Saturday, September 23, 2000

'Cosmeceutical' concept is latest skin-ovation

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He has a new product, and a new way to sell it

By John Eckberg
The Cincinnati Enquirer

        John Strucke gets a little sheepish about 15 minutes into a description of his startup. He is excited about the company's prospects — raving, even — and he knows it.

        Last week the firm threw the switch on its iSO-Care Web site at www.isocare.net. This division of Mediphasics, an e-commerce firm in Crestview Hills, has plans to bring a molecularly treated skin-care line to consumers worldwide.

John Strucke (right) plans to sell iSO-care skin-care products via Web pages designed by Michael Kennedy (left) and Jean Fitzpatrick of Kennedy and Associates. (Gary Landers photo) | ZOOM |

        Stepping into the cage with the multibillion tigers of the cosmetic world calls for courage and a big dose of self-promotion.

        “I know it sounds like a lot of hype. That's what I used to think when I listened to myself talk about iSO-Care. But this stuff is real and it works,” Mr. Strucke said.

        Mr. Strucke is the president of a company that has a first-year revenue target of “several million” and is poised to exploit three megatrends

        • Millions of aging baby boomers who want to look younger.

        • Doctors seeking new revenue sources through the Internet.

        • A broad consumer desire for natural cosmetics.

        Even before the company fired up the e-switch, calls were coming in from a couple of national magazines. Writers wanted to know about the company's new acne treatment system.

        Doctors were calling, too, for information about the company's botanical and natural skin-care line that relies on a process of molecular separation to produce the products. “We are sitting at the junction of some important market dynamics,” Mr. Strucke said.

        Retail sales of anti-aging products more than tripled from 1994 to 1998, to $1.657 billion, and are expected to climb to $4.3 billion by 2003, according to a recent study published by Marketresearch.com, a market research firm based in Bethesda, Md. The compounded annual growth rate for the period was 40.7 percent.

        “Cosmeceutical” products in the anti-aging market first gained a retail foothold eight years ago. Unlike cosmetics, which cover up wrinkles, the products contain ingredients designed to reduce and protect against the signs of skin aging.

        According to the study, drugstores hold an estimated share of 29 percent of sales in the cosmeceutical industry, followed by department stores at 26 percent and mass merchandisers at 24 percent.

        Mediphasics hopes to crack that $900 million cosmeceutical niche by molecularly separating components of substances that are considered food by the federal Food and Drug Administration.

        The process relies on the science of stereo chemistry or chiral separation to differentiate molecules depending upon the direction of the spiral of the molecule. The raw form of the substances that are treated have played a role in cosmetics for thousands of years, including egg yolk, vanilla bean, camomile, jasmine and rose hips.

        Chiral separation has become commonplace among pharmaceutical companies — about $100 billion is spent annually on research — and is used to create cough syrups, diuretics, anti-cancer medicines and vitamins.

        But the cosmetics industry has not begun to embrace the same strategy — until now.

        “You have a high active ingredient level with no side effects and you get results quickly,” Mr. Strucke said. “We offer three weeks or your money back. People will see, feel and smell the difference.”

        He said the chirally treated natural ingredients enhance the body's ability to make repairs to skin and do it quickly.

        But the first step in this company's business plan was not to create cosmetics. The company wanted a network that could bring the cosmetics to family physicians, who in turn need to broaden their service revenues.

        The firm recognized that any new cosmetics line would have to compete with a host of multinational companies with bigger brands, more clout and marketing budgets that could rival the gross national product of many Third World nations.

        Instead of selling products in stores, the firm plans to sell products over the Internet and through the offices of partner physicians. There are 26 products to sell toners, cleansers, scrubs, face masks, eye treatments and protective treatments.

        iSO-Care is negotiating with a company that manages business operations for 28,000 doctors' practices. “We generate revenues by offering services and products to patients,” Mr. Strucke said.

        “The fact is that the economics of being a primary care physician has changed dramatically in recent years. They cannot run their businesses like other companies. They can't put their face on billboards. They can't hand out coupons.”

        But they can offer alternative services, which could include products that enhance patients' looks. Mr. Strucke, a Burlington resident, created Mediphasics, the parent company of the skin-care line, to bring skin care and other services to physicians.

        “Our idea is to create a space where patients come for good things skin care, vitamins, fitness and for communication with their doctor,” he said.

        Mediphasics intends to relieve doctors and their staffs of the chores of managing inventory, displaying products and handling sales.

        “The fact is that primary-care physicians have seen income decline nearly 40 percent in the past five years in areas where managed care dominates,” Mr. Strucke said.

        The Web-based nature of the system means that doctors can create a cyber-slot for patients or a “pipeline of communication” between patients and their doctors.

        The firm has a goal of 1,000 physician partnerships within the first year and a roster of 50,000 patients buying their cosmeceuticals over the Web.

        The demographic opportunity is staggering. Elective cosmetic surgery is growing at a 25 percent annual rate, and men may soon be among the biggest customers for cosmetics, although that hasn't happened yet, said David Lumis, project manager for Package Facts, the New Orleans-based division of Marketresearch.com.

        One reason why men have not become major consumers of skin-care and anti-aging products is because they do not want to buy a product from a department store clerk who usually sells to women. “Men don't want to stand in line in an area of the store that has traditionally been seen as a women's department,” Mr. Lumis said.

        “So far, it's been lackluster sales to men.”

        But that could change any time, he said. Mr. Lumis, who studied cosmeceuticals a year ago, said he knew of no other firm that has used chiral chemistry to create cosmetics.

        The company has teamed with three local firms to deliver iSO-Care PLM America for fulfillment expertise and the capability to provide packaging and shipment on a national basis, Synchrony Communications Inc. for Internet and consumer call center expertise, and Kennedy and Associates to create Web pages.

        The firm has signed up 65 doctors in Northern Kentucky and Greater Cincinnati to run its beta test, which is expected to start Monday. In the meantime, Mediphasics chief executive Dr. Neal J. Moser, certified in pulmonary, critical care and internal medicine, expects the company to thrive once it is associated with physicians.

        “It will be a lot like a seal of approval,” he said. “My role will be to build that physician network.”

       

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