Chattem, Inc. Announces Definitive Agreement to Purchase Selsun Blue From Abbott Laboratories.

Business Editors

CHATTANOOGA, Tenn.--(BUSINESS WIRE)--March 5, 2002

Chattem, Inc. (NASDAQ: CHTT), a leading marketer and manufacturer of branded consumer products, announced today that it has signed a definitive agreement to purchase Selsun Blue(R), a leading medicated dandruff shampoo, from Abbott Laboratories (NYSE: ABT) for $75 million, plus inventories. Selsun Blue's 2001 worldwide net sales were approximately $41 million, and the brand is marketed in both the United States and in approximately 50 foreign countries. The transaction is scheduled to close during Chattem's second quarter of 2002.

The acquisition includes worldwide rights (except India) to manufacture, sell and market Selsun Blue plus related intellectual property and certain manufacturing equipment.

Financing for the transaction will be provided by Chattem's approximately $35 million of cash and a new credit facility led by Bank of America.

Selsun Blue was launched in 1953 as a prescription drug and in 1974 was introduced as an over-the-counter medication. The over-the-counter product contains 1% selenium sulfide, while the prescription strength, which constitutes a small portion of domestic sales but is well known by dermatologists, contains 2.5% selenium sulfide. Approximately half of foreign sales are the 2.5% formula. Selsun Blue is widely recognized by consumers both domestically and internationally and has a strong reputation for effectiveness.

Abbott Laboratories will initially manufacture the product for Chattem under a contract manufacturing arrangement. Chattem expects to move certain production to its Chattanooga, Tennessee facilities within 12-24 months following closing. Abbott or manufacturers under contract to Abbott will manufacture the product internationally for Chattem until Chattem enters its own agreements with foreign contract manufacturers, also expected to take 12-24 months. Chattem will also rely on Abbott's sales force or distributors to market and sell Selsun Blue in those countries where Chattem does not already have a presence. Chattem expects to take over the international sales and marketing effort in most markets in 3-9 months. Chattem anticipates that the ownership of Selsun Blue internationally should create the opportunity to introduce certain of its other brands in countries where they are not currently sold.

The transaction should immediately boost sales and EBITDA and be accretive to Chattem's earnings per share. In its fiscal 2002 first quarter earnings release, the Company will give guidance as to the anticipated increases to sales, earnings per share and EBITDA for the balance of fiscal 2002 and fiscal 2003 that will result from the ownership of Selsun Blue.

Chattem, Inc. is a leading marketer and manufacturer of branded consumer products including health, beauty, and skin care products. The Company's products target niche market segments and are among the market leaders in their respective categories across food, drug and mass merchandisers. OTC health care products include: the Gold Bond(R) line of medicated powders, creams and lotions; topical analgesics, including Icy Hot(R), Flexall(R), Sportscreme(R), Aspercreme(R), Arthritis Hot(R), Capzasin-P(R) and Capzasin-HP(R); menstrual internal analgesics Pamprin(R) and Premsym(R); and Herpecin-L(R) lip balm. Skin and beauty care brands include: Mudd(R) facial masques, pHisoderm(R) acne and facial washes, Sun-In(R) hair lightener, Ultra Swim(R) shampoo and conditioner, and Bull Frog(R) sunscreen products. Nutritional supplements include: the Sunsource(R) brand including Garlique, Rejuvex, Propalmex, New Phase and Omnigest-EZ. Chattem also markets Dexatrim Natural(R), Dexatrim Results(R) and Ephedrine-free Dexatrim Natural(R) and Dexatrim Results for appetite suppression. Chattem conducts a portion of its global business through subsidiaries in the United Kingdom and Canada.

Paragraphs 5 and 6 above of this press release constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which contains a safe harbor for forward looking statements. The Company relies on this safe harbor in making such disclosures. The forward looking statements are based on management's current beliefs and assumptions about expectations, estimates, strategies and projections for the Company. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward looking statements. The Company undertakes no obligations to update publicly any forward looking statements whether as a result of new information, future events or otherwise. The risks, uncertainties and assumptions of the forward looking statements include, but are not limited to existing and possible future product liability claims relating to the prior existence of PPA in Dexatrim; the possible effect of the negative public perception resulting from product liability claims or sales of Dexatrim products without PPA; the lack of availability, limits of coverage and expense related to product liability insurance; the possibility of other product liability claims, including claims relating to the existence of ephedrine in Dexatrim Natural; the impact of brand acquisitions and divestitures; the impact of extraordinary gains or losses resulting from product acquisitions or divestitures, financings or debt repayments; product demand and market acceptance risks; product development risks, such as delays or difficulties in developing, producing and marketing new products or line extensions; the impact of competitive products, pricing and advertising; the Company's ability to integrate Selsun Blue into its own operations; the Company's ability to sell and market Selsun Blue internationally where it has only limited experience and infrastructure; constraints resulting from financial condition of the Company, including the degree to which the Company is leveraged, debt service requirements and restrictions under indentures and loan agreements; government regulations; risks of loss of material customers; public perception regarding the Company's products; dependence on third party manufacturers; environmental matters; and other risks described in the Company's Securities and Exchange Commission filings.