E. Thomas Arington, a devout Baptist who likes to open meetings with a prayer, sees his battle to market a generic version of the country's best-selling prescription drug as a tale of biblical proportions.
David vs. Goliath: Mr. Arington's Duramed Pharmaceuticals Inc., a small generic drug maker tucked off Interstate 71 in Pleasant Ridge, vs. drug giant Wyeth-Ayerst Laboratories, which makes a $750 million-a-year, conjugated estrogens drug named Premarin.
Premarin is used by about 8 million American women every day to fight the bone disease osteoporosis - a market that could triple in the next five years, thanks to aging baby boomers.
But for all the national publicity it has generated, Duramed's struggle to walk onto Wyeth-Ayerst's turf is merely the latest chapter in a tumultuous corporate survival tale. In fact, given its trials the past decade, Duramed might be more appropriately likened to another biblical figure: Lazarus rising from the dead - repeatedly.
Amid bank-loan restructurings, a recall of its top product, a private workout with debtors and losses totaling $33 million, Duramed held on through the late 1980s and early 1990s. Amid a new round of layoffs last year, a wildly fluctuating stock price and premature media reports of the company's imminent demise, Duramed held on.
''Where do I get my strength from? God Almighty,'' Mr. Arington says with his Shelbyville, Ky., roots evident in his accent. ''That's where it is.''
Duramed's survival is even more remarkable, given the pharmaceutical industry's track record. Numerous small drug makers have either withered or sold out while awaiting regulatory approval or dollars to market a would-be blockbuster product.
Even as Duramed continues to wait and hope for approval of a generic Premarin, which it calls Cenestin, the company and its chief are once again showing signs of their resilience.
In the past few months, Duramed wiped out its debt with longtime lender Provident Bank and now is quietly moving into an expansion - hiring back about 40 of the 110 or so workers it laid off during 1996, filing new drug applications with regulators, striking joint-venture deals and scouting around Greater Cincinnati for more distribution space to lease.
Perhaps most promising is an as-yet-undisclosed joint venture with a raw-materials supplier that would propel Duramed into the $750 million market for oral contraceptives - a market that, like Premarin, has no generic competition.
With heavy media attention on conjugated estrogens, ''it's easy for the outside world to conclude Duramed really is a one-trick pony,'' Mr. Arington said.
''But they don't know our story. ... Beginning in 1998, we're going to be a healthy company with or without conjugated estrogens,'' he said.
On the cusp of a coup
On the eve of his 60th birthday this month, Mr. Arington is on the cusp of one of the biggest coups in pharmaceutical history if he can wrestle away a substantial share of the estrogen market from Wyeth-Ayerst.
Extracted from the urine of pregnant mares, conjugated estrogen has proven a valuable tool in easing the symptoms of menopause as well as fighting bone deterioration caused by osteoporosis.
A recent study determined that women who take estrogen-replacement drugs like Premarin might be at increased risk for breast cancer. But Wyeth-Ayerst said the study doesn't change its belief that the benefits of hormone-replacement therapy outweigh the risks.
And analysts are still bullish on Premarin's potential.
Duramed's sales of $50 million a year could easily top $300 million with a less expensive, generic Premarin hitting the market. That's why the occasional media speculation of imminent approval during the past two years has sent Duramed's stock soaring - only to see it fall back after more silence from the Food and Drug Administration.
Mr. Arington says he has been tempered by playing the waiting game with regulators and frustrated playing the political game with Wyeth-Ayerst's strong lobbyists.
So he regrouped to survive and grow with or without conjugated estrogens.
A year ago, Duramed had only one pending application with the FDA: its quest to sell a generic Premarin. Today, it has 10 drug applications in such fields as metabolic disease, the central nervous system and cardiovascular care. Seventeen more new-drug applications are expected to be filed with the FDA this year.
Even without conjugated estrogens, Duramed executives say they could generate four times as much gross profit in 1998 if its other pending applications are approved.
''It should start to get brighter by the third quarter of this year,'' Mr. Arington predicted.
Other pluses include:
An improved balance sheet. Out of $44 million raised in a pair of stock offerings last year, about $4 million went for fees, roughly $20 million to repay Provident and the remainder dedicated to research.
Three new joint ventures that the company briefly talked about publicly for the first time in a recent interview with The Enquirer. A drug application emanating out of the oral contraceptives partnership will be filed this year with anticipation of approval by mid-1998. Two other joint ventures involve oncology and an undisclosed partner who has agreed to market Duramed products in the Pacific Rim.
Last year's purchase of Hallmark Pharmaceuticals moved Duramed into offering and researching more drugs using controlled-release technology.
But the acquisition came in a good news/bad news scenario that seems to follow the company. Duramed was forced to back away from marketing one of Hallmark's chief products, a hypertension drug named Captopril, because a dozen competitors in the market had eroded prices and eliminated any profitability.
Terry Dunlap, an analyst who tracks Duramed for National Securities Corp., is confident that the generic conjugated estrogens will be approved. But if not, he still has faith that the company's rejuvenated drug pipeline should help it see brighter profits ahead, and he has bought a small stake - he won't say how much - in Duramed himself.
And the analyst credits Mr. Arington for keeping the conjugated estrogens fight alive even as he pushes his company into new products, like a drug maker must.
''I think he demonstrates leadership, especially in the face of adversity, which is rare among certain CEOs, especially in the pharmaceutical industry,'' Mr. Dunlap said. ''I think he's a visionary who's willing to take risks. Not many people are willing to take the risk that Arington is.''
Consensus builder
Earl Thomas Arington grew up in the Louisville area in a Presbyterian household and attends Mount Carmel Baptist Church.
Despite the appearance of running the company autocratically, insiders say Mr. Arington's management style invites other opinions and consensus-building. He meets with employees once a month, fielding their questions inside the company cafeteria.
Proud, determined and sensitive to criticism, he has steadfastly and repeatedly battled those who would question Duramed's viability.
In summer 1995, when CNBC broadcaster Dan Dorfman reported that Duramed had a ''rotten'' balance sheet and a 50 percent chance of filing for bankruptcy within six months, Mr. Arington went on the offensive.
He said Mr. Dorfman was apparently being used to circulate bad information and orchestrate a damaging story against his company that would benefit stock speculators.
Mr. Arington won't say much now about Mr. Dorfman's analysis, except, ''I just ask you: Where is he today?''
Mr. Dorfman has since lost one of his other jobs, as an analyst for Money magazine, after he was investigated over whether he profited off his stock commentaries. A CNBC review last year said it found no evidence against him.
Mr. Arington's sensitivity might come out of having personal and professional stakes in whether Duramed thrives or falters. Not only is he Duramed's biggest individual shareholder, with a 15 percent stake, but three of his four sons work for the company.
Mr. Arington, a former district manager with American Cynamid, was running two pharmaceutical-consulting companies - Marketmaster and Hampton-Laine Inc. - when he began at Duramed.
For years, Marketmaster had sold Duramed products on a commission basis. When Duramed CEO Dasan Potti resigned in August 1987, Mr. Arington took over an operation embroiled in controversy.
''We were 120 days past due on every vendor,'' he recalled. ''We had unhappy shareholders, employees and vendors. Then it got worse.''
Two weeks before Mr. Arington came on board, the FDA launched an investigation into Duramed's manufacturing methods. The day after he took over, Oct. 23, the company launched a costly recall of its conjugated estrogens because of a packaging problem.
Regulators then began investigating widespread fraud in the generic drug industry, putting Duramed under an unwanted spotlight again.
After losses exceeding $33 million over a five-year span, Duramed managed a meager $315,000 profit in the first half of 1993.
''It's astonishing they've made it this far,'' Kidder Peabody analyst Jerry Treppel said at the time.
In 1989, the company filed a new petition with the FDA for conjugated estrogens and entered the regulatory limbo that continues.
Most disappointing year
Last year was not Duramed's roughest financially, but it was the most disappointing to its chief executive. Duramed fully expected immediate action on its conjugated estrogen petition following a special FDA advisory committee hearing on the issue in Washington, D.C., in July 1995. Instead, 1996 passed with no action.
The holdup with the FDA hinges on whether a valid generic version of Premarin must contain all 10 ingredients of Premarin. Duramed's Cenestin contains all but one of the estrogens: delta 8,9-DHES, which the government classifies as an impurity.
Wyeth-Ayerst officials have acknowledged delta 8,9-DHES might not be special, but they insist that by tinkering with Premarin's ingredients, there is a chance of changing the therapeutic response.
For now, Duramed stays in almost daily contact with the FDA and continues to hold on to a national-launch worth's supply of estrogen that was made and stockpiled inside its $11 million estrogen plant in Pleasant Ridge. If the FDA acts, the company will immediately triple its space, using largely vacant rooms down winding corridors dedicated to the estrogen project.
Mr. Arington, the optimist, repeats the same refrain he has for the past two years.
''If anybody is skeptical, it's me. But I have the distinct feeling (the FDA) is very close to a decision,'' he said. ''I think I'm patient ... I think on all fronts, we've made tremendous progress. When I look down that tunnel now, I can see the light.''
