\volume 3- Growth Investment

Through its subsidiaries, Florida-based GeoPharma Inc. (Nasdaq: GORX; Recent Price: $4.35; Market Capitalization: $42.9 million) manufactures, packages and markets over-the-counter and generic pharmaceuticals, health and beauty care, dietary supplements and convenience foods products. GeoPharma also operates a wholly owned subsidiary that is the exclusive pharmacy benefit manager for certain union health plans, insurance companies, and other self-insured companies.
The company's strategy is to build a multi-faceted company that's able to capitalize on efficiencies and synergies arising from vertically integrated operations. GeoPharma's vertical operations include the capabilities of manufacturing and distribution, sales and marketing, an in-house formulation laboratory and other chemical analysis services, customer service and public relations.
A vertically integrated model could prove to be a key advantage in the highly competitive generic pharmaceutical market where, in addition to cost efficiencies, success is often determined by the amount of time to market. According to the Generic Pharmaceutical Industry Association, generic drugs usually enter the market 30% below the brand price and decline to 60% or 70% of the brand price after two years. The market of generics has seen tremendous expansion of late, growing to $28.0 billion in 2005 from $12.0 billion in 2001, representing over half of all prescriptions. However, with intense competition quickly eroding profit margins, a vertically integrated firm stands to benefit from getting its product to market faster and from having lower unit costs associated with that product.
GeoPharma's primary manufacturing facility is a 33,222 square foot leased space in Largo, Florida. The second manufacturing facility is also located in Largo, at a size of 10,000 square feet. Combined, GeoPharma's two FDA registered facilities can manufacture approximately 900 million tablets and capsules annually. For the year ended March 31, 2005, these plants operated at 40% of capacity.
Subsidiary Belcher Pharmaceuticals, which is the prime manufacturing entity, produces over-the-counter and generic drugs as well as the company's dietary supplements. Belcher Pharmaceuticals entered the generic drug segment in March 2003. Since that time, it has acquired manufacturing rights to several key off-patent drugs for human and veterinary use.
For example, Belcher has filed a patent on a unique method to stabilize the drug Levothyroxine, sold under the brand names Synthroid (Abbott) and Soloxine/Levoxyl (King Pharmaceutical). Belcher has also filed an animal Abbreviated New Drug Application (ANDA) for Carprofen, the generic version of Pfizer's Rimadyl, arthritis and joint-ailment products prescribed for both the animal and human markets. Pfizer's patent expired in 2004.
Sales of private label pharma- and nutraceuticals, manufactured by the Belcher division, accounted for approximately 36% of total revenues, or $17.9 million for the year ended March 31, 2006. One of GeoPharma's advantages is that its private label business is not dependent on any one customer for more than 5% of its revenues.

GeoPharma Inc. subsidiary Go2PBM Services is the pharmacy benefit manager for Careplus Health Plan, a New York-based Prepaid Service Plan (PHSP) that also provides healthcare to individuals through Medicaid Managed Care, Child Health Plus and Family Health Plus. Go2PBM generated one-third of GeoPharma's total revenues for the March 31, 2006, year-end, or $16.5 million.

GeoPharma Inc. subsidiary Breakthrough Engineered Nutrition markets its own branded line of dietary supplements: Lean Protein Bites, Carbslim, Lean Protein and Thermo ZXE. Roughly 29.7% of GeoPharma's total sales, or approximately $14.7 million, came from its branded products sold through the Breakthrough Nutrition subsidiary in the year ended March 31, 2006.

In August 2005, GeoPharma formed American Antibiotics to manufacture and distribute Beta-Lactam antibiotic pharmaceutical products. For the year ended March 31, 2006, revenues from the newly formed American Antibiotics totaled $0.5 million, or 3.9% of total revenues.
GeoPharma's consolidated operating revenues for the year ended March 31, 2006, were $49.74 million, up 76.2% from the year before. Likewise, gross profit increased 115.6% to $12.46 million year-over-year. Net income for the year was $1.79 million, a reversal from the net loss of $0.9 million in 2005.
GeoPharma is shifting its revenue streams along different lines, moving toward becoming vertically integrated, and in the process, improving margins significantly. For the trailing twelve months (ttm), GeoPharma's earnings totaled $0.20 per diluted share. At a price of $4.48, this translates into a pricing multiple of 22X ttm earnings. Rising Star Stocks currently rates GeoPharma a Buy with a price target of $6.00, which represents a pricing multiple of 30x ttm earnings.