Chattem, Inc. Announces Results of Review of Active Ingredient in Dexatrim.

Business Editors

CHATTANOOGA, Tenn.--(BUSINESS WIRE)--Oct. 20, 2000

Chattem, Inc. (NASDAQ:CHTT), a leading marketer and manufacturer of branded consumer products, announced today that a Nonprescription Drugs Advisory Committee commissioned by the United States Food and Drug Administration (FDA) to review the safety of phenylpropanolamine (PPA), the active ingredient in the Company's Dexatrim brand, has determined that PPA is not considered safe for use as an appetite suppressant. The recommendation of the committee now goes to the FDA for consideration. The committee made the identical recommendation with respect to the use of PPA in decongestants, which affects certain formulations of such popular over-the-counter brands as Alka Seltzer, Contac, Dimetapp, Robitussin and Triaminic.

The committee's findings relied mainly upon an epidemiology study of hemorrhagic stroke and PPA conducted by Yale University, which found an association between PPA use and hemorrhagic stroke, despite being based on only 6 cases of exposure to appetite suppressants out of 706 stroke cases enrolled. An independent panel of leading epidemiology experts, commissioned by the Consumer Healthcare Products Association, reviewed the study's results and determined its results were inconclusive because, among other things, the small number of reported cases and other intervening factors, such as alcohol and tobacco use by and pre-existing hypertension in the six stroke patients who reported a probable use of a PPA-based diet suppressant within three days of stroke onset.

The Company intends to work with the FDA on next steps regarding the PPA study, which could include product reformulation or product discontinuation of Dexatrim with PPA. The timing of any further action is unknown at this time.

Dexatrim's sales in the fiscal year ending November 30, 2000 will be approximately $30 million, of which approximately $10 million will come from Dexatrim Natural, which was launched December 1, 1999 and does not contain PPA. The Company also plans to launch Dexatrim Natural Ephedrine-Free January 1, 2001 together with a new 90-count bottle of both forms of Dexatrim Natural.

The financial impact of yesterday's decision is uncertain until the result of any subsequent FDA action is known. However, Dexatrim with PPA was expected to contribute approximately $8 million in EBITDA and $.40-$.50 per share in earnings in fiscal 2001. The Company previously projected 2001 net sales of $205-220 million, EBITDA of $47-50 million and earnings per share of $1.00-$1.20.

Statements concerning the impact of governmental regulations, the Company's business outlook, anticipated profitability, sales or expenses and sales growth, together with other statements made in this press release that are not historical facts are "forward looking statements" as that term is defined under the federal securities laws. All forward looking statements are subject to the risks and uncertainties which could cause actual outcomes and results to differ materially from those expressed or projected, including those described in the Company's filings with the Securities and Exchange Commission.