CHANTAL FIGHTS TO REGAIN CONFIDENCE OF INVESTORS.

Byline: Gregory J. Wilcox Daily News Staff Writer

Chantal Pharmaceutical Corp., the Los Angeles company that makes an expensive wrinkle remover, scrambled Tuesday to boost investor confidence after its stock plunged 62 percent in response to a negative article in Barron's.

Chantal said damage control would include an independent audit after this week's edition of the financial magazine cast doubt on claims the company makes for its Ethocyn skin treatment, which costs $75 for a two-month supply.

Barron's also questioned Chantal's deal with Ethocyn's major distributor.

Chantal's stock dropped $11.81 on Monday to $7.31. It closed Tuesday at 7 -5/8, up 5/16, well off its record high of 28-1/8.

Chairwoman and chief executive Chantal Burnison said that the audit will focus on figures from distributor Stanson Medical Marketing, which says it has placed product in more than 14,000 retail outlets.

"We are trying to regain the confidence of the shareholders," Burnison said. "We are completely confident of our distribution, financial projections, and the efficacy of Ethocyn-based skin care products."

Some analysts think Chantal can rebound from the negative publicity.

"What we have going here is the rebuttal to the people who have shorted the stock and created a bear rate on the stock," said Peter A. Massaniso, an analyst at Ponte Vedre Partners in Ponte Vedre, Fla. "I think the key is the audit that will be done on Stanson. That's an important step for the company to take."

The audit will focus on Stanson's retail orders, reorders, and returns, which are estimated to be less than 1 percent, the company said.

Stanson Medical is run by Frederick M. Reinstein, whom Barron's said is the target of three lawsuits accusing him of fraudulent business practices. He was hired in June to distribute Ethocyn and the terms included a "put option" that enabled him to force Chantal to buy the distribution company any time after Dec. 31, 1995.

That means Chantal could have been placed in the position of buying back product, thus converting revenue to inventory.

That's not the case anymore, though. On Tuesday Burnison said that distribution agreement has been modified "effective immediately" and the put option deleted.

Chantal can still buy Stanson, but on its own terms, Burnison said.

In return, Reinstein can sell his company to anyone he wants to without Chantal's approval after Dec. 31, 1996.

And Burnison said she was aware of the lawsuits pending against Reinstein.

He could not be reached for comment.

And within the week Chantal will hold a conference call for institutional investors who will be able to discuss the effectiveness of Ethocyn with dermatologists and skin care experts who have studies scientific data on the product.

One dermatologist, UCLA professor Dr. Richard Strick, did a clinical study and concluded that it works. He presented his findings to the American Academy of Dermatology in August 1994.

Ethocyn is a molecule Chantal developed called ethoxhexyl-bicyclooctanone. It took 14 years and cost $17 million to develop.

Ethocyn blocks skin cell receptor points from reacting with a hormone that reduces the skin's ability to snap back into shape after a person smiles or squints, company spokesmen say. This lack of elasticity is what causes wrinkles.

It is not absorbed into the bloodstream, nor does it influence hormone levels, the company says.

Investors initially embraced the news, running the stock price up from about $1.75 a year ago to above $20 before the plunge on Monday.

During fiscal 1995 the company earned $406,139, or 3 cents per share, on sales of $7.2 million. The previous fiscal year Chantal lost $1.8 million, or 19 cents per share, on sales of $165,077.

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