A soothing expansion: skin medication maker Stiefel Laboratories is already No. 1 in many overseas markets, and now it wants to replicate that success in the US

South Florida CEO, July, 2004 by Rochelle Broder-Singer

* Charles Stiefel knows skin. The CEO of Stiefel Laboratories is the No. 1 maker of prescription skin treatments in Europe, Canada and Brazil. Now he wants to expand his share of the market in the United States.

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After founding the business in 1847 in Germany, the Stiefel family moved it to the US in 1944. For the last 20 years, the Coral Gables-based pharmaceutical company has sold more dermatological remedies overseas than it has at home.

"We invested a lot of capital and a lot of human resources outside the US, partially to take advantage of the fact that in many markets, there were fewer competitors," says Stiefel, who is also chairman and president of the company.

The strategy paid off. Revenue for 2003 was $361 million, up 24 percent from the year prior. International operations accounted for 65 percent of that revenue.

The company's reach overseas is broad. It operates in 33 countries, and has manufacturing plants in six countries. It has research and development facilities in New York, and owns the largest dermatological research facility south of the equator--in Brazil--as well as a similar facility in the United Kingdom.

The US is one of the few countries whose government does not impose price controls on prescription medications, making it an attractive market for pharmaceutical makers.

Stiefel aims to increase the US share of the company's revenues from 39 percent to 50 percent within three years. To do that, the firm is marketing heavily, and increased its sales force from 34 reps to 149 over the past two years. Stiefel has also hired people with experience negotiating with managed care and insurance companies. Production will be ramped up once a $30-million addition to the company's New York research and manufacturing facility is completed.

Stiefel is focusing his sales force on Duac, a shelf-stable acne fighting gel that combines benzoyl peroxide--the active ingredient in off-the-shelf Clearasil--with an antibiotic. The US Food & Drug Administration and its counterparts in Mexico and the UK have approved the drug for sale; it is already the top acne care product in Canada.

"Duac is their home run," says Dr. Stephen Mandy, a University of Miami professor of dermatology. "That's a very effective combination."

Mandy says the longevity of the Stiefel brand gives the company an edge in the US market because many dermatologists prefer to prescribe brand name drugs instead of generic versions. That is because generic drug manufacturers sometimes cut costs by substituting inactive ingredients during the manufacturing process--for example creams or gels used to deliver a drug dose. Even small changes in the composition of a particular drug base can affect how a patient will react to the medication.

Stiefel, with its 100-plus year history, "has strong recognition in the field and is admired and trusted by dermatologists--and that's a valuable asset," Mandy says. Even as other pharmaceutical companies have merged or been purchased, "Stiefel has been a constant in the industry, and that gives it brand power."

To be sure, the company's rapid expansion is not without its pitfalls.

"A lot of people think there is no downside to growth, but there really is," Stiefel says. "It can stretch your cash flow, and it does put stress on resources."

To address that, the company expanded its employee ranks to 2,500 this May, up from 2,200 employees worldwide last year.

The strategy seems to be paying off. Revenue since Stiefel was made CEO in 2001 grew 43 percent from $252 million to $361 million last year.

Still, Stiefel is not satisfied. "We'd like to be number one everywhere," he says.