Biotech: Drug Developer Attempts 1 Stop Shop Strategy
Baby boomers’ hunt for that ideal look is spawning a niche of new skin care products called “cosmoceuticals,” or pharmaceutical-based cosmetics, and “neutraceuticals,” or vitamins to improve the skin.
That is good news for DermTech Intl., a San Diego-based contract research organization, or CRO, that specializes in developing and testing dermatology products for cosmetics and drug manufacturers.
According to a local venture capital group, in the highly fragmented CRO market only those offering drug makers a whole package of “one-stop shopping” services will succeed.
William Patch, vice president of Western States Investment Corp. in San Diego, invested $1.1 million in DermTech when it was still known as the California Skin Research Institute and merely focused on testing compounds to see if they irritated patients’ skin.
CSRI, founded in 1995 by Lawrence Rheins, was a money-losing venture.
Steven Lash, president and CEO of DermTech, said last year CSRI had a net loss of $700,000 on $1.1 million in revenues
Lash, who was brought in August 1999 to give CSRI a makeover, started by renaming the firm, then expanded it to offer clients one-stop shopping.
To do that, Lash created five units: The CSRI unit, which focuses on signing deals with local clients; an advisory unit that offers a package deal of consulting services and testing to small- and mid-sized firms; a third and fourth unit for pre-clinical and clinical testing; and the DermPatch unit, which aims to further develop a patch designed to detect DNA and RNA in the skin.
Lash hopes the new strategy will boost DermTech’s revenues to $4 million this year and lift it out of the red.
The outlook is good. Revenues for outsourced contract testing services rises about 20 percent every year, according to Centre Watch, a CRO trade industry publication.
The outsourcing of skin care products has climbed steadily from more than $1 billion in 1993 to $4 billion in 1998 as drug makers are looking for ways to slash costs, Centre Watch reported.
Richard Juelis, vice president of finance at Cellegy Pharmaceuticals Inc., a South San Francisco-based specialty biopharmaceutical firm, said a good CRO lets companies pick and choose what services they want.
Aside from not having the internal staff to test their cosmoceutical products, Juelis finds outsourcing is cheaper and unbiased.
Juelis believes new products geared toward baby boomers will increase demand in outsourcing.
However, the demand will be spawned by the smaller to mid-sized firms that lack internal expertise and the money to test their own products. He said most of the large cosmetic firms develop and test their products internally.
