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Stocks C / CNS, Inc.


Subject:  Re: Too many eggs in one basket? Date:  11/20/2004  12:10 AM
Author:  TMFWgourlay Number:  72 of 132

You seem optimistic about the company - do you think they rely too much on the nasal strips? Do you know when the patent will run out on that and other companies will be able to make them as well?


They definitely rely heavily on the nasal strips. According to their annual report, “Breathe Right nasal strip products currently represent the cornerstone of the Company's business.” But do they rely too much on the nasal strips? That's hard to say. Since their cornerstone product is making lots of money for them, it makes sense that they should market it in every way they can. “The Company intends to exploit new markets and opportunities that it believes exist for its current nasal strip products and plans to commercialize potential new Breathe Right branded products.” But they do have other products that are building strength, and management says they are actively seeking out other products and entire product lines.

Products now include nasal strips, snore relief spray, saline nasal spray, Vapor Shot personal vaporizer, and Fiber Choice tablets. Following are some quotes from the annual report showing their commitment to expanding their product line:

“In addition to expanding the Breathe Right® and FiberChoice brands and introducing other new products, the Company is exploring possibilities for acquiring or licensing new consumer health care products that have established consumer brands, particularly those that complement the Company's drug-free, better breathing and digestive health platforms. The Company is also considering opportunities for licensing new products and technologies.”

“The New Business Development Team is focused on the expansion of the Company's product base through the development, acquisition or licensing of promising consumer health care products. The New Business Development Team is responsible for identifying and evaluating potential new products, inventions and other business prospects that will enable the Company to achieve its long-term growth and profit objectives, including opportunities for the acquisition of established product lines and brands that may become the basis for a third brand platform.”

And you asked about their patent. I couldn't find any reference to when their patents expire, but they refer to multiple patents and trademark protection, and legal proceedings to protect them.
And they have some competition in spite of their patents.

“Although the Company is currently the leading manufacturer of external nasal dilation products, Schering Plough Corp. entered the market in September, 1998 with an external nasal dilation device. Schering Plough Corp. recently sold its nasal strip business to Aso Corp., a subsidiary of Aso International of Japan. In May 2003, Aso Corp. announced it was acquiring the marketing, sales and distribution of Schering Plough's nasal strip device effective June 3, 2003. Other companies have also entered the nasal dilation market with private label products.”

“Many of the Company's competitors have significantly greater financial and operating resources than the Company. The Company has developed and implemented marketing strategies aimed at minimizing the impact of competitive products. As a result of these strategies and other steps taken by the Company, the Breathe Right nasal strip has maintained approximately 90% of the nasal dilator market despite the entry of other competitors into the market place.”

“ The Company believes the patents owned and licensed by the Company on the Breathe Right nasal strip will limit the ability of others to introduce competitive external nasal dilator products similar to the Breathe Right nasal strip in the United States and most major international markets. The Company intends to aggressively enforce its patent rights covering the Breathe Right nasal strip and has engaged in litigation to protect its patent rights.”

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