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Hi Phil,

I generally agree with your points and having a diverse line of products for revenue. The problem I see with this is the cost of producing and selling this broad line of products. One can see this directly by looking at the gross margins and SGA. There are pros and cons to having a diversified or specialized product line, the best I see is having a balanced approach or middle ground for KG.

Having said the above, I believe nothing will beat a blockbuster drug and leads on to the issue of R&D.

You're right in that KG is light on the R&D and they make that up by product acquisitions, their underlying business. Competition for this type of business is fierce with companies such as Shire Pharmaceuticals, Watson Pharmaceuticals, Boivail Corp, Forest Labs, and others going after patent protected products. For KG to succeed in the long term and if they're not able to produce products in-house due to the small R&D, a partnership with a biotech company would be a better alternative. One such partnership (Novavax) has been successful in getting Estrasorb approved by FDS recently. Unfortunately Estrasorb address's the area of woman's health via HRT and this not a good market to be right now. If KG can partner with biotechs in the area of cardiovascular/respiratory, then there would be a better opportunities of a blockbuster. This is one strategic area I'd like to see KG management address.

I'll wait to see how the year ends and review the performance of KG. 2004 is going to be an interesting year and I'd like to see KG management announce some initiatives to produce growth of at least 15% in revenue.

Best of luck to all.


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