According to IMS Health-NPAtm and IMS Health-National Sales Perspectivestm, in 2004, the prescription market in the United States for all respiratory disorders was approximately $13.4 billion while the prescription cough and cold market in the United States was approximately $1.3 billion. According to IRI, consumers spent approximately $2.6 billion on OTC cough, cold, allergy, and sinus remedies during the 52 weeks ended January 23, 2005.

Respiratory disorders have different causes and symptoms, but the production of excess or thick mucus is a common factor in many respiratory disorders. Physicians prescribe single-ingredient and combination long-acting guaifenesin products to address the excess mucus associated with respiratory disorders such as acute respiratory infections, bronchitis, common cold, cough, and sinusitis. Based on data from IMS Health-NPAtm, it is estimated that approximately 25 million prescriptions were dispensed for long-acting, single-ingredient and combination guaifenesin products containing dextromethorphan or pseudoephedrine for the 12 months ended June 30, 2003. According to IMS Health-National Disease and Therapeutic Indextm, these prescriptions were often written in combination with an antibiotic.

According to the American Lung Association, adults contract two to four colds per year primarily between September and May. The OTC “cough, cold, allergy, and sinus” market includes products that consumers purchase over the counter to address mild respiratory disorders such as the common cold, cough and allergic rhinitis. These mild respiratory disorders often have multiple symptoms including nasal, sinus and bronchial congestion, cough, runny nose, and fever. Many of these products contain more than one active ingredient in order to be effective against several different cough and cold symptoms. Guaifenesin, in short-acting formulations, is an ingredient in many of these cough and cold OTC products. This market is fairly fragmented with seven brands accounting for 51% of dollar sales during the 52-week period ended January 23, 2005, according to IRI. During this same period, according to IRI, private label products represented 24% of this market.

Mucinex SE, Mucinex DM and Mucinex D and their maximum strength versions are the only long-acting guaifenesin products approved by the FDA.

Mucinex SE helps loosen phlegm (mucus) and thin bronchial secretions to rid the bronchial passageways of bothersome mucus and make coughs more productive.

Mucinex DM combines the expectorant properties of Mucinex SE with the cough suppressant dextromethorphan. Mucinex DM is the only long-acting guaifenesin and dextromethorphan combination product approved by the FDA.

Mucinex D adds the decongestant pseudoephedrine to the expectorant properties of Mucinex SE. Mucinex D is the only long-acting guaifenesin and pseudoephedrine combination product approved by the FDA. The Company intends to begin marketing Mucinex D in the first quarter of 2006.

The Company has also received FDA approval for extended-release formulations of guaifenesin, guaifenesin/dextromethorphan and guaifenesin/pseudoephedrine at twice the strength of the approved Mucinex formulations. The Company also recently acquired the rights to the Humibid brand. The Company believes that Humibid was the most recognized brand in the former prescription long-acting guaifenesin market. In the first quarter of 2006, the Company intends to launch the maximum strength version of its single-ingredient guaifenesin product under the Humibid brand and target the physician community that continues to prescribe Humibid. The Company also intends to launch the remaining maximum strength combination formulations in the second half of 2006.

Cost of goods sold increased $8.3 million to $13.4 million for the six months ended December 31, 2004, as compared to $5.0 million for the six months ended December 31, 2003

Selling, marketing and administrative expenses increased $20.9 million to $30.8 million for the six months ended December 31, 2004, as compared to $9.8 million for the six months ended December 31, 2003.

Interest expense decreased by $1.5 million, or 97%, to $52,000 during the six months ended December 31, 2004, as compared to $1.6 million for the six months ended December 31, 2003.

Interest income increased $242,000 to $294,000 during the six months ended December 31, 2004, as compared to $52,000 for the six months ended December 31, 2003.