OTC cold remedy maker moves into supplements to reach markets less dependent on illness rates
Pro Phase Labs, makers of the venerable Cold EEZE OTC remedy, are planning the launch of a new line of supplements called TK Supplements. The first product in the line, called Legendz XL, is an herbal formula that focuses on men’s sexual health.
CEO Ted Karkus told analysts during the company’s most recent earnings call that he came on board to turn around a company that was adrift.
“We inherited a company that we believe five or six years ago was headed for bankruptcy. We restructured the company. We bottomed out sales, turned around sales while turning around the company, cut a couple of million dollars of overhead out of the company. Since the bottoming of sales even with this weak cold season, our sales are still up about 50% from the bottom,” Karkus said.
Becoming a year-round company
But more restructuring is needed. As matters stand, being so heavily reliant on one seasonal product is a risk, Karkus said. If not enough people get sick, sales will suffer. Incidents of upper respiratory illness were down more than 10% this year, Karkus said, and in some weeks were off by as much as 25%.
“Cold-EEZE sales and all cough cold product sales are highly correlated to the incidents of upper respiratory illness. It's pretty obvious when people are sick, they buy cough cold products, when they’re not sick they don’t,” Karkus told analysts in the call that has been posted in transcript form on the site seekingalpha.com.
“The fact that our sales were down less than double-digits is actually a great feat on our part, but unfortunately that doesn’t mean that our sales were up and that unfortunately doesn’t mean that we had the type of performance that we would like. So it’s a moral victory, but by no means is it satisfactory in my mind and our senior team’s mind,” he said.
Shifting part of the focus to supplements will help the company enter a category that has more durable demand, Karkus said. The first supplement in the line, Legendz XL, claims to be a blood flow enhancer. It is a multi-ingredient herbal formula featuring rhodiola, maca and epimedium among other ingredients. The company says it has conducted placebo-controlled trials to support the claim that the product boosts blood flow within 60 minutes.
“You never know if a class action attorney is going to come along and make a claim anyway against us whether it's founded or unfounded. And so we went a step further by building an even larger clinical study having even more patients in it, so that we're on really solid footing on making that claim,” Karkus said.
Future products in the TK line will include a prostate health supplement and a free testosterone booster, Karkus said. LegendZ will be promoted first through a TV informercial campaign and only later will be distributed through more conventional channels, Karkus said.
