Ed Calesa knows women-or rather, he understands the female market. After starting his career as marketing research manager
for Roche, he co-founded Health Learning Systems in 1971 and pioneered the use of continuing medical education as part of
the healthcare promotional mix. There he developed and implemented two of the earliest and most successful initiatives targeting
female baby boomers. Launched during the drive for women's liberation in the swingin' seventies, Calesa's campaigns helped
open a dialogue between opinion leaders and women, addressing contraception and the use of formula for newborns. During nearly
20 years in that position, he gained an intimate understanding of baby boomer women and the ob/gyns that serve them.
Calesa sold Health Learning Systems in December 1988 to the agency holding company WPP and retired. He continued investing
in what he knew-healthcare, particularly in specialty pharma companies. But throughout his years of retirement, he kept thinking
about the women he first targeted with birth control and baby formula messages. Now those same women were entering menopause,
and their healthcare needs were radically different.
In 1996, Calesa linked menopause, baby boomer women, and ob/gyns in a business concept that became the basis of Women First
Healthcare (WFHC). Calesa believes targeting that niche makes compelling dollars and sense. After all, nearly 5,500 women
a day turn 50 according to the National Institute on Aging. Although the US Census Bureau estimates that there are 54 million
women 45 or older in the United States, that number is expected to grow to 72 million by 2020. As cost-containment became
a higher priority for managed care, women began to supplement their primary care physicians and internists visits with gynecological
check-ups. And if that wasn't reason enough, it is well documented that women influence the majority of healthcare decisions
and spend the majority of healthcare dollars.
In the BlackAfter leading WFHC through two years of market research and raising capital, Calesa turned over the reigns to David Hale.
Hale spearheaded a series of co-promotional agreements with Johnson & Johnson's Ortho-McNeil for the hormone replacement therapy
(HRT) Ortho-Prefest (estradiol/norgestimate) and the birth control pill Ortho Tri-Cyclen (norgestimate/ ethinyl estradiol),
and with Bristol-Myers Squibb's anti-cholesterol therapy Pravachol (pravastatin). But before long, WFHC expenses soared to
almost twice its revenue. The stock plummeted from its initial offering price of $11 per share in July 1999 to 44 cents a
share in October 2000, and NASDAQ sent WFHC a letter stating it was in danger of being delisted. Serious action was needed
to keep the company in business.
Calesa took back control of the company, naming a slew of new appointments, including Saundra Childs, who headed up the company's
contracting and managed care division as vice-president of pharmaceuticals-forming the foundation of a powerful team. Calesa
then changed the business model from co-promotion and licensing to acquisition, enabling him to reorganize the sales staff
on its own terms. In doing so, he realigned the company's expenses and revenues.
As CFO Charles Caporale explains, "Co-promotion typically involves a contractually mandated fixed expense, at least in terms
of the sales force, and a variable income stream. The combination can be lethal to an organization if the co-promotion product
does not produce as expected. Under an acquisition model, the expenses are variable in that the building of a sales and marketing
infrastructure can be timed to coincide with revenues, thereby providing a better alignment of expenses and revenues."
Investors' confidence in Calesa began to build when they saw losses cut from $18.7 million in the first half of 2000 to $3.9
million in the second half. From those murky waters sprang the new WFHC, which reported its first profit in the fourth quarter
2001 and is projected to be in the black in 2002. Now, C.E. Unterberg, Towbin, one of four investment houses following the
company, expects WFHC to be one of the fastest-growing specialty pharma companies within the next two years.
One-Stop ShopWith Calesa at the helm, WFHC reworked its existing agreements with Ortho-McNeil and acquired Ortho-Est (estropipate). The
company also amended an earlier Laboratoires Fournier agreement struck during Hale's tenure that allowed WFHC greater flexibility
to sell the HRT Esclim (estradiol) to managed care organizations. The move increased its group purchasing business, which
helped catapult the company into the managed care arena. Since then, WFHC has acquired Elan's headache product Midrin (isometheptene,
dichloralphenazone, acetaminophen), Roche's Bactrim (trimethoprim and sulfamethoxazole) line of antibacterial products, and
Wyeth's pain management drugs Synalgos (dihydrocodeine), Equagesic (meprobamate), and Wygesic (propoxyphene and acetaminophen).
By the end of 2002, the company hopes to round out its targeted portfolio by acquiring additional approved prescription products
that can be marketed to ob/gyns and nurse practitioners as well as therapies for which women have purchasing influence. Potential
products, within that wide net, must fall into the $1-$20 million range and have strong brand name equity, even if they face
generic competition. A white paper, "Self-Aware: Women at the Forefront of Healthcare," written by Self's director of marketing
and strategic planning Cynthia Walsh, confirms what Calesa already knows-women are willing to pay more for a prescription
drug they know and trust.
"We do a very good job of due diligence in acquiring our products," says Childs. "Some people ask why we acquire pharmaceuticals
that have generic competition. It's because we know that when we reformulate them, either with a new dosing, an indication,
or some kind of line extension, it will return to the market offering an advantage. That will allow us to get on pharmacy
benefit managers' (PBM) formularies, which increases product usage."
For that reason, Calesa believes the specialty pharma business model is elegant in its simplicity. To succeed, WFHC must acquire
under-promoted products at a reasonable cost, and then market them in ways that will boost sales.
One Size Does Not Fit All In a Barron's interview, money manager Oscar Schafer explains that WFHC's focused management and targeted niche may allow
it to outperform larger pharma companies. Perhaps that is because, while large companies are scrambling to establish expensive
programs to become customer-focused, WFHC was born that way.
"Many companies say they are customer-driven, but they are not," says Calesa. "Other companies research and manipulate molecules
to come up with products, then figure out how to market them. We started with a blank page and listened to doctors and patients
to find out what they need. Next we turned to the experts on our health advisory board and worked to bridge the gap between
clinicians' concerns and patients' needs. Then we acquired and licensed those products."
WFHC market research found that women aren't getting what they want-particularly, greater use of natural products and more
individualized ways to manage their healthcare. The company's two leading products fill that need: the Ortho-Est pill comes
in two doses, the Esclim patch has five formulations, and both are soy-based estrogens. That approach distinguishes it from
larger companies, such as Wyeth, which controls 75 percent of the $2.5 billion HRT market. WFHC sales reps bring those differentiated
messages to clinicians, breaking through the clutter of information about the benefits and risks of estrogen products.
Test and Treat Women worry that taking HRT will lead to cancer, so compliance is a problem, according to Childs.
Based on that, the company developed a protocol called "Test and Treat," which WFHC supports through medical education and
promotions such as "lunch and learn" events and teleconferences. Test and Treat involves measuring estrogen levels in the
blood before prescribing HRT, then testing again after two months to evaluate the treatment's effectiveness. The idea is to
minimize side effects by finding the lowest effective dose. Although the protocol is a marketing concept that supports Esclim,
the practice is backed as clinically sound by WFHC's health advisory board, made up of opinion-leaders and notable physicians
specializing in women's health. Other areas of medicine, such as endocrinology, already use that approach to determine dosing,
yet women are traditionally prescribed an empirically determined dose of hormones, usually based on symptoms.