IGI Laboratories, Inc. (IG-AMEX)
August 6, 2012 Issue
The Most Powerful Name In Corporate News and Information
Having Completed a Successful Turnaround and Doubled Contract Revenues since 2010, IGI Laboratories, Inc. is Well Positioned for Future Growth as a Contract Manufacturer of Dermatological Formulations and Submitting their first Five Abbreviated New Drug Applications (ANDAs)
IGI Laboratories is a developer and manufacturer of dermatological formulations. Its business is divided into two segments: contract formulation and manufacturing for companies in the pharmaceutical, cosmetic, and OTC markets, and development of generic drug products to be marketed in the IGI label.
Since 2010, the company has
been successful on both fronts, doubling contract revenue in two years and
submitting their first five Abbreviated New Drug Applications (ANDAs). The
company’s stock is traded on the AMEX exchange under the symbol IG.
Jenniffer Collins joined IGI as Chief Financial Officer in July, 2011. She has more than twenty years experience in accounting and finance, most recently as Vice President-Treasurer at the Lightstone Group, a privately held real estate firm. Jenniffer also served as Corporate Controller for Orchid Cellmark, Inc, a biotechnology company, and Director of Finance and Investor Relations for Tellium, Inc, an optical switching company, in addition to seven years of public accounting experience.
Interview conducted by: Lynn Fosse, Senior Editor, CEOCFO Magazine, Published – August 6, 2012
Mr. Moore: IGI is a manufacturing company located in Buena, New Jersey. We perform contract formulation and manufacturing for customers in the pharmaceutical, cosmetic and over-the-counter (OTC) markets. We also develop Abbreviated New Drug Applications for our own use. Our specialty is in dermatology and topical dosage forms: creams, ointments, gels, lotions, solutions and suspensions.
Mr. Moore: Yes, we have a full development laboratory here. We do formulation work in house and manufacturing in house as well, with all of our work in topical products.
Mr. Moore: We look at the business in two parts. The contract services portion of our business would be about 30% development and 70% manufacturing. However, the ANDA or the pharmaceutical product development is currently 100% in development.
Mr. Moore: Pharmaceuticals offer us an opportunity to get into a market place that is more predictable and reliable, as well as it allows for better profit margins.
Mr. Moore: In contract formulation, we have specialists involved in development work, so we can take very complex ideas and convert them into practical formulations for our customers. In the pharmaceutical perspective, our approach is to develop generic versions of existing products. Therefore, it involves reverse engineering of innovative products and then reconstruction of the formulation.
Mr. Moore: There is always something new in dermatology. Certainly, from a cosmetic perspective, they are constantly identifying new sources of material that become popular. For example, green tea was a big rage for a while. Ingredients go through cycles. In the pharmaceutical area, if you look at the critical areas of treatment, acne is a common condition targeted by many prescription drugs. Then there are the standard topical formulations to treat conditions like fungal infections and bacterial infections.
Mr. Moore: If you look at dermatology, it is a unique subset of the pharmaceutical market with a few factors that cause it to be unique. The most important of which is bioequivalence. For other types of dosage forms, one can demonstrate bioequivalence through relatively straightforward means, but in dermatology you are typically required to do a comparative clinical trial against the innovative drug. There are a few exceptions to that in dermatology and those are what we focused on initially. There are certain products that are granted waivers from demonstrating bioequivalence, so there is no expense in bioequivalence attached to them. Those were early focuses for us. The second category would be corticosteroids, where one is only required to perform a vasoconstriction study in subjects not in patients and it is much less expensive than doing a clinical trial. Therefore, we focused on those two areas to start with. Ultimately, we will get into the third category as well, performing clinical studies.
Mr. Moore: We have a technology that is called Novasome, which is a liposomal technology that encapsulates an active ingredient and as a result of that encapsulation different physical properties and effects can be carried out by the product. We have probably 50 active patents surrounding the Novasome technology. The technology has been used frequently in cosmetic products for customers, also in a number of recognizable over the counter products. However, the technology has never been used in pharmaceutical products and that is an opportunity we have in the future.
Mr. Moore: Without getting terribly technical, it can provide a particular product with enhanced penetration, it can reduce irritation in a formulation and it can provide enhanced moisturization to a formulation. In addition, it has the potential to extend shelf life. In any given formulation it will have a different action, so it will not do all of those things in one particular formulation.
Mr. Moore: We are growing our business from year to year. I started in April of 2010 and Jenniffer just joined us last year, but over the past two years, we have more than doubled our top-line sales. At the same time, we have pursued the submission to the FDA of ANDAs and we have submitted five to date. Therefore, in both contract manufacturing and development, as well as developing our own ANDAs, we have made substantial progress over the past couple of years.
Mr. Moore: There was no magic bullet. We came in and organized the operation and we focused our attention on quality and upgrading quality throughout the organization. We made that our primary sales approach to customers. It was a complete customer focus, from an internal perspective, assuring that we always deliver on time, and that our products are of the highest quality. This is because the customers we appeal to are customers that are a bit above the standard competition in the markets they serve.
Mr. Moore: In terms of contract manufacturing and contract formulation work, there are a number of large contract manufacturers that look for high volume and high output products. We cannot compete with them, which is why our focus is on quality and on the capabilities that we have in formulation. There are a few companies that do the same thing that we do from a contract manufacturing perspective. One way we have distinguished ourselves substantially is our foray into pharmaceutical products. The standards that we have established throughout the organization and operation right from development through packaging are all pharmaceutical standards and those are applied across the board, no matter what product we are making. Therefore, we have distinguished ourselves to a degree, and part of success rests on the fact that we have focused on becoming a pharmaceutical company that does contract manufacturing, as opposed to being just a contract manufacturer.
Mr. Moore: They are learning. In the contract-manufacturing world, people do. In the pharmaceutical world, we have only been at this for two years but I believe we have gained a good reputation within the pharmaceutical market, specifically in dermatology. People are recognizing that we are here and that has resulted in our gaining some new contract work that is pharmaceutically oriented, as opposed to cosmetics and OTCs.
Mr. Moore: We will continue to do what we do best, which is offer customers contract formulation and manufacturing, while also focusing on submitting more and more ANDAs, to build a portfolio of generic topical drug products that ultimately will be marketed in the IGI label. We do not currently market anything in our own name, but that is going to occur in the foreseeable future.
Mr. Moore: That is under discussion right now. We see the benefits of both ways. We certainly have the contacts should we decide to go with marketing partners, but ultimately, it is clear that we want the IGI label to be on the product and we want to have the responsibility for marketing those products ourselves in the long term.
Ms. Collins: Charlie mentioned that we have been able to grow the business significantly over the past couple of years. Since Charlie arrived, one of the focus points for IGI, was to stabilize the contract manufacturing business and to make it profitable, generating cash to fund our development efforts. We are still in a situation that we have a limited amount of funds. Our next funding point will hinge around the ability to get some of our ANDAs approved by the FDA and start to market those products in our own label. We have done a great job of being able to stabilize the contract manufacturing business, so that we are able to generate cash from that business now, which can help us offset some of the development-funding costs, because obviously, those costs are incurred now and the revenues will be realized in the future. Our focus is to take the amount of cash that we have on the balance sheet and to bridge this gap over the next twelve to eighteen months. We continuously look at what we need now, versus what we can wait for and what other financing and funding requirements we are going to have in order to grow the business. While mindful of our cash position, we want to make sure that we are continuing to build our portfolio, so that we have that revenue stream in the future.
Ms. Collins: We filed our first ANDA in September 2010. The typical review cycle right now is anywhere between 24 to 36 months. Therefore, a critical point for us is going to be to get that first drug approved with the FDA, and then begin to market it ourselves and generate significantly more revenue than we currently have from our contract manufacturing business. That is where the future growth of this business is. Investors should be able to look at the company’s business model, understand the company’s future potential, and be able to see our historical progression to date where we are creating a company that can wisely use funds generated from our contract manufacturing business to fund our future development. In addition, we can be ahead of the curve before we actually have that opportunity to have that drug approved. IGI Laboratories is a great investment opportunity for anyone in the near future. Obviously, the stock is trading relatively low right now and our valuation is based upon our historical financial results, so as expected we are not getting any credit for what our future business will look like.
One of the things that I take the most pride in about this organization is
the team that we have put together and the dedication of the employees of
the company. We are a small company with only 40 employees, but our people
are qualified. They are well- trained and they are very talented. It has
been a group effort that has allowed us to turn this business around in a
relatively quick period and move it in the right direction. I have no doubt
moving forward that we have the right people to drive this business into a
very successful generic pharmaceutical company, while maintaining our
contract services business.
It has been a group effort that has allowed us to turn this business around in a relatively quick period and move it in the right direction. - Charles E. Moore
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