products, direct sales and customer
service programs for pharmaceutical companies and other healthcare
organizations. Additionally, we provide toll-free interactive voice response
services in support of our clients' marketing efforts. Our teleservices
capabilities can be used in conjunction with our personal selling activities to
augment large scale programs or broaden geographic coverage for our clients. We
target physicians, nurses, pharmacists and other healthcare professionals with
telephone sales of prescription and over-the-counter drugs and other healthcare
products. In addition, we conduct patient support and education programs, and
telephone recruiting of healthcare professionals for seminars, teleconferences
and other programs organized by us or our clients. We also perform direct mail
follow-up and sample fulfillment services of both prescription and
over-the-counter products for our clients.
     Professional Sales Force Recruitment & Training.  We provide recruitment
services to help our pharmaceutical company clients identify and interview
qualified candidates for their internal sales forces. Dedicated recruitment
managers maintain and update an active national database of approximately 9,000
candidates from a variety of sources, including our 71 district managers and
national sales managers, a compensated referral program in the field and ongoing
advertising in major metropolitan areas. We interview candidates at least two
times and evaluate them for outstanding sales skills and selling successes. This
provides a ready pool of qualified full-time and part-time sales professionals.
     We provide training to healthcare sales professionals in a variety of
media, including workshops, newsletters, audiotapes, texts and computer-based
programs. Our training materials provide healthcare sales professionals with
information about products, medical market trends and sales opportunities.
CLIENT RELATIONSHIPS
     We seek to develop and maintain long-term relationships with our clients.
We believe that our clients view us as a strategic partner and a valuable
resource in designing and implementing their marketing communications programs.
In 1998, we provided our services to 154 clients. Based on 1998 revenues, our
largest clients include Johnson & Johnson, Procter & Gamble, SmithKline Beecham,
Organon, Glaxo-Wellcome, Abbott Laboratories, Bristol-Myers Squibb and Hoechst
Marion Roussel. In 1998, 11 operating companies of Johnson & Johnson accounted
for 22.7% of revenues. In 1997, Johnson & Johnson accounted for 30.4% of
revenues and SmithKline Beecham accounted for 12.2% of revenues.
     We have enjoyed long-standing relationships with many of our clients, eight
of which, including Johnson & Johnson, Procter & Gamble, SmithKline Beecham,
Glaxo Wellcome and Hoechst Marion Roussel have been clients of ours for more
than eight years. Generally, our major client relationships represent multiple
contracts with several affiliates and/or divisions of the client. While the
affiliates of several of our major pharmaceutical clients account, on an
aggregate
basis, for a significant part of our total revenues, we believe that these
affiliates have sufficient operating autonomy to permit them to make marketing
commitments on an individual basis. Therefore, we believe that the termination
of a contract by one affiliate of a major pharmaceutical client would not
necessarily result in a termination of all contracts with that client.
     Generally, our contracts for medical marketing services are one year or
less in duration and are subject to termination by the client upon 30 to 90
days' prior notice and without penalty. These contracts provide for payment
based on a monthly retainer fee. We also enter into contracts for project-based
assignments, the duration of which vary from days to several months. These
contracts are usually cancellable with minimal notice or penalty. Our contracts
for personal selling services generally are one year in duration, and many are
subject to termination by the client upon 60 to 90 days' prior notice and
without penalty. These contracts provide for payment based either on an hourly
billing rate or on each "completed call" by a field representative or telephone
call by a telerepresentative. A completed call is generally defined as a
face-to-face meeting by a field representative with a medical professional. In
the peer influence area our contracts require us to conduct a certain number of
meetings with a guaranteed level of physician participation. Payment is
typically made in three equal installments; upon commencement, at the mid-way
point and upon completion. Contracts in the peer influence area are generally
terminable at will.
     We focus on maintaining strong relationships with product managers and
senior management at each of our clients and providing creative and
result-oriented solutions to their marketing communications needs. Our account
managers develop relationships principally with the product managers at the
pharmaceutical companies and spend significant time on-site at client
facilities. Our account managers work with the product managers to implement,
and in some cases assist in developing, the client's marketing plan within a
prescribed budget.
RECENT ACQUISITIONS
     On February 28, 1999, we acquired the remaining 20% minority interest in
one of our subsidiaries for $0.7 million. On March 5, 1999, we acquired the
assets comprising the business of Lipton Communications Group, Inc., a company
specializing in marketing services directed at the Hispanic community, to
augment our existing service capabilities in that area. The purchase price for
this acquisition was approximately $1.7 million.
     In order to expand our international presence, on April 16, 1999, we
acquired a 9% equity interest in Pan Advertising Limited, a U.K. medical
advertising company. The purchase price for this acquisition was approximately
$0.6 million, payable in Nelson stock valued at the initial public offering
price. On April 15, 1999, we acquired a 60% interest in Monkey Communication
S.P.R.L., a Belgian medical marketing company. The purchase price for this
acquisition was approximately $0.6 million, payable one half in cash and one
half in Nelson stock valued at the initial public offering price. We have issued
71,017 shares of stock in connection with these acquisitions. Based upon an
assumed initial public offering price of $     per share, we would issue
additional shares in connection with these acquisitions shortly after the
closing of this offering.
FACILITIES
     Our corporate headquarters are located in New York, New York, in
approximately 13,500 square feet of space occupied under a lease which expires
on October 31, 2007, with a renewal option for an additional five-year term. We
also lease additional space, aggregating, at December 31, 1998, approximately
221,500 square feet, in New York, New York, Lawrenceville, Princeton and Clark,
New Jersey, Kansas City, Missouri, Blue Bell, Pennsylvania, Kennesaw, Georgia,
Walpole, Massachusetts, and Washington, D.C. We also have offices in London and
Brussels. We believe that our facilities are adequate for our current
operations, but that additional space will be needed as we continue to grow.
COMPETITION
     Our industry is highly competitive and fragmented. In the medical marketing
area, we compete directly and indirectly with:
     - specialty healthcare marketing and communications firms;
     - public relations agencies;
     - management consulting firms; and
     - in-house advertising and marketing departments of pharmaceutical
       companies.
     The expansion in healthcare marketing to consumers has led to increased
competition from large traditional advertising agencies. Many of them offer both
consumer and professional advertising, as well as public relations services.
Certain of these agencies are beginning to broaden their services to include
medical education, as well as other medical marketing services.
     In the professional selling area, we compete against:
     - in-house sales and marketing departments of pharmaceutical companies;
     - full-time and part-time contract selling organizations;
     - general and healthcare-focused telemarketing firms; and
     - other outside providers of peer influence services.
     We believe that we compete primarily on the basis of demonstrated
reputation for:
     - quality;
     - breadth of services;
     - price;
     - geographic presence;
     - technological expertise; and
     - the ability to promptly provide clients with customized solutions to
       their marketing communications needs.
     We believe that our competitive strengths are our experience and expertise
in the healthcare industry, our ability to provide the broadest range of
services of any independent, healthcare focused marketing communications company
and our strong long-term client relationships with major pharmaceutical
companies.
GOVERNMENT REGULATION
     The healthcare industry is extensively regulated. Various laws, regulations
and industry guidelines affect the provision, licensing, labeling, marketing,
promotion and reimbursement of healthcare services and products, including
pharmaceutical products. It is possible that new or different laws, regulations
or guidelines may apply in the future.
     The pharmaceutical industry is subject to extensive federal regulation and
oversight by the FDA. For instance, the Federal Food, Drug and Cosmetic Act, as
supplemented by various other statutes, regulates, among other matters, the
approval, labeling, advertising, promotion, sale and distribution of drugs.
Under this statute, the FDA asserts its authority to regulate all promotional
activities involving prescription drugs. Accordingly, our business and that of
our clients, to the
extent such business involves promotion and marketing of pharmaceutical
products, is subject to the extensive regulation of the pharmaceutical industry.
     The Prescription Drug Marketing Act of 1987 regulates the distribution of
drug samples to physicians and imposes strict storage, inventory and
record-keeping requirements on pharmaceutical manufacturers and distributors
related to such activities. We, as part of our detailing activities, distribute
prescription drug samples to physicians and other healthcare professionals and
are subject to the requirements of the Prescription Drug Marketing Act. We
believe that we are in compliance with this act.
     Our services are affected by various guidelines promulgated by industry and
professional organizations. For example, certain ethical guidelines promulgated
by the American Medical Association (the "AMA") govern, among other matters, the
receipt by physicians of gifts from health-related entities. These guidelines
govern the honoraria and other items of pecuniary value which AMA-member
physicians may receive in connection with functions sponsored by our
pharmaceutical company clients. Similar regulations have been implemented by
other professional and industry organizations, such as the Pharmaceutical
Manufacturers Association. Some of our clients also have their own policies
regarding such matters. The provision of continuing medical education services
is subject to compliance with guidelines promulgated by the FDA and various
accreditation bodies and professional associations, such as the rules of the
Accreditation Council of Continuing Medical Education.
     Certain portions of the teleservices industry have become subject to
increased federal and state regulation in recent years. The rules of the Federal
Communications Commission (the "FCC") under the Federal Telephone Consumer
Protection Act of 1991 limit the hours during which telemarketers may call
consumers and prohibit the use of automated telephone dialing equipment to call
certain telephone numbers. The Federal Telemarketing and Consumer Fraud and
Abuse Prevention Act of 1994 broadly authorizes the Federal Trade Commission
(the "FTC") to issue regulations prohibiting misrepresentation in telephone
sales. In August 1995, the FTC issued regulations which, among other things,
require telemarketers to make certain disclosures when soliciting sales. We
believe that our operating procedures comply with the telephone solicitation
rules of the FCC and the FTC. However, additional federal or state legislation,
or changes in the regulatory environment, may limit our or our clients'
activities in the future or significantly increase the cost of regulatory
compliance.
     The failure of Nelson or its clients to comply with, or any change in, the
applicable regulatory requirements or professional organization or industry
guidelines could:
     - limit or prohibit certain of our or our clients' business activities;
     - subject us or our clients to adverse publicity; and
     - increase the costs of regulatory compliance or subject us or our clients
       to monetary fines or other penalties.
Such occurrences could have a material adverse effect on us.
     We generally require our clients to indemnify us against claims and
expenses arising with respect to services performed on our clients' behalf,
except those resulting from our own negligence. We have never been made a party
to a claim or lawsuit based on our services for a pharmaceutical client nor have
we ever been held responsible for the regulatory non-compliance of a client.
LIABILITY AND INSURANCE
     In recent years, there has been an increasing number of lawsuits against
healthcare industry participants alleging malpractice, product liability and
other legal theories. Such lawsuits often involve large claims and significant
legal costs. As a provider of services to the pharmaceutical
industry, we face the risk of being named as a party in such lawsuits, with the
attendant risks of significant legal costs, substantial damage awards and
adverse publicity. Even if any such claims ultimately prove to be without merit,
defending against them can result in adverse publicity, diversion of
management's time and attention and substantial expense. Therefore, such claims
could have a material adverse effect on us.
     We maintain insurance policies, including liability insurance. We cannot be
certain that our insurance coverage will be sufficient to cover all future
claims or will continue to be available in adequate amounts or at a reasonable
cost. Although many of our contracts require our clients to indemnify us for
claims and expenses arising with respect to services performed by us on the
client's behalf, our contracts may not provide for adequate indemnification
against all potential litigation risks facing us. Our contracts often require us
to indemnify clients for our negligence. We can be held liable for errors and
omissions of our employees for services we perform that are outside the scope of
any indemnity. Our insurance policies do not insure us against the errors and
omissions of our employees. We could also incur losses because of the cost of
legal proceedings associated with our services or the pharmaceutical products
with respect to which we provide services.
LEGAL PROCEEDINGS
     On November 22, 1995, a former Nelson employee filed a complaint against
Nelson and Wayne K. Nelson in the Superior Court of New Jersey, Mercer County.
The complaint alleges discrimination on the basis of his disability, intentional
infliction of emotional distress, invasion of privacy and interference with
prospective business advantage. The complaint seeks damages for lost past and
future wages and benefits, emotional distress and injury to his reputation. The
complaint also seeks punitive damages and attorneys' fees and costs. A monetary
amount, however, has not been specified in the complaint. The parties are
currently engaged in discovery. A trial date has not yet been scheduled.
     We believe, upon the advice of counsel, that we have meritorious defenses
and are vigorously contesting the allegations. Because the action is still in
the discovery stage, and the ultimate outcome will depend upon the jury's
determination of the credibility of witnesses, we cannot predict the trial's
outcome and any potential monetary award. Management does not believe, however,
that Nelson will incur material liability as a result of these proceedings.
     In addition to the foregoing matter, from time to time we are subject to
litigation incidental to our business.
EMPLOYEES
     As of March 31, 1999, we had 1,764 employees, including 832 full-time
employees and 932 part-time employees. Our personal selling operations account
for all of our part-time employees. The following table shows the number of our
full-time and part-time employees broken down by discipline as of March 31,
                                               NUMBER OF    NUMBER OF
                                               FULL-TIME    PART-TIME    TOTAL NUMBER
                                               EMPLOYEES    EMPLOYEES    OF EMPLOYEES
Medical Marketing Services...................      594           --           594
Professional Selling Services................      238          932         1,170
     We are not party to a collective bargaining agreement with a labor union,
and we consider our relations with our employees to be good.

QUIGLEY CORP. (OTC: QGLY) is a bulletin board high-flyer that markets Cold-Eeze, a zinc gluconate-glycine lozenge which advocates claim has an anti-viral effect on the human rhinovirus, the most common cause of colds. The veracity of this claim is something which remains hotly contested to this day, and there has also been more than a little debate over the legitimacy of the company and its associates.

On January third, Rogue reporter Louis Corrigan (RgeSeymour) brought you "Quigley: A Real Cold Cure?", wherein the clinical evidence was examined, and the debate over the efficacy of the product was presented through interviews with many of the principal researchers. One week later, the television show 20/20 presented its own segment on Cold-Eeze, a glowing report which left Quigley bulls cheering.

Their celebration was not destined to last for long, though, as Barron's printed a scathingly bearish view of the company the very next day. The article raised questions about the legitimacy of the company and its associates. A number of other articles have since appeared in various media outlets, most recently in The Washington Post. Today, Rogue brings you an in-depth look at many of the questions raised about the company, the stock, and Quigley's financing efforts. For the story, Rogue contacted Quigley's general counsel, an outspoken market-making bear, Quigley counsultants, and a securities firm that bears say ran nominee accounts for people close to the company. While the verdict is far from being in on Quigley, Rogue presents some interesting accounts of the activity surrounding the company, and answers some lingering questions.

Barronized

For every person who likes to tell a great story, there's often someone else who likes to ruin it, or at least give it a tragic twist. Investors following the saga of highflyer QUIGLEY CORPORATION (OTC Bulletin Board: QGLY, formerly QUIG) were treated to just such a double dose of conflicting media attention three weeks ago. It's worth asking exactly which version of the story sounds right.

On Friday, January 10th, ABC's 20/20 news magazine featured a lengthy segment celebrating the company's Cold-Eeze lozenges as one of the only cold remedies that actually works. Dr. Michael Macknin, the lead author of an important double-blinded trial conducted at the Cleveland Clinic, was shown saying he got goosebumps when he first realized how positive the Clinic's trial results were. After watching this glowing broadcast, investors were no doubt left with goosebumps of their own -- until they checked out the next day's Barron's.

In a two-page article, reporter Bill Alpert wielded the oft-bloody Barron's hatchet. First Alpert chopped up the science supporting the company's claims for Cold-Eeze. Macknin reappeared, this time as a clinician so full of caution that he now seemed nearly to disbelieve his own findings. He said that the clinic's trial was conducted on just 100 patients in the same city during just one month. Who's to say that the researchers didn't just get lucky in finding one virus -- of the more than 200 than can cause a cold -- that was incredibly susceptible to Quigley's zinc gluconate-glycine lozenges?

Then there were lingering questions from cold experts, such as the University of Virginia's Dr. Jack Gwaltney. Had the trial subjects been adequately blinded about whether they were receiving the zinc lozenge or a placebo? Any such bias could completely undermine the trial results. Since Alpert included no response from Macknin about this important concern, a reader was left to think that the clinician had no adequate response to Gwaltney.

Still, Alpert saved the real dirt for last. In the final nine paragraphs, the Barron's piece laid out an astonishing web of people "censured, barred or jailed by securities authorities for stock fraud" who have had, or still have, connections with Quigley Corp. The article ended with the kind of knowing comment Barron's loves to issue: trading in Quigley stock was now under investigation by the Securities and Exchange Commission (SEC), so investors shouldn't expect the stock to "levitate" forever.

Specifically, Alpert reported that Raphael D. Bloom, a disbarred stockbroker convicted in 1989 of stock fraud, had introduced company Chairman and CEO Guy Quigley to a financial consulting and public relations firm called Diversified Corporate Consulting. The "managing member" of Diversified is William A. Calvo, III, a securities lawyer who was disbarred in Florida state court, and later in Federal Court, for his participation in a fraudulent public offering. Diversified, in turn, introduced Guy Quigley to another public-relations firm, Carousel Consulting, run by former stockbroker Joseph Radcliffe who has had a career "at notorious brokerage firms."

In addition, the financial weekly reported that Quigley's Brooklyn-based auditor Nachum Blumenfrucht "was the auditor for the notorious stock promoter Phil Abramo." A key subject in the recent Business Week cover story about the Mob's activities on Wall Street, Abramo is reportedly identified in court documents as a capo in the De-Cavalcante crime family. He has just begun serving a one-year prison sentence for tax evasion. Barron's also reported that Quigley had previously employed the securities lawyer Barbara R. Mittman, who also once worked for Abramo. Mittman practiced law with another now disbarred attorney, Edward Grushko, who conducted work for some of the more spectacular stock swindlers of recent years, including Thomas Quinn and Arnold Kimmes.

This schizophrenic one-two media punch left investors reeling. On the one hand, the 20/20 segment strongly suggested that cold sufferers would be better off if retailers simply cleared away the palliatives that now dominate the cold remedy market and instead filled the shelves with Cold-Eeze. If Quigley could just increase its manufacturing, virtually any earnings target seemed possible.

The Barron's report, though, was enough to leave a reasonable investor leery of getting anywhere near Quigley. At any moment, it seemed, the SEC could halt trading in the stock. Six weeks down the road, Quigley holders might find themselves happy to cash out at a fraction of what they paid for the stock.

Anticipation of the favorable 20/20 coverage, in combination with short covering, had pushed Quigley's share price from $18 to an intraday high of $37 in the days prior to the broadcast. At that Friday's close, around $30 a share, Quigley had a market capitalization of over $250 million, based on the number of outstanding shares plus currently exercisable stock purchase warrants and options. Even for a company experiencing rapid growth, this was an astonishing figure, since Quigley had merely $1 million in sales for fiscal 1996 and had estimated its first quarter 1997 earnings would come in at $1.8 million, on $3.9 million in sales.

In the days immediately following these conflicting high-profile reports, the stock whipsawed wildly, losing half its value on a drop to the mid-teens before recovering to the mid-20s and then dropping once again. But after a roller coaster ride and a recent 2-for-1 stock split, Quigley recovered to levels seen just prior to being Barronized. Though the stock has drifted lower in recent days, it's still trading about where it did before anticipation of the ABC broadcast sent the stock soaring.

As aficionados of the efficient market theory suggest, share prices always discount the available news about a company. What Quigley's share price is telling us, then, is that market participants are not much worried by the web of intrigue fed to Alpert by the short-sellers who had gotten caught in the squeeze. Uncertainty about the SEC investigation may be weighing on the shares, though some would find that preposterous.

Still, the market doesn't seem to believe that company officials will be implicated if the SEC uncovers trading violations or other criminal actions. Indeed, the company has argued that it's under organized attack from someone, presumably the shorts, perhaps even some market makers, who have undoubtedly lost millions as Quigley's stock has made its improbable ascent from $0.65 a share last April.

In a press release dated January 14th, Guy Quigley said that the "clearly biased and inaccurate portrayal of the company, its management, its medical studies, and its patented Cold-Eeze product" in Barron's was the culmination of a series of attempts to hurt the company and its stockholders. These included "an onslaught of false, misleading and malicious information disseminated through Internet services such as America Online and through anonymous faxes and phone calls to major customers of the Company." The latter claimed that Quigley would be unable to meet its orders.

Quigley officials also said that the Bloomberg News Service picked up two phony press releases sent from a Staples store in New York City on fake Quigley stationery. The first one, sent on December 31st, erroneously claimed that the company's then Chief Financial Officer Eric Kaytes was resigning. (Kaytes was recently "promoted" to Vice President in charge of Management Information Systems. The company named George Longo as the new CFO. Longo has previously worked for KPMG Peat Marwick and Rhone-Poulenc Rorer, Inc., where he handled SEC, IRS, and general accounting issues.)

The other fake press release, on the day of the 20/20 broadcast, indicated that Quigley had made a $10 million "Reg S" private placement of shares to offshore investors at $6.50 a share. An offering at such a deep discount to the market price would have worked as well as a pin would in bursting a bubble.

Quigley General Counsel Thomas F.J. MacAniff told Rogue that the company asked the SEC before Christmas to investigate these criminal disruptions of the firm's business activities. Contrary to the rumored conspiracies, he said that Diversified Corporate Consulting was actually the first party to request that the SEC get involved. "Now that's a classic, isn't it? A conspirator complains to the SEC," MacAniff quipped. He believes that Barron's and other financial media have failed to report this because "it doesn't fit" the story they want to print.

On the other hand, the company's critics, some of whom admit they have lost money shorting the stock, continue to fire away. Some suggest that company officials have been party to a well organized stock rig. They point to Quigley's 1-for-10 reverse stock split of January 1996 as a classic maneuver used to "box" a stock so that it can be controlled by a handful of traders. These critics highlight other factors they say are consistent with a stock manipulation, such as Quigley Corp.'s issuance of millions of new shares and warrants; the professional status of the company's now former auditor Blumenfrucht; or trading conducted for individual accounts held by members of the Bloom and Quigley families and, until recently, managed by the same broker at a small firm called Empire Securities.

The company's critics also make a series of diverse arguments about the legitimacy of the science supporting the Cold-Eeze product, the security afforded by the company's patents, and the company's ability to produce the kind of sales that it has recently reported.

The more one listens to both sides, the more it becomes clear that there are more than two sides to the story. It's even possible to imagine that Quigley may have been set up as a stock rig by parties who never imagined Cold-Eeze might really work or perhaps didn't really care if it did as long as the story sold. It's also possible to imagine that Quigley Corp. is simply under attack by desperate short-sellers who have simply lucked out in finding a cast of shady, but in this case honest, characters connected to the company.

In failing to address the overall accuracy of these diverse accusations, and thus the credibility of the short story overall, the Barron's article presents a potentially misleading perspective. There is, for example, no way for Alpert to know what the SEC investigation will uncover or whether it will implicate Quigley officials in securities violations or harm Quigley's stock. Indeed, there are few better examples of offline hype.

On the other hand, Quigley Corp. does have some past and present relationships that should give investors serious pause. "If someone wants to accuse us of being naive and/or stupid, I can understand that criticism," General Counsel MacAniff said.

But investors' real worry is that company officials may be guilty of more than poor judgment or inadequate due diligence when choosing business associates. A related concern is that Quigley has been issuing stock, stock warrants, and stock options at a torrid pace. Even if these activities are not part of a stock rig, as the company's critics suggest, they do mean that Quigley insiders and certain undisclosed investors have generated some rather astonishing paper profits as the stock has risen, even as other shareholders have seen the value of their shares diluted.

The Short Story

"I've got to be honest with you, I've never seen a manipulation work this well."
-- Anthony Elgindy on Quigley

To take Anthony Elgindy at his word is to believe that you're talking to one of the last honest men on Wall Street. As president of Key West Securities (KEYZ), a Fort Worth, Texas firm that makes a market in Quigley, Elgindy says that he's seen his share of conflict and has risen to the occasion to do the right thing -- even when it's meant facing down the Mob or losing money on a position while he made others aware a fraud was afoot.

In Gary Weiss's Business Week story on the Mob, for example, Elgindy was mentioned as the one market maker who refused to cease trading in First Colonial Ventures when threatened by parties who had physically assaulted other market makers in an effort to "persuade" them to back off. Elgindy told Rogue that he has served as an expert witness on securities fraud and is currently a federal witness and informant on three ongoing cases. He said he's been sued "maybe 20 or 30 times" for slander but never lost a case, even beating Bear Stearns.

"I really stress the accuracy of the information above all else. If you can't put your phone number and your name to it, then don't bother writing about it," he said.

Elgindy is one the most vocal critics of Quigley Corp. His posts on The Motley Fool message boards using names such as "Stock Dung" and "DntWstMyTm" have been merciless. He's also believed to be one of the main sources providing information to Jonathan Levy, the chief investigator in the SEC's regional office in Miami and the man leading the probe into trading in Quigley's stock. Elgindy is also the only trader willing to be quoted on the matter.

In a phone interview the day the Barron's story broke, Elgindy said that he had turned over to the FBI and the SEC over 30 tapes his firm had made in accordance with federal protocol allowing traders to tape phone conversations. He said these tapes included threats and trash talk from, among others, Jerry Rosen, a former associate of Carousel Consulting's Joe Radcliffe and currently a trader at J. Alexander Securities, the most bullish market maker in Quigley.

"I know some market makers who are involved in Quigley who have received dead fish in the mail," Elgindy said. "The message is, get out of the stock... Whatever you can imagine, it's absolutely there [on the tapes], from 'You're going to die' to 'Your family is going to die' to 'Your cattle are going to die.' "

Elgindy said he's concerned for his safety, but he's also full of casual bravado. "Mob guys really look out of place among the cattle and the fields [of Texas]. They pull up in their Cadillac, I don't know, they just don't blend in. There might be four Italian guys in the whole state."

In Elgindy's view, "Quigley was a rig from the very beginning. It most definitely was... If you know anything about stock fraud, what they will do is that they'll do a reverse split. They take over a company that's got nothing."

The reverse split reduces the number of shares outstanding so that a company can then be less conspicuous in issuing new shares and reducing the stake of the old stockowners. Elgindy believes that's what happened with Quigley. "They issued new shares, brand new shares to themselves. Then they issued themselves a series of options. Then they issued stock to offshore entities. Then they issued stock to their brothers, their families, their wives... You have a situation that's set up to benefit the insiders."

Thoroughly skeptical of the Cold-Eeze product, Elgindy said that Quigley's stock has risen mainly through skilled promotion and manipulation by market makers such as Rosen. He said that when the SEC gets all the trading records together, "they'll see there's a big giant circle where all the shares are changing hands among the same people all day long." That is, he believes that a covey of market makers working together pushed the stock higher, through coordinated efforts to push up the bid. "There is no real market [for Quigley]. J. Alexander and Jerry Rosen dominate the market... And when you have a rigged market, the stock needs to be pulled."

Elgindy clearly thinks that Quigley officials have participated in the alleged rig. For example, he claimed that someone with the company actually sent the phony press releases to Bloomberg. "Jerry Rosen was calling market makers [on January 10th] and telling them that there was going to be a false press release on Quigley, and the company's upset -- before the press release even came out."

He said that these false press releases serve two purposes. They allow Quigley to "blame it on the shorts, to play victim" while also trapping the shorts. "They like to send out information which would cause people to get more short because they know they got the stock logged.... Everybody who's in this stock who's short is just holding their breath."

At the time, Elgindy said he had no position in Quigley. "When an investigation is initiated, I usually try to flatten out. I don't want there to be a conflict. I don't want to impugn or detract from my credibility." He also makes no secret of what his position had been. "I was short the stock, and I lost the money."

Though American brokerage houses do not allow individuals to short stocks traded on the OTC Bulletin Board, anyone willing to put up a 200% cash reserve can do so through Canadian firms. Still, the largest short-sellers of Quigley are likely the market makers themselves making very active bets against the stock. Indeed, market makers in these stocks, and even stocks listed on Nasdaq's Small Cap market, do not have to follow the normal Nasdaq rules requiring traders to short only on an uptick. They also do not have to settle a short position within the otherwise typical 10-day period. That is, these traders can establish naked short positions and hold them indefinitely, or until shareholders call for physical delivery of shares, which puts pressure on the clearing firms to produce the stock certificates.

As Elgindy and others attest, many markets makers have been forced by their clearing firms to cover their short positions in Quigley. One trader said that on January 8th, a day the stock soared, total forced buy-ins hit 150,000 to 250,000 shares. Knight Securities (NITE), M.H. Meyerson (MHMY), and Key West were all said to have been bought-in that day. As Barron's suggested, the bullish market makers knew there were forced buy-ins coming, so they simply moved their bids out of the way, allowing the stock to soar. The huge swings in price during this period suggest the shorts were being squeezed in waves, and Quigley shares simply traded much lower again after each wave.

For his part, Elgindy denied that his firm was ever bought in. He also said that the short sellers involved in Quigley have deep pockets and that "they're not going to go anywhere." In fact, he said many simply re-established their positions after being bought in.

If Elgindy's conspiracy theory is wrong, he'll obviously be involved in some serious litigation down the road. For someone who says he prides himself on his credibility and accuracy, though, Elgindy offers some rather dubious arguments.

For example, on January 2nd, Quigley Corp. announced preliminary results for the first quarter of fiscal '97, which ended December 31st. Revenues were $3.9 million with "anticipated net earnings" of $1.8 million. Elgindy and other critics or short sellers don't see how a company with merely $370,000 at the end of September could even produce such sales. Moreover, they note that while the company registered fiscal '96 sales of $1.05 million, $607,000 of that figure showed up as receivables, meaning the company wasn't getting payed in a timely fashion.

"They don't have a credit line; no one is financing the receivables," Elgindy said. "I don't see any kind of financing activity. How is this stuff being manufactured and sent out without money?" Indeed, he wondered if the lozenges actually were being sent out, and if so, where, since retailers didn't seem to have the product.

Elgindy said that he has made monthly phone calls to George Eby, the holder of a method patent for the use of zinc gluconate as a cold remedy. Quigley Corp. gave Eby 60,000 shares plus a royalty of 3% of gross sales for the rights to his patent. Elgindy said that each month, he asks Eby about the size of his royalty check. For October, the check was about $5,000; for November, about $15,000.

Elgindy argues, then, that total Quigley sales for the first two months of the fiscal first quarter were around $660,000. That meant Quigley must have sold $3.24 million worth of lozenges in the final month of the quarter. "Yet the company in the same breath says, in January, they're not going to be able to send out more than a million and a half because they don't have the capacity to do more," Elgindy said. "So they had the capacity to do about $3 million in December, but they lost it in January?"

It's a creative theory based on an insightful research angle. Unfortunately, the theory seems to fall apart due to several inaccuracies. For one thing, Quigley's press release of January 2nd actually indicated that the company "was implementing its previously announced plan to increase manufacturing to approximately $1.5 million per week." The 10-KSB does say that for November and December, the company was manufacturing and shipping product "at the rate of approximately $500,000 per week." But Elgindy's other assumption is wrong too.

The 10-KSB states that Eby receives his royalty "on all gross sales (subsequent to the Registrant receiving payment upon such gross sales)." Considering the high level of receivables at the end of fiscal '96 and the inevitable lag in cutting checks to Eby, it's not at all clear that Eby's royalty figures, even if accurate, can tell an investor anything timely about Quigley's sales.

Elgindy and other critics also claim that transfer records confirm that the all-important Cleveland Clinic trial was sponsored and payed for by Quigley Corp. "Everybody was compensated through the issue of shares," he said.

Quigley's MacAniff denied that charge. "We paid them nothing for the study," he said last week. The company is "contributing" to the cost of the new Clinic study of children in the Cleveland area, but all Quigley provided for the first study was the lozenges.

In an earlier interview in December, Dr. Michael Macknin, the lead author of the Cleveland trial, said that the Clinic received no compensation from Quigley for the first study. "I'd have had them pay for the first study if I'd thought it was going to work. We ended up financing the whole thing." Macknin said that for the current children's study, Quigley was paying 10% of his salary, but that money was going into a research fund at the clinic, not directly to him.

On the other hand, public filings disclosed this past Thursday indicated that Macknin had filed to sell 9,000 shares of Quigley. Macknin's office referred all questions to the Clinic's media office, which did not respond to Rogue's inquiry. Friday's Washington Post reported that Macknin said he bought the stock from the company at market value after his paper had been completed but before it had been published in the Annals of Internal Medicine. Counsel for Macknin and for the Clinic cleared the purchase.

Though the issue raises certain ethical questions and is sure to further cloud the trial results, attorneys questioned by the Post said Macknin's purchase and sale does not constitute insider trading. Moreover, since the study was already completed, it's difficult to argue that his decision to purchase Quigley shares influenced his paper's findings -- though the company's critics will surely make that case.

On the other hand, an unconfirmed report circulating on the message boards said that Macknin had told Bloomberg News that in March of 1996, Quigley Corp. gave him options to purchase 10,000 shares at $1 a share. If this proves true, it would raise some more serious questions about the researcher's integrity and the company's honesty in addressing the issue of compensation.

The Company Responds

Quigley Corp.'s official view is that the company is under attack. In two long, occasionally tense interviews with Rogue, Quigley General Counsel Thomas MacAniff sounded like a man reluctantly making a list of people who might eventually need to be sued even as the company tries to remain focused on the key issue of increasing its manufacturing capacity. But he said, "I'm not going to sue somebody if I can avoid it. We're out to produce a product.... I've never seen a company in my life litigated into a success."

This past Wednesday, new Quigley CFO George Longo announced that the company was bringing in a Big Six accounting firm, replacing the controversial auditor Nachum Blumenfrucht. The previous Wednesday, however, MacAniff defended Blumenfrucht, giving no indication that the company had plans to replace him.

MacAniff explained that the company found Blumenfrucht in 1991 through their securities counsel at the time. "It was a small company, his price was right. He did a good job." MacAniff also focused on what he deemed the highly misleading reporting in the Barron's piece.

He said that Blumenfrucht did work as an auditor for Phil Abramo, but that the assignment involved auditing "one blind pool, that had $18 to $19 thousand in it, for one year." MacAniff said that Abramo has been around for years and "involved in God knows how many transactions," and yet Blumenfrucht was the auditor for one 1994 pool in which Abramo was merely one participant. The Barron's portrayal of Blumenfrucht as "Abramo's auditor" was "true as far as it goes" but completely misleading since it failed to address the context. "Is it actionable? No. The guy who wrote the article is clever."

A member of the New York State Society of Certified Public Accountants, Blumenfrucht is a licensed CPA in good standing with the state of New York. The State Education Department's Office of Professional Discipline said there had been no disciplinary actions against Blumenfrucht since his license was issued in April of 1981. He also has a clean record with the SEC.

On the other hand, Blumenfrucht, as the company's critics have charged, does not participate in peer review. Though the New York State Society of CPAs has no official position on the issue, Bill Pru of the Society's compliance staff said it was "very unusual" for a public company to be audited by a CPA who does not participate in peer review.

MacAniff noted that neither the SEC nor the NASD requires an auditor to be peer-reviewed -- which is true. But Nasdaq officially suggests that companies going public and joining either the Nasdaq national market or the small cap market -- though not necessarily the OTC Bulletin Board -- should "retain a national accounting firm or a firm that is a member of the American Institute of Certified Public Accountants (AICPA)." Blumenfrucht was not and could not be a member of AICPA because the Institute requires CPAs to participate in peer review.

MacAniff addressed other charges made by the company's critics. He said "it's correct" that Raphael "Ray" Bloom introduced Quigley Corp. to Diversified Corporate Consulting but that the company had never made any payment to Bloom. MacAniff also said that the company "had never heard of" Interactive Media Services. According to Elgindy, Interactive held 132,000 shares of Quigley at the end of December in an account at Empire Securities, a firm based in Syosset, New York. The account listed Bloom's New York address as the key contact. (Empire's president Robert Spitzer said that figure is "ridiculous" and "absolutely wrong.")

Diversified is a different issue. MacAniff said that Quigley Corp. signed an agreement with the financial consulting firm on September 3, 1996. "There was no contract between the company [and Diversified] nor any investment in Quigley by Diversified until Septemeber 3rd," he said. But the agreement signed that day "was the result of contracts that had been passed back and forth since, I think, early June."

Though the nature of that contract remains hazy, it appears to be the case that Quigley agreed to take on Carousel Consulting for its public relations and investor relations work at the same time that Diversified made an investment in Quigley, the investment being, according to MacAniff, "the main relationship." He said that Diversified purchased 300,000 shares in September. "There was another investment in October. They exercised some warrants at $3, or something like that."

Diversified's managing member is William A. Calvo, III, who was disbarred in 1988 for engaging in stock fraud in an offering for The Electronic Warehouse, Inc. Was Quigley Corp. aware of this in September? "Hell, no," MacAniff said. Neither he nor Guy Quigley nor securities counsel Bill Riley knew about Calvo's record at the time. "I thought we had him checked out, but I guess not. Frankly, it's water over the dam. As far as I'm concerned, they met the terms of their contract with us." MacAniff said the company had originally thought that Diversified could do more for them in terms of "getting the product introduced," but "the product introduced itself."

The company's critics suggest, though, that this deal with Diversified may have been part of a stock rig. Elgindy said that the people behind Diversified own SGA Goldstar, an online newsletter which the SEC has charged with engaging in a systematic practice of promoting small stocks, such as the now halted SYSTEMS OF EXCELLENCE (NASDAQ: SEXI), in exchange for shares which it would then sell into the buy orders it had helped generate. Around the time of Diversified's deal with Quigley, a poster to the AOL Investor's Network stock boards said that Quigley's home page was featuring a recommendation from SGA Goldstar.

MacAniff said that's untrue. "They never appeared on our Web site. The only knowledge we have of them is somebody faxed us an SGA Goldstar report that was totally inaccurate, and we wrote SGA Goldstar and told them that their report was inaccurate. But we don't know who they are."

Eric Schwartz, the SEC's lead attorney on the SGA Goldstar complaint, refused comment regarding any possible connection between SGA Goldstar and Diversified or SGA Goldstar and Quigley. In mid-December, the commission filed an amended complaint listing 10 companies, in addition to Systems of Excellence, which it believes SGA Goldstar promoted for cash or stock payments. Schwartz simply said that these examples were "not meant to be exhaustive."

MacAniff said that he did not know if Diversified still owned any Quigley shares. "I think they sold all of their stock between 4 and 6," he said. Indeed, "part of that [the October S-8 filing] was Diversified, if I'm not mistaken." If that were true, however, Diversified would appear to have less reason to complain to the SEC in December about fraudulent faxes harming Quigley, which MacAniff said they did. During his second conversation with Rogue, MacAniff said, "I don't feel that we have any ongoing relationship with Diversified. But they're our shareholder, and they hold a certain investment."

As for Carousel, Quigley is still paying the firm $3,000 a month to handle a limited amount of investor contact. "That will continue probably until August," MacAniff said. InFocus, based in Princeton, New Jersey, has recently been hired to handle all new or current investor inquiries or contacts with the media.

In terms of the basic question of how the company has been able to ramp up production so fast with so little cash on hand, MacAniff said simply that "there are a number of turns, and fortunately, the payment is prompt." Quigley now has "more than adequate cash." The company is continuing to work to expand production significantly beyond the current level of $1.5 million a week. He said that "in the very short term" the company hopes to double that. "We're trying to be very conservative about our capacity."

Additional capacity is necessary because Quigley currently has a $12.5 million order backlog, which MacAniff characterized as "stuff that should see delivery in the next 60 days or immediately, if possible." He also said that a $7.5 million purchase order from Zee Medical is not included within the above backlog since "that purchase order is not as firm as the others."

MacAniff also said that at least one post to the Fool folder concerning upcoming competition was inaccurate. "Hedgy1" had posted a message indicating that Don Lepone, president of leading private label lozenge maker NUTRAMAX (NASDAQ: NMPC), had told analysts in a conference call that his company was looking at marketing a Cold-Eeze knock-off product. Lepone was said to have indicated that he did not believe Quigley's patents were insurmountable. MacAniff said that Quigley Corp. had been approached by Lepone about doing contract manufacturing for Quigley and that the parties had met in December to discuss the matter.

Reached this past Thursday for comment, Lepone confirmed MacAniff's account. "Our relationship with Quigley is that we are having conversations, ongoing conversations, with them to become a contract manufacturer of their product."

Lepone said he never used the word "patent" in the analyst conference. "My statement of the conference call was that Nutramax was working on a zinc product, as well as everyone else that we know about. That was my statement of the conference call. And working on a zinc product could mean that we were working with someone on a zinc product or we were working to develop our own product and I never said one way or the other what that was."

Filing New Shares

Quigley Corp.'s critics do score some points in their critique of the company's public filings. Consider the rather arcane example of the private placement of shares under the SEC's Regulation D, the section of rules governing the limited offer and sale of unregistered securities.

In Quigley's 10-QSB quarterly filing for the third quarter of 1996, the company indicated that it "continues to offer shares under its 504 offering and is contemplating other equity offerings." Regulation D, section 504 permits a company to sell up to one million dollars in securities in a private placement. These shares can be resold without being formally registered, though the company must submit a Form D notice to the SEC that the sale took place.

The company's critics argue that offerings under 504 are not permitted for a company such as Quigley which files with the SEC pursuant to section 13 or 15d of the Securities Exchange Act of 1934. SEC spokesperson John Heine declined to comment on any specific case, but conversations with him suggest that a reporting company -- such as Quigley was in June of 1996 -- cannot rightfully offer shares under section 504. It's also unclear whether the company's January 1995 private sale (the last reported under section 504) of 1.6 million shares for $225,000 was proper. On the other hand, the company's proposed $6-8 million common stock offering mentioned in the subsequent 10-KSB would be legitimate under Regulation D section 506.

Other filing questions pertain to Quigley's liberal issuance of new shares and stock purchase warrants. Who received all these shares and warrants, and exactly how well do the numbers add up? (The following calculations do not take into account the recent 2-for-1 stock split unless otherwise noted.) At the end of the 1995 fiscal year on September 30, 1995, shares outstanding stood at 33,614,140 or 3.36 million based on the subsequent 1-for-10 reverse stock split which became effective on January 11, 1996. Subsequent 10-QSB filings show that number rising to 4.19 million by the end of June and again to 4.77 million by the end of the 1996 fiscal year on September 30, 1996. The company's recent 10-KSB indicates that there were 6,049,594 shares outstanding as of December 31, 1996.

The company's 10-KSB does account for the additional 1.41 million shares issued during fiscal '96. The largest allotments included 269,320 to pay for goods and services rendered (the majority for advertising & promotion); 530,000 shares to "various officers for past services rendered"; and 497,087 shares to "various individuals [who] purchased shares, options or exercised options in the Company."

Yet, these shares are now worth 1,000% to 2,000% more than they were worth when the company issued them. In retrospect, then, Quigley Corp. appears to have used undervalued stock to pay its key officials and promoters even as it sold such low-priced shares to "various individuals" in transactions that, all total, added 42% more shares to the total outstanding.

Given Quigley's shaky financial condition in recent years, these transactions are perhaps not very surprising. The company may have had no other choice than to use its stock to keep afloat. Still, the company has continued to issue shares, options, and stock purchase warrants, often at exercise prices that now look awfully sweet. There are so many currently exercisable options and warrants that it's difficult to determine precisely how many fully diluted shares of Quigley there are.

When asked to explain these matters, Quigley general counsel MacAniff referred Rogue to Robert Friedman of New York's Olshan, Grundman, Frome and Rosenzweig. Friedman has only recently begun working as a securities attorney for Quigley. He said he could not speak to the specifics but that the company had assured him that all the "share ownership and option and warrant issuances that are required to be reported" have been. "I think you can assume, then, that the publicly available documents speak for themselves," he said.

Yet exactly what they are saying remains both a bit unclear and potentially troubling to investors. Footnote 14 of the 10-KSB indicates that as of September 30, 1996, there were 800,000 Class D stock warrants outstanding (the last issued in February 1996) exercisable at $1.00 and 850,000 Class E warrants issued in July of 1996 exercisable at $3.50. The filing shows that 585,000 of these various warrants are held by Quigley officers or directors, including 250,000 held by Guy Quigley.

Item 5 of the 10-KSB shows that as of December 26th, an additional 700,000 Class E warrants exercisable at $3.50 had been issued. Since these exercisable warrants do not appear in the table of beneficial owners, it would appear that Quigley Corp. issued these warrants to an outside party sometime in the first quarter of fiscal 1997. At the recent post-split price of $10 per share, these warrants could now be exercised for a quick $11.6 million profit.

Footnote 14 also says that Quigley Corp. "sold incentive stock options to various salesman [sic]." For $960, the company handed out options for 140,000 shares exercisable in the $1.25 to 1.50 range "upon reaching certain sales goals."

In addition, the previously mentioned sale of 497,087 shares during fiscal '96 went hand-in-hand with the sale of options. Footnote 10, part t says, "By agreement with the optionholders, 1,250,000 shares of common stock underlying the purchase options were registered pursuant to Form 8-A in Agust [sic] and October 1996." The S-8 filing of August 13th shows that one million of these options could be exercised at $2.50 while the S-8 of October 25th registers 250,000 shares exercisable at $3.00.

The 10-KSB filing, then, suggests that Quigley has about 8.54 million shares outstanding on a fully diluted basis if one takes into account the currently exercisable options and stock warrants. Aside from 250,000 Class D warrants issued in December of 1994, the rest of the actual or potential share expansion occurred in the 15-month period that included fiscal '96 and the first quarter of fiscal '97. During this period, the company effectively expanded the shares potentially outstanding by 4.93 million, or 147%.

The Short Story Continued

Quigley's massive share expansion does, at the very least, dilute future earnings. For example, the company's anticipated first quarter earnings of $0.30 per share really amount to just $0.21 per share on a fully diluted basis. The share expansion also offers at least circumstantial support for the story told by Elgindy and others who believe Quigley is a stock rig.

In addition to the 530,000 shares and 585,000 warrants that have gone to officers and directors, more than 300,000 shares are believed to have been sold to Diversified at perhaps $3 per share or less, based on public filings and MacAniff's comments. Also, 300,000 stock warrants exercisable at $1 were issued to Pacific Rim Pharmaceuticals. As the company's critics are quick to point out, and MacAniff confirmed, Guy Quigley's brother Gary is one of the principals in Pacific Rim. Still, both MacAniff and the SEC filing indicate that Pacific Rim received these warrants for developing the Far East market for Cold-Eeze. Based in London, Gary Quigley is also working to market Cold-Eeze in Europe through Scanda Systems Ltd. Exactly who received all the other shares and warrants isn't public knowledge.

One of the shorts' more provocative claims is that the presumably orchestrated run-up in Quigley shares has been accompanied by discrete Quigley sales by insiders or outside conspirators, often through "nominee" accounts. Empire Securities in Syosset, New York is alleged to be one center of such trading. The SEC's Jonathan Levy has requested Empire's account records for anyone who traded in Quigley from January of 1996 to January 10, 1997. Levy also asked to see the firm's own trading records in Quigley, for which the firm did serve as a market maker.

Individual account statements, or partial statements, obtained by Rogue show that Empire managed accounts for Quigley family members and some associates of the company, including Ray Bloom. As Quigley stock rose through the teens during December, some of these people were selling Quigley shares.

These accounts were all managed by the same broker, confirmed to be Rich Fredericks, who left Empire on December 27th to join Long Island-based Colin Winthrop Securities. That firm makes a market in Quigley and is one of several that Elgindy said is involved in the alleged rig.

The question is, what does such information really tell us? The shorts say that it establishes a link between Bloom and the Quigley family, and that Fredericks's oversight of these accounts allowed him to manage the collective sell-out even as manipulators drove the stock higher.

When asked to comment on these accounts and the stock sales in the mid-teens, Quigley's MacAniff said, "They sold them way too early, didn't they?" Indeed, Quigley shares tripled in the month after these sales began. MacAniff also noted that Guy Quigley, his wife Wendy, and his children are the biggest holders of Quigley stock, with about 1.3 million shares not counting purchase warrants, and that "not one damn share of that has been sold."

According to Fredericks, the Empire accounts with any sizeable holdings in Quigley had been under his care for five years; he previously worked with a firm that did underwriting for Quigley Corp. He dismissed the idea that these accounts were connected to a stock rig. "Since the people owned the stock for five years, I find that a long time to wait." When asked directly if he had been helping manipulate Quigley Corp. stock, he curtly replied, "What, are you crazy? Good-bye." And with that he hung up.

Empire President Robert Spitzer said, "There's really no story here." He said that one of the Quigley family accounts had held Quigley Corp. shares with Empire for at least 2 to 3 years. To say, as the shorts do, that these were "nominee" accounts, is preposterous, according to Spitzer. "What do you think, these accounts are trading millions of shares?" He said Empire had "nothing to do with all of this" and that his company was "a peanut" in the SEC's probe.

Spitzer said that Empire's customers traded only about 75,000 Quigley shares during the entire month of December, a drop in the bucket when daily trading volume was running at about half a million shares. He also said that the firm's own trading didn't amount to much either "We're very conservative. We watch the net capital very carefully. We were out of the way [on the bid and ask] almost all the time on this thing."

Spitzer said that Fredericks's departure from Empire had nothing to do with anything involving trading in Quigley. Rather, Fredericks left the firm after Spitzer had decided to get Empire out of the trading business altogether. "I didn't like that whole side of the business. I didn't understand it. I just didn't like it. I was uncomfortable."

What Spitzer would really like to know is who obtained the individual account records from Empire that are now circulating. Moreover, how did someone obtain a copy of the letter sent to him by the SEC's Levy. "The SEC wants to know also. I didn't send it to anybody.... You tell me who's behind this whole charade." Spitzer added that someone he knew had received a false letter, supposedly from the SEC, on falsified SEC stationery.

On the face of it, it's hard to see that there's much to make of the Empire connection based on the materials Rogue could obtain. The company's critics have woven a compelling story around this material, but the plot sometimes falls flat. For example, Elgindy thinks that one Empire account held by Robert Smith-Felver and Martha P. Smith-Felver is a nominee account, and he wonders exactly who these people are and from where they're getting their shares.

The 10-QSB for June answers the question. The Smith-Felvers, in April of 1993, exercised their options to acquire 25,000 shares, after adjusting for the reverse stock split. Since "they were owed money by the Company for advertising services," they applied the $2,500 as payment for the shares. In August of 1994, they exercised their remaining options, applying an additional $2,500 owed to them by Quigley as payment for 25,000 shares. These shares were restricted.

Back to the Product

"We cannot evaluate the truth of the implications on the second page. But on the first page, when they talk about the research, they're in gross error.... And I resent it. If they're as inaccurate on the second page as they are on the first page, then they're a bunch of clods."

-- Dr. Nancy Godfrey on the reporting by Barron's

When queried shortly after the Barron's article appeared, Dr. John Godfrey and his wife Dr. Nancy Godfrey, patent holders and paid Quigley consultants, were initially quite taken aback by the conspiracy theory Alpert suggested. They both said that none of the figures mentioned in the article were familiar to them aside from Blumenfrucht and that despite sometimes daily, wholly unannounced visits to Quigley, they had never seen any signs that Guy Quigley or other company officials were less than honorable people. They admitted they might be naive, but their initial reaction was that the short story of intrigue sounded "almost like a total fabrication."

Dr. Nancy Godfrey, in particular, was furious at what she deemed Alpert's "gross error" in discussing the clinical research. What it comes down to is that the Godfreys don't believe even Macknin's specific caveats are warranted, since, they argue, the data from the Cleveland Clinic's trial are actually stronger than Macknin's group represented them as being in the paper published last July in the Annals of Internal Medicine.

The Godfreys said they were originally set to have their names on the Macknin paper since they had helped the Clinic set up the protocol, but that they pulled their names from it because Macknin insisted on backing away from their original agreement on what patients would be included in the final comparison. That is, Macknin insisted that the study compare study subjects on an "intent-to-treat" basis. That meant that anyone who enrolled in the study would be included in the final numbers, regardless of whether they followed the protocol. Some patients failed to record their symptoms on a daily basis, as required. Others took little or none of the medication. Others were treated for flu or with antibiotics, suggesting that these patients were suffering from more serious infections than a cold virus.

Comparing subjects on an intent-to-treat basis is a perfectly reasonable way of conducting a clinical trial. But according to Dr. John Godfrey, it was not the criterion of "protocol-evaluable patients" used in all of the previous studies, including the Godfreys' Dartmouth College trial, which the Cleveland trial was attempting to replicate. Based on the original plan, then, none of these unassessable patients should have been included in the final comparison between the group receiving zinc gluconate glycine and the group receiving the placebo. That meant that data for 10 of the 50 patients on zinc and 7 of the 50 patients on placebo should have been omitted from the final comparison.

If one assumes that the zinc works, as the Dartmouth study showed, then it's clear why this methodological change would water down the final results. Ten patients who might have benefitted from the zinc likely did not because, for example, they didn't take the medicine at all or they had more serious ailments. On the other hand, the seven patients on placebo missed nothing, or nothing but the placebo effect. Thus in a November article in Alternative Therapies that re-analyzes the Cleveland Clinic's data, the Godfreys suggest that that trial actually showed a 48% reduction in a cold's duration rather than the 42% which Macknin reported.

Dr. John Godfrey also disagrees with Macknin's cautionary view that it's possible that there was one virus going around the Cleveland Clinic at the time of the study that just happened to be especially susceptible to Quigley's product. "Let us be realistic!" Godfrey said, in a written response to Rogue on the subject. He pointed out that the Cleveland and Dartmouth trials both showed remarkable efficacy for the use of zinc gluconate glycine lozenges. And these trials were conducted at sites over 500 miles apart; were separated by over 5 years; were conducted in different seasons (Dartmouth in April, Cleveland in October); were conducted by investigative teams who both expected a negative result; sampled different populations (mostly young male undergraduates at Dartmouth and mostly mature female staff at the Cleveland Clinic); and were conducted according to nearly identical protocols.

"Realistically," Godfrey wrote, "what do you think the odds are that the two near-identical results could be due to both populations being infected with one particularly zinc-susceptible virus or to some other artifact(s) at both sites?"

Barron's did not speak with the Godfreys, however. What's more, Alpert does not even include Macknin's own specific defense of his data in light of questions raised by Gwaltney concerning how adequately patients were blinded to whether they were getting zinc or placebo. That information is in the Annals paper and Macknin was perfectly willing to discuss the matter when Rogue caught up with him in December.

In medical science, what counts as sufficient proof that a treatment works is often contingent on the politics of the disease and the clinician's sense of patients' needs. There is no hard and fast rule. Certainly, clinicians would like to see several large clinical trials conducted at different sites, with perhaps more than a thousand patients studied, before they are willing to say that a therapy is truly effective. But that kind of caution is hardly equivalent to saying, as some of Quigley's critics do, that the Cleveland Clinic study was bogus and that no medical professional would accept it as legitimate. A close reading of the published research suggests that that is a completely untenable position. Based on the available evidence compiled on 173 patients, Quigley's Cold-Eeze actually does appear to work quite well. Further research needs to be done, but that research seems likely to confirm and even further extend the findings of the Dartmouth and Cleveland Clinic studies.

Of course, the current battle between Quigley Corp. and its critics ultimately has little to do with whether the Cold-Eeze product works. It's about the integrity of a company and the integrity of the marketplace. Ultimately, the matter is now in the hands of the SEC.

--Louis Corrigan (RgeSeymour)