Scharper’s history in the Italian market begins in 1958, but the company as we see it today was really created in the mid nineties, when you founded La Farmochimica Italiana (LFI) with your father Dr Lino Cartolari and later acquired Scharper Spa from HMR. What was the rationale behind buying Scharper’s name and products in 1997 -therefore changing the brand 2 years after LFI started developing its innovative approach to nutraceuticals by commercializing Eufortyn- and what have been the main milestones and achievements since then?
The company was created in 1995, one year after the corruption scandals that engulfed the healthcare sector in Italy and initiated a period of sharp decline for the pharmaceutical industry. Many products were pulled from the reimbursement lists, there was a sharper decline in the market itself and it was a very challenging time. But it’s often in times of big changes like these that you find opportunities.
We identified one of these opportunities when starting up Scharper, in the beginning of the consolidation trend in the industry. As more and more players increased their growth targets, most of them had to focus exclusively on blockbusters and could not afford to invest in niche products, that carried too a low potential turnover for companies of their size. This process left room for smaller laboratories, willing to invest in specific niche segments of the market. In this scenario, Scharper chose to position itself in the gynecologic field as a licensing partner of choice for multinationals for such products.
The first partnership was therefore established with Synthelabo, for whom gynecology was no longer a strategic area of focus. In a context when three of their main products in this area were declining, Scharper offered to take over their promotion and not only stopped the decline but allowed the products to grow again. One of these products is still marketed by Scharper after 14 years.
In this process of finding new partners, we purchased the brand name Scharper from HMR (which was the name of one of their subsidiaries) when this was formed as a product of the merger between Hoechst-Roussel and Marion Merrell Dow. We also acquired some of their non strategic products, licensed the rights for a new important compound and took on about 40 reps that, as a consequence of the merger were made redundant. This was an important move as it allowed us to build our asset base and level of recognition in the market.
But in addition to this, we identified a second opportunity. Whilst the number of available pharmaceutical products on the market was decreasing, especially in the so-called ‘tonics’ category – products that typically complement the main therapies and support energy levels in patients under specific treatment – the needs for such support therapy remained unchanged . Thus, Scharper launched products that were classified as food supplements or nutraceuticals, but focused on innovative, highly scientific products mainly through the application of new technologies to natural subtances that, while maintaining their safety profile, improved their effectiveness. Furthermore, we promoted such products exclusively to the medical community, with the support of strong scientific documentation, that made them effectively another option in the doctors’ therapeutic choices.
From 1996, Scharper therefore positioned itself as a laboratory able to provide different types of pharmaceutical solutions, without direct promotion to pharmacists or advertising campaigns in the press, clearly differentiating itself from OTC companies. Whereas the final customer is the patient, the main audience is the doctor. And while most products we developed derive from natural substances or plant extracts, they are supported by clinical trials and reach the same levels as drugs in terms of standardization.
Such an innovative positioning shall provide Scharper with future growth opportunities in Italy and beyond.
Relying on this strategy, how do you assess the performance of the company in terms of growth and revenues?
Until 2005, the average growth maintained a double-digit level, around 15 to 18%. Then, in the more challenging environment of the past three years, it stabilized around 5 to 10%.
But these are times of consolidation of Scharper’s organization. As a small group, we adopted a flexible and open model, developing ideas and projects in-house, but also relying on collaborations with various entities whenever needed, especially to establish technological platforms. For instance, a partner company with an innovative technology enabled us to dramatically improve the levels of solubility and absorption of Scharper’s Q10 compound, therefore drastically improving its efficiency. This new multi-compound is now allowing us to build a technological platform to address a number of different medical needs.
In addition to that, we created a network of collaborations with Italian and foreign universities. Some interesting studies have recently been carried out with the Centre for Ageing of the Gainesville University in Florida, to develop a product dedicated to enhancing energy level of patients experiencing chronic fatigue as a side effect of specific illnesses or aggressive treatments.
Looking at both Scharper’s business lines- prescription drugs and integrative products- in which therapeutic areas do you see more remaining unexploited potential?
Scharper does not really have two distinct business lines. The company’s vision is to target specific needs by providing doctors with an array of therapeutic tools ?whether they are drugs developed through classic chemical synthesis, herbal drugs (that are subject to specific regulations), medicinal food, medical devices, nutraceuticals or cosmeceuticals- always scientifically tested with a high level of safety.
Some of these products might not be considered as ‘therapeutic’ according to the traditional – but at the end of the day, it is just matter of regulatory classification. The Co-Q10 based multi-compound, I mentioned before, is allowing us to explore applications in the area of mithocondrial therapy, that span the fileds of ENT and neurology. Many of the products in dermatologic line, for example, are often injections, creams and gels that although classified as medical devices or even cosmeceutical are actually used by dermatologists or aesthetic surgeons before and after certain types of procedures (laser therapy, peeling and dermabrasion), with protective, lenitive, lubricating or pro-elasticity effects.
Looking at high-potential therapeutic areas, the recent developments in the nutri-genomics field led us to perform genomic studies, to understand the mechanism of action of certain natural subtances e gene expression.
In addition, the ageing population, especially in Italy, creates a number of new unmet medical needs and great opportunities for Scharper. Individuals in their seventies would like to feel as healthy as 50 years old, and products have to be developed to target the degeneration processes. But then, we really need to understand that nutrients are conceptually not different from drugs, with advantage of having generally a ‘tried and true’ high safety profile, and can play a crucial role in addressing specific and important medical needs.
But overall, whereas Scharper needed to have an opportunistic approach in its early stages of development, the model is becoming more and more structured as our organization is growing. The product portfolio pipeline is now more on specific areas of expertise where we have a market or technological know-how, such as , cell metabolism (es.: chronic fatigue), aging, ENT (es.: hearing loss protection), Women’s health, Paediatric care and dermatology. As a consequence we are much less dependent on licensing for our growth. While focused, we try nonetheless to be sufficiently flexible to listen to doctors, identify their needs, and develop adequate products for such needs.
In this process of using high technology and clinical testing to develop innovative nutraceuticals and cosmeceuticals, how would you rate the Italian environment for R&D and which assets make Italy a strategic place for clinical research?
Some improvements have been made recently in this field.
Last year, a budget provision accounting for 60% of the savings generated by generics has been devoted to the support of innovative drugs development- a good first step, but 99 additional steps are probably needed, especially to face the issues related to bureaucracy.
For the time being, Italy is not fully recognizing the value of research. And whereas it used to be an acknowledged fact that conducting research abroad was too costly, Scharper’s studies abroad actually proved to be cheaper and faster than they would have been in Italy – the study in Florida I mentioned before took just 6 months to be completed instead of the two years we projected if we were to conduct it in Italy. Surely, it is this kind of situations that contribute to the brain drain Italy is now suffering from.
The lack of dynamism of Italian research is also probably linked to the educational system itself which, at university level, is based more on seniority and connection than meritocracy, and does not provide the adequate funding to reward excellence.
Last but not least, there is a global prejudice according to which products dedicated to health should not be costly. But surely the industry also needs to generate profits to be reinvested in R&D, and clear regulations should be enforced in this sense. Finally, the regionalization of health care has increased substantially the complexity and costs of operating in the pharmaceutical industry today.
However, examples of creativity and individual excellence are not lacking and we define it as part of our mission to discover these jewels in the sand, and identify researchers and scientific ideas that, notwithstanding all these difficulties, still blossom in our country. In this respect authorities can play and important role both in easing the burden of bureaucratic constraints as well as stimulating technological progress by defining a number priorities, and devoting resources to strategic therapeutic areas, especially for pathologies connected to aging or that are growing to epidemic proportions (such as such as diabetes and obesity). I think also that Italy should invest more in basic research as well as development research, including clinical studies, while today the financing opportunities in product development seem to be focused more on manufacturing processes. This logic defies the current trend of becoming knowledge rather than manufacturing based economies.
What is your strategy to cope with the Italian highly decentralized healthcare system and have a full coverage of the territory?
Italians are resourceful by nature and used to adapt to the system, regardless of its level of coherence and relevance. And indeed, each of the 21 regions is constantly changing its rules.
A key asset of Scharper’s organization is its ability to be focused and flexible at the same time, and therefore be quick and efficient independently from the evolutions of the regional frameworks. In this regard, our rep organization force plays a crucial role, and really works in a different way: instead of pushing products following the traditional promotion methods, our representatives focus their time to understand the doctors’ practice, see where they can bring support, and offer more adequate solutions, especially in areas where the medical needs are fully met. Their role also is bound to evolve in order to become real representatives of the company on territory, even in the relationship with all the stakeholders (ie: doctors, hospitals, local regulatory bodies etc.), and not just to ‘push pills’.
Scharper is surely a well-established local success story, but the creation of the Pakistan affiliate back in 1997 also show that, from the beginning, the company has been looking at the world. What led the company to choose Pakistan as first direct presence and what are your future ambitions on an international footprint.
Surely, this decision can seem intriguing at first sight.
But I am personally convinced that business development does not always have to follow a straight line. Back in 1997, Scharper was still in its exploration phase and interested in marketing ‘branded generics’ developing markets as means for potential expansion. Amongst many possibilities, Pakistan was chosen as a test market to assess the company’s growth potential beyond the Italian borders.
Shortly after that, Scharper also developed a joint ventures in Malaysia and the Philippines. Nowadays, even though Pakistan is a growing market, the company is in negotiation for the sale of the affiliate to a larger European company that would be able to dedicate more time and investment, while we want to invest more into innovative products and focus on more developed economies.
Overall, future international strategy will probably be based on licensing agreements as a first step; potentially followed by joint ventures or direct presence at a later stage in other European markets. In this regard, a partnership has recently been established with Angelini Group, that has an extensive network throughout Eastern Europe, in order to bring one of Scharper’s products to this growing market. In the USA we already have ongoing discussions with potential partners that I believe will also lead to successful collaborations.
But when working with large groups, it is challenging for a small or mid-size company to establish a balanced relationship. This is why, regardless of the geographic area, the ideal partner should be, to a certain extent, similar to Scharper – especially in terms of size, values and approach.
As a final message to the readers of Pharmaceutical Executive, could you expose your personal ambitions for Scharper in the next five years?
Scharper will keep following a clear vision and a concise mission; to provide doctors with an array therapeutic tools to satisfy unmet needs.
The company has grown so far in a steady and prudent manner, and while we want to speed up the growth process we don’t want to embark in risky ventures that can put the company in jeopardy for the sake of immediate growth. Our focus on natural subtances allows to contain our costs and risks while allowing for attractive growth and returns.
Therefore, the mid-term target is to double the sales within the next four-five years (from about Euros 30 to 60 millions), and fuel a constant growth both in the Italian and international activities.
Building on your father’s legacy to lead a family-owned company, would you say you are born an entrepreneur or is it a skill you developed with time and experience?
My father, Dr. Lino Cartolari, epitomizes the quintessential entrepreneur, that bootstrapped to success through a combination of vision, smarts and hard work. I hope I was able to inherit at least some of his skills, mainly to focus on a vision and dream, to be naturally curious and interested in all kinds of opportunities and to do what it takes to make things happen.
But entrepreneurial spirit has to be combined with analytical and methodological skills. In this regards, my educational training and experience in large more structured companies taught me a lot ?both in terms of what to do and what not to do.