Laboratoires Arkopharma S.A.

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Laboratoires Arkopharma S.A.

BP 28
Carros
F-06511 Cedex
France
Telephone: +33 4 93 29 11 28
Fax: +33 4 93 29 11 62
Web site: http://www.arkopharma.com

Public Company
Incorporated: 1980
Employees: 1,600
Sales: EUR 253.9 million (2004)
Stock Exchanges: Euronext Paris
Ticker Symbol: ARK
NAIC: 325412 Pharmaceutical Preparation Manufacturing

Laboratoires Arkopharma S.A. is France's leading producer and distributor of phytotherapeutic medicines—that is, medicine based on plants. The Nice-based company also has built up a leading position on the worldwide market, with subsidiaries in 12 countries, and sales to more than 65 countries. The largest part of Arkopharma's product range targets the over-the-counter (OTC) market, with treatment for commonly self-medicated conditions such as headache, pain relief, cold relief, insomnia, and the like. Arkopharma also is a leading producer of appetite control and diet-related products, vitamins and minerals, and skin care treatments, and also produces a line of veterinary products. In addition to its OTC range, the company also develops a range of prescription-strength medicines, including supplemental treatments for AIDS, cancer, and other diseases. Phytotherapy remains the group's largest market, at 65 percent of sales of EUR 247 million ($280 million) in 2004. Europe represents the group's core market, at nearly 90 percent of total sales. North America accounted for just 6 percent of sales, while the Asian Pacific (in large part through Australian subsidiary Nutrasense) added 3 percent. Colette Robert is the group's president, and founder Max Rombi is chairman of the board of directors. Sons Olivier and Philippe Rombi serve as co-CEOs. Arkopharma is listed on the Euronext Paris Stock Exchange. The Rombi family controls approximately 54 percent of the group's shares.

French Phytotherapy Pioneer in the 1980s

The use of plants for healing purposes had its roots in mankind's earliest history. The earliest known records of attempts to classify plants according to their medicinal properties dated back to ancient Sumer, and the earliest Chinese dynasties also developed a system of medicine based on plants and herbs. In this way, hundreds of species had been classified as medicinal plants.

In the West, the first classification attempts appeared in Greece, and included the efforts of such noted figures as Hippocrates, Dioscorides, and Galen. Yet the use of plants and herbs for their medicinal and pharmaceutical effects appeared universal among cultures and civilizations around the world.

Modern medicine itself grew out of the use of plants. A major step came following the work of Swiss alchemist Philippus Aureolus Paracelsus (1493–1541), who developed the idea of the "active principal," that is, the part of the plant that contributed its medicinal effect. The notion of the active principal was to give rise to a global pharmaceutical industry, which developed new drugs and medicines through the identification, and ultimately, the artificial synthesis of the active molecules in plants and other substances found in nature.

For many, however, the development of the pharmaceutical industry and of such highly targeted molecules had unpleasant consequences, not the least of which were the often unpleasant side effects of many, if not most, modern medicines. By the late 1960s and especially during the 1970s, a growing number of people had begun to question the basis of the pharmaceutical industry, particularly as it grew into one of the most powerful sectors of the global economy. The highly symptom-oriented nature of Western medicine also came under criticism, particularly as many common drug therapies were known to cause symptoms, and even illnesses, as painful as the treated disease itself.

This led to a growing interest in a return to more traditional healing techniques, and particularly, an interest in the use of the whole plant, rather than a single identified "active" substance contained in the plant, for the treatment of many common ailments. The branch of phytotherapy, that is, plant-based medical therapies, became part of a trend toward the development of gentler and less toxic treatment methods. Unlike many competing "alternative" therapies, however, such as homeopathy, among others, phytotherapeutic preparations presented clear active ingredients that were capable of being identified and quantified.

In France, Dr. Max Rombi had become part of the movement toward more holistic medical treatment by the late 1970s. In 1980, Rombi went into business for himself in order to produce his own phytotherapeutical preparations. Rombi founded Laboratoires Arkopharma that year, and was joined by chemist Colette Robert, among others.

Rombi's idea was to break from traditional delivery methods of plant-based medicines, which generally were presented in liquid form, and were heated and/or dissolved in water or alcohol. Rombi recognized that a market existed for a more convenient form of delivery. Inspired by the tablets and capsules of mainstream medicine, Arkopharma sought a method for encapsulating its plant preparations. By 1982, the company's efforts resulted in the launch of its line of Arkogélules, which featured powdered, whole plant in gelatin capsules. The capsules were an immediate success, not least because they seemed to capture the spirit of the times, and the "on-the-go" nature of French society in the early 1980s.

The launch of the Arkogélule enabled Arkopharma to claim an early lead in the French phytotherapy sector. By the end of 1982, sales had topped the equivalent of EUR 8 million. Arkopharma extended its product range into the mid-1980s, adding a line of vitamins and minerals, as well as a line of veterinary products. Among the company's biggest sellers, however, was its line of dietary and appetite control preparations.

Arkopharma's research and development effort also worked toward a new breakthrough, inventing the Cryobroyage method of plant preparation. Launched in 1985, the new method employed liquid nitrogen to deep freeze plants and enabled them to be ground at temperatures below −196 degrees Celsius. In this way, the totality of the plant and its active ingredients was conserved, in contrast to traditional plant preparation techniques. The method also permitted the plants to be ground more finely, enabling them to be more efficiently digested.

Arkopharma's breakthrough came in 1986, when the Health Ministry of the French government recognized phytotherapy as a legitimate branch of medicine. The ministry put into place a certification system, called the "Autorisation de Mise sur Marché" (or AMM), as a means of legislating the marketing of phytotherapeutical medicines. Arkopharma quickly took advantage of the new legislation, achieving AMMs for 18 of its products by the following year. In 1987, as well, the company launched a new line, Arkofluides, featuring encapsulated oils.

Acquiring Scale in the 1990s

The French government's recognition of phytotherapy not only boosted the branch's profile in France, but also enhanced its legitimacy elsewhere in Europe. Arkopharma moved to capture a share of the growing European market for plant-based therapies, creating subsidiaries in Spain, Italy, and the United Kingdom by 1987. The rising interest in plant-based treatments in North America also encouraged the company to set up a subsidiary in the United States. By the end of 1988, the company's sales had topped the equivalent of EUR 31 million.

Arkopharma made a number of strategic expansion moves in the early 1990s. In 1990, for example, the company acquired one of its chief French rivals, Laboratoires Phytodif. Another acquisition, of Homéopathie Ferrier, enabled the company to boost its range with Ferrier's production of homeopathic medicines. By 1991, Arkopharma also had expanded its sales network to include Germany. To meet its production needs, the company added a new 15,000-square-meter facility that year as well.

By 1994, Arkopharma had expanded its international sales reach by forming a series of distribution agreements. In this way, the company entered the Danish, Finnish, and Portuguese markets in Europe, and also added sales in Hong Kong, Malaysia, Taiwan, Singapore, and China. Part of the success of the company's international expansion was due to the launch, in 1993, of a new line of diet products, called Arkoline, which became a strong seller for the company both at home and abroad. In that year, as well, the company added the Nutriline family of nutritional therapy products.

Arkopharma continued rolling out new products into the mid-1990s. A significant milestone for the company came with the launch of its Mincifit line of "slimming" creams and oils in 1995. In this way the company became an early entrant into what was to become one of the fastest-growing cosmetics categories at the dawn of the 21st century.

At the same time, the company entered the dental care field, launching its own brand, Arkofresh, in 1995. That year, as well, the company acquired Laboratoires Veterinaire ICC, a manufacturer of veterinary products, and especially anti-parasite collars. The purchase of ICC made Arkopharma the number two maker of tick and flea collars in France.

Arkopharma's sales had topped the equivalent of EUR 80 million by the middle of the 1990s. The company then prepared for the next phase of its development by listing its stock on the Paris Bourse's Secondary Market in 1996. The public offering enabled Arkopharma to make a new acquisition, of Laboratoires Homéopathie Complexe, that year. The company also acquired a new logistics center, a 15,000-square-meter facility in Carros.

Company Perspectives:

ARKOPHARMA—The science of health, naturally.

Arkopharma returned to innovation the following year with the launch of the market's first 100 percent vegetable-based capsule coating. Until then, the company's capsules had been based on gelatin, derived from cows. Yet rising concerns over mad cow disease in the late 1990s, and the inherent conflict between the company's plant-based therapies and the animal-based delivery method, as well as the natural tendency of the company's core consumer market to reject the latter, had en-couraged the company to commit to the development of the new capsule type, based on cellulose fibers.

The launch of the new capsule coincided with a boom in the company's international development. Arkopharma added to its foreign network, buying up its Belgian distributor in 1998, and setting up a subsidiary in The Netherlands that year as well. The following year, the company established a true presence in the U.S. market with the purchase of New Hampshire-based Oakmont Investments, Inc., and its Health from the Sun and Oakmont Laboratories brands. The acquisition gave Arkopharma control of Oakmont's line of vegetarian essential fatty acid capsules and, still more important, access to Oakmont's distribution network among the 6,000 some stores in the U.S. health food market.

Phytotherapy Leader in the 2000s

Arkopharma relied on outside sources for most of the raw products used in its preparations. In 1999, however, the company launched a new subsidiary, called Burgundy, dedicated to the production of certain plants and plant extracts for use in the group's phytotherapy products. The company expanded its product line again in 2000, buying up a 75 percent stake in Nutrasense, based in Australia. The acquisition enhanced the company's access to the Australian, New Zealand, and related Pacific markets, and also extended its product range to include the strong Nutrasense brand of plant-based arthritic and rheumatic medications.

The Nutrasense and Oakmont acquisitions played a major role in the shifting geographic focus of Arkopharma's sales. From a purely French company at the beginning of the 1980s, Arkopharma had grown into a truly international phytotherapy leader. By the early 2000s, international sales represented nearly 80 percent of the company's sales of almost EUR 184 million in 2001.

Arkopharma moved to boost its position in the cosmetics market, taking advantage of growing concerns over the massive use of often dangerous chemicals by the mainstream cosmetics and skin care leaders. In 2002, the company launched a new brand, Laboratoires Plante System, featuring 16 plant-based skin care and cosmetics products. The following year, the company had a new major success, this time in the diet-related segment, with the launch of its drinkable appetite control beverage, 4.3.2.1 Minceur. By 2004, that product had become the company's top seller.

Arkopharma maintained its growth momentum into the middle of the 2000s. In 2003, the company moved into Switzerland, acquiring that country's PAD and Phyto Pharma Medika. That same year, Arkopharma added a Canadian subsidiary to boost its North American presence. By the end of 2004, Arkopharma's sales had grown again, nearing EUR 250 million.

In the mid-2000s, Arkopharma and the growing phytotherapy industry faced new pressures. In 2003, Arkopharma was forced to withdraw one product, Exolise, launched in 1999, from the market because of reports that the product had caused liver damage in a number of people. Then in October 2005, Max Rombi, who had since retired as chairman of the company, was charged with involuntary manslaughter because a reported mix-up between two Chinese herbs, one innocuous, the other toxic, used in one of the company's weight-loss preparations allegedly had caused the deaths of two women.

These cases highlighted for many the potential danger of plant-based medicines, and especially the risks involved in the tendency for consumers to self-medicate using phytotherapeutic formulations. For others, however, the pressure to enforce stricter legislation on the phytotherapy sector, and the alternative healthcare sector in general, represented an attempt by the global pharmaceuticals industry to gain control of, if not eliminate, a growing competitive threat. Arkopharma's strong growth since its founding highlighted the appeal of alternative treatment methods to mainstream medicine.

Key Dates:

1980:: Max Rombi founds Arkopharma in order to produce plant-based medicines.
1982:: Arkogélules, the first capsule-based plant preparations in France, is launched.
1985:: Arkopharma develops "Cryobroyage," a deep-frozen preparation method; the company expands into vitamins and minerals, as well as veterinary products.
1986:: The French government acknowledges phytotherapy as a legitimate pharmaceutical branch.
1987:: International expansion is undertaken, with subsidiaries in Spain, the United States, Italy, and the United Kingdom.
1990:: Homéopathie Ferrier in France is acquired.
1991:: Arkopharma acquires rival Laboratoires Phytodif in France.
1995:: Arkopharma acquires veterinary products group Laboratoires Veterinaire ICC in France.
1996:: A public offering is made on the Paris Stock Exchange; the company acquires Laboratoires Homéopathie Complexe in France.
1997:: A 100 percent vegetable-based capsule is launched.
1998:: Arkopharma launches a subsidiary in The Netherlands; a distributor in Belgium is acquired.
1999:: Arkopharma acquires Oakmont in the United States.
2000:: Arkopharma acquires Nutrasense in Australia.
2002:: A new line of plant-based cosmetiques is launched.
2003:: Arkopharma enters Switzerland with the acquisition of PAD and Phyto Pharma Medika; the company launches a Canadian subsidiary.
2005:: Max Rombi is charged with involuntary manslaughter in an alleged ingredients mix-up.

Principal Subsidiaries

Arkopharma UK Ltd.; Arkopharma GmbH (Germany); Arkopharma LLC (U.S.A.); Nutrasense Australia Pty. Ltd.; Arkochim España; Arkopharma Nederland B.V; Arkofarm S.R.L. (Italy); Arkopharma Benelux; Arkopharma Ireland Ltd.; Arkopharma Canada.