Wrinkle-Conscious Boomers Drive Canadian Firm’s Growth

With its new listing on the TSX Venture Exchange, Pickering-based NSP Pharma Corp. (TSXV: NSP) is delivering on its promise of dynamic growth as its popular Modèle line of anti-aging skincare products make it a leader in the growing North American cosmeceutical market.

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« We’re a new Canadian company selling 16 product SKUs in more than 9,100 pharmacies across North America, a strong portfolio that rivals even the biggest names in the industry, » said Sergio Martines, President and CEO of NSP Pharma.

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« Listing on the TSX Venture Exchange better positions NSP Pharma to attract the marketing capital it needs to continue building Modèle into a global cosmeceutical market leader, » he adds.

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Cosmeceuticals are cosmetics with pharmaceutical properties. Cosmeceutical sales are driven by wrinkle-conscious baby boomers who are looking for safe and effective alternatives to needles and old-style creams to reduce the visible effects of aging. Boomer women in particular are looking for premium-quality skin care products, and are responding to cosmeceutical product promises, attractive packaging and visible results.

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According to Cleveland-based market research firm The Freedonia Group, demand for anti-aging products is expected to increase 11.1 per cent per year to reach US $29 billion by 2007. As a result, pharmacies across North America are investing heavily in skincare as a profitable destination category.

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Canada’s Shoppers Drug Mart, London Drugs, Jean Coutu and Katz groups, along with CVS, the largest drug store chain in the U.S., have all introduced new skincare lines and well-trained beauty advisors who are qualified to evaluate customer skincare needs and recommend specific product-based treatment regimens.

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Thirty-dollar lip treatment rapidly penetrates North American pharmacies

In partnership with a European consortium led by Dr. Vincenzo Guerrieri, Martines came to Canada from Italy in 1999 to start Modèle (modeleskincare.com) and to market European cosmeceutical and nutraceutical products to North Americans.

Martines and his team researched the market and developed new products with fresh packaging to appeal to North American tastes. Modèle’s Collagen Lip Treatment was launched in the fall of 2001 at Shoppers Drug Mart, Canada‘s largest pharmacy chain. The lip treatment conditions and penetrates lips to reduce wrinkles and increase volume. But selling it to Shoppers wasn’t easy.

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« Our first challenge was to show Shoppers Drug Mart that there was a market demanding a lip treatment worth thirty dollars, » recalls Martines. « They agreed to an ambitious 12-month trial to sell 70,000 collagen lip treatments. They all sold within a few months ».

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Shoppers has since become an ambassador for the brand, ordering additional products that continue to be top sellers, and implementing a full Modèle product-line offering in their stores.

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With a strong foundation established in Canada, NSP Pharma took aim at the US market in September 2003 through an agreement with CVS pharmacies. CVS agreed to try the lip treatment with a conservative 12-month sales target. Again, after only a few months, actual sales surpassed the 12-month target by 300 per cent.

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Marketing: The fuel for rapid incremental growth

NSP Pharma has generated significant revenues and a growth rate of 100 per cent per year since 2001. Revenues were $5 million in 2004, and revenues for the first quarter of 2005 alone reached $5 million, or three times projection. Martines is projecting sales of $50 million for 2007, or a 500 per cent increase over 2005.

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« We don’t want to saturate the Canadian market so we have a carefully developed plan in place to manage growth strategically, » explains Martines. « We have to do this right if we are to become one of the most trusted brands on the market. »

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Martines says NSP Pharma will continue to invest a large percentage of sales revenue back into the Modèle brand to fuel growth and increase brand awareness. « We feel that a $5 million marketing investment this year and another $10 million in 2006 will trigger $55 million in sales in 2007, and position us well for continued growth thereafter. »

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The Future: Competition, regulatory standards, winners and losers

Looking forward, Martines believes the North American cosmeceutical industry will grow and evolve, but that not all companies will survive. « As this market grows, regulators will demand proof in support of product claims. Many of today’s cosmeceutical products do not have the necessary clinical trial data to satisfy regulators and will suffer the consequences, » he says.

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Martines says Europe continues to lead the world in the development of cosmeceuticals and related regulations. Modèle products are researched, developed and produced in Europe, where they are subject to stringent European Union pharmaceutical production and clinical trial standards. While the product’s packaging and loyal customer base are driving sales today, Martines believes Modèle’s pharmaceutical pedigree will give NSP Pharma a definitive competitive edge in a more regulated and competitive future.

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« As the cosmeceutical market expands, it will attract both big pharma interest and regulator scrutiny, and products that don’t work or can’t prove their claims will be squeezed out of the market, » says Martines. « That will be good news for consumers and it bodes well for the future of NSP Pharma. »

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About NSP Pharma

NSP Pharma Corp. (nsp.ca) is a leading cosmeceutical and pharmaceutical company that markets innovative, high-quality anti-aging products to retail drug, department and mass merchandiser chains in the United States and Canada. NSP Pharma Corp.’s objective is to become the premier supplier of skincare and healthcare products to an aging global population.

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Based in Pickering Ontario and employing 14 people, NSP’s products are currently sold in more than 9,100 stores across North America: in Canada through Shoppers Drug Mart, London Drugs, Pharma Plus, Jean Coutu, Pharmasave, Pharmaprix, Uniprix and Sears, and in the US through CVS, Albertsons, Save-on Drugs, Osco Drugs, Jewel-Osco, ACME and Rite Aid pharmacies.

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Statements made in this release are accurate as of the time of their release and may not reflect future circumstances. Should unforeseen risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, NSP Pharma Corp. reserves the right to update and amend the statements contained herein.

Source: NSP Pharma Corp.

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