Deal Clears the Air About CigArrest Ads : * Marketing: Advantage Life Products gains worldwide rights to sell the stop-smoking aids. The agreement ends a rash of lawsuits with a Carlsbad firm.
After three years of rivalry, Advantage Life Products said Thursday that it has won unrestricted, worldwide marketing rights to its stop-smoking products from the Carlsbad company that created the name.
Advantage Life, based in Laguna Hills, also said it and the other company, More Direct Response Inc., agreed to stop suing each other over distribution and marketing of the product CigArrest.
The agreement will allow Advantage Life to advertise on television and to sell its smoking cessation products domestically, in Canada and in other lucrative international markets, the company said.
Until now, Advantage Life was limited to selling CigArrest through U.S. retail stores, such as the Thrifty Drug Store and K mart chains. Advantage bought marketing rights for retail sales from More Direct, which retained the right to telephone orders prompted by TV commercials.
“Gaining full control and worldwide rights to the CigArrest brand is a tremendous breakthrough for our company,” Advantage Life President Don Danks said. “This development clears the way for a new aggressive advertising and promotional campaign that should lead to greater sales.”
Under the new agreement, Advantage Life will pay a royalty on net sales, instead of having to pay royalties when inventories are delivered, Executive Vice President Jim Stapleton said. Also, More Direct will be able exercise options on 400,000 shares of Advantage common stock at $1.50 per share, instead of the $3.13 price in the previous agreement.
A More Direct spokesman could not be reached for comment.
CigArrest was first marketed six years ago to help smokers kick the habit. Now sold as pills, lozenges and gum, CigArrest contains lobeline sulfate as its active ingredient. While considered perfectly safe, CigArrest is not considered effective by the Food and Drug Administration. But unlike the nicotine-laced gum that is recognized by the FDA, CigArrest is available without a prescription.
Advantage bought the rights from More Direct to sell CigArrest through retailers in 1988. But the relationship was contentious from the start, leading to several lawsuits. The companies had separate, uncoordinated marketing efforts and sold CigArrest in different packaging. Most recently, Advantage Life sued More Direct in August, alleging that it was not living up to its promises to properly advertise CigArrest on television and radio.
And the troubles were reflected in Advantage Life’s sales and profits. Even though CigArrest is now sold in 35,000 stores across the nation, the company had a net loss of $1.6 million for the fiscal year ended April 30, contrasted with a profit of $846,000 in the previous year. Revenues were $6.7 million last year, down 39% from $10.9 million in 1990.
Advantage stock closed unchanged Thursday at 63 cents.
The new agreement’s provision allowing Advantage to tap international markets--previously barred by More Direct--will allow for greater CigArrest sales in countries like Canada, where the stop-smoking movement is so strong that taxes have been imposed to drive up the cost of cigarettes as high as $6 or $7 a pack.
“The opportunity to move forward with the product is unlimited,” Stapleton said.
