Antacid's rise and fall a bitter pill
By GREG SAITZ
STAR-LEDGER STAFF
Acid+All was a product that seemed to have been touched with a magic wand.
From the moment the antacid launched early last year, supported by an aggressive ad campaign that billed the product as hip and trendy, things just fell into place.
There was a lengthy article about Thomas Pharmaceuticals and its product in the Wall Street Journal. Major drugstore chains such as Walgreens and Rite-Aid quickly agreed to put Acid+All on its shelves nationwide. A trade publication named it one of the top 10 new products for 2006.
"It had everything going for it," said John Lucas, who served for a time as chief executive of Thomas Pharmaceuticals, a subsidiary of Matawan-based iVoice.
Everything but money.
Now, on the eve of iVoice spinning off Thomas Pharmaceuticals as a separate, publicly traded company, Acid+All is on life support. Sales of the company's only product have been minimal this year. In regulatory filings with the Securities and Exchange Commission, the company said it has no more inventory and has received no new orders from retailers for the spearmint-flavored tablets.
Even if orders did come in, Thomas Pharmaceuticals said it would be unable to fill them. As a result, once inventory in stores sells, the antacid likely will no longer be available.
Acid+All's rapid rise and fall illustrates the challenges small companies face in selling their ideas in a marketplace dominated by giants. As it is, only about 10 percent to 20 percent of new products ever succeed, experts said.
THE LAUNCH
"This is another example of just how difficult it is to launch new products in an established category," said Timothy Calkins, a professor at Northwestern University's Kellogg School of Management, who teaches marketing strategy and bio-medical marketing.
"It's hardest when the product isn't noticeably different from" existing products, he said. "People don't have a compelling reason to switch."
The idea behind Acid+All was to upend the "frumpy" antacid category, where stalwarts Rolaids and Tums give off a no-nonsense, utilitarian vibe. Executives believed they could do with antacids what Altoids did with breath mints and Starbucks did with coffee.
Thomas Pharmaceuticals packaged its pills in a metal tin with a blue and white design similar to the British flag. Then they launched Acid+All backed by advertising, public relations, sponsorship and events targeting Baby Boomers, travelers and executives.
There was an ad on the cover of Drug Store News in January 2006, and Thomas Pharmaceuticals landed its first order in February 2006, from the luxury Peninsula Hotel in Manhattan.
Then came a lengthy article in the Wall Street Journal, complete with a portrait of company founder Tom Thomas. Acid+All already was available through Drugstore.com, and in the ensuing months Duane Reade, Walgreens, Rite Aid and hundreds of independent stores agreed to sell the product.
The company even got Acid+All into Entertainment Weekly's Oscar gift bag last year.
"Obviously, this is a great triumph of PR," said Philip Sawyer, a senior vice president at GfK Starch Communications, a research consultancy that studies ads. "Whoever was doing the PR was just nailing it, hitting it out of the park."
Sawyer was less enthusiastic about the print advertisements for Acid+All, which he said were replete with concepts considered ineffective. And when trying to get a new product into consumers' heads, he said it takes more than gloss and cool packaging.
"You have to do something big and you have to do something powerful and imaginative to get people's attention," Sawyer said. "It's hard to do that."
THE PLUMMET
By last November, Thomas Pharmaceuticals said Acid+All was in more than 20,000 pharmacies and drug stores, selling for about $3.89 a tin. But there also was a problem lurking, according to former CEO Lucas and SEC filings.
The company needed more money. Lucas, who said he no longer is affiliated with Thomas Pharmaceuticals, said founder Thomas wanted to try to raise $10 million from private investors.
He wasn't successful. Although Lucas described Thomas as a genius with "many, many great ideas," he said Thomas wasn't effective in luring investors.
"I know what investors like to hear, and it's not how great the product is, because by itself that doesn't create profitable liquidity," said Lucas, who has led several startups. "They want to know how you're going to make money."
Thomas, who resigned from his company in March, could not be reached for comment.
The cash shortfall ultimately started affecting the business.
"As a result of not having adequate financing for sales and marketing activities, retailers that previously carried the Acid+All product stopped ordering such product," the company said in a regulatory filing. "This in turn resulted in the company's packager to stop packaging the Acid+All product."
Walgreens said it discontinued carrying Acid+All earlier this year.
Overall, sales were $179,938 in 2006; for the first six months of this year, sales were $26,707, according to regulatory filings. During that 18-month period, the company lost more than $2.1 million.
By comparison, two of the top over-the-counter antacids, Prilosec and Pepcid AC, had $441.8 million in combined sales last year, according to market research firm Information Resources.
THE FUTURE
When iVoice acquired Thomas Pharmaceuticals in January 2006, the prospects for Acid+All were different. iVoice is a small company that for the past several years has acquired and then spun off startup businesses.
Jerome Mahoney, chief executive of iVoice and chairman of Thomas Pharmaceuticals, said the business is talking to groups in an effort to revive Acid+All.
"There are a lot of challenges," Mahoney said. "We're trying to make it work, but there are no guarantees."
In regulatory filings, Thomas Pharmaceuticals said it can't continue to operate unless it gets more money or merges with another business after the spinoff from iVoice. Its auditor has said it's uncertain whether Thomas Pharmaceuticals can stay in business because of the losses and capital deficit.
Plans are moving forward to give iVoice shareholders a special dividend of Thomas Pharmaceuticals stock and make it a stand-alone public company. Shareholders who own iVoice as of tomorrow will receive the dividend, likely sometime next month.
iVoice has employed a similar strategy with four other subsidiaries in an attempt to increase shareholder value, regulatory filings show. However, iVoice acknowledged the market value of three of the four companies spun off has decreased, and "stockholders have not received an increase in the value of such shares."
Like iVoice, Thomas Pharmaceuticals will be a penny stock and likely will trade for a penny or less per share. iVoice shares shot up 585 percent, to 9.6 tenths of a penny, Tuesday after the company announced the record date for stockholders entitled to shares of Thomas Pharmaceuticals. The stock then declined again, closing Friday at 3.5 tenths of a cent.