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VALLEY BUSINESS | VITAMIN MAKERS: IN NEED OF PEP?

Pharmavite Puts Energy Into Immediate Results

Privately Held Company Says Consumers Expect Supplements to Make Them Feel Better Faster

September 26, 2000|LEE CONDON | SPECIAL TO THE TIMES

MISSION HILLS — When Joy Joseph started working at Pharmavite Corp. 20 years ago this week, the company's research and development branch included just herself and two others.

Today, as vice president of quality, research and development and technical operations, Joseph oversees a staff of 25 chemists and pharmacists, including several with doctorates.

"We're a think-tank type of R & D group," Joseph said.

These days, her branch is especially busy as it is the key to the company's five-year strategic plan. The company, which markets its products mostly under the Nature Made and Nature's Resource brand names, was built on traditional vitamins. But now consumers want supplements that provide them with more immediate benefits, Joseph said.

"We've set a strategy to develop new products that have a specific health benefit," Joseph said. "Today, supplements are more directed at providing an immediate effect."

The best example is SAM-e, an amino acid derivative that the company says relieves joint pain and the symptoms of arthritis and can improve mood and liver function. Pharmavite was the first company to market SAM-e widely in the U.S. Since it was introduced in March 1999, SAM-e has become the best-selling supplement among the more than 150 products the company sells. Between March and December, the company had sales of $60 million for SAM-e.

The rise of SAM-e has come at a time when other supplement makers are struggling to deal with a downturn in the herbal supplement market. Although Pharmavite is a privately held company, competitors who are publicly traded have seen their stock prices plummet largely because of concerns about slowing sales of once-hot herbal products such as St. John's wort.

"I think SAM-e ate it up," Joseph said of St. John's wort. "A lot of people who were using St. John's wort are now using SAM-e because it works better for what they need."

In coming years, the company plans to use the SAM-e strategy to develop new supplements in areas that include women's health, intestinal health, bone health and the sports nutrition market, deemed by the company's market researchers as potentially the most lucrative areas, Joseph said.

Started in 1971 by local pharmacist Barry Pressman, Pharmavite Corp. is now fourth in national sales of vitamins/supplements, according to Nutrition Business Journal. Acquired in 1989 by Tokyo-based Otsuka Pharmaceuticals, Pharmavite declined to specify its annual revenue or to confirm the Nutrition Business Journal's numbers.

Grant Ferrier, editor of the journal, estimated the company's 1999 supplement sales at $450 million. That tally puts it fourth in nationwide sales behind American Home Products, makers of Centrum ($620 million), Carson-based Leiner Health Products, which makes the Your Life brand ($530 million), and Rexall Sundown ($520 million).

Ferrier estimated the company would have sales of $500 million this year, continuing a pattern of growth that started in the '90s, the vitamin boom years. In 1996, the journal estimated the company's sales at $290 million. "They have been one of the leading growth companies in a growth industry," Ferrier said.

Although vitamin industry growth slowed this year, causing a nose dive in stock prices among publicly traded companies, Pharmavite is still experiencing sales growth.

"We don't experience the same highs and lows that the other companies do. We have a broader base of products," said Doug Jones, the product manager in the company's marketing department.

Last year Pharmavite's Nature Made brand scored big with SAM-e. Between March and December of 1999, the company had sales of $60 million for SAM-e.

Joseph said SAM-e is an example of Pharmavite's new strategy of providing supplements that offer immediate relief of symptoms. Traditional vitamins may offer a benefit over the long term of a person's life but do not have an immediate effect on how a person feels, she said.

In the last year, the company has introduced several new products to the market, including a new sports nutrition bar under the Jog Mate brand name and new high fiber and calcium beverages under the Optimize brand name.

"For all of the leading vitamin and supplement companies, new products are key to your future growth," Jones said. "It's something we try to be very aggressive about."

It makes sense to Ferrier that the company is weathering the current downturn in the industry. The company has a broad range of products and never relied heavily on the herbal market. However, he said the company's aggressive approach to introducing new products is pretty standard in this industry.

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"One of the characteristics of this industry is it sort of rides the wave of new emerging products," Ferrier said. "You have St. John's wort dropping by $70 million, but now SAM-e is making $100 million."

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