After getting his B.S. degree in science from Colgate University in 1978, Jonah Shacknai managed to serve as the chief aid to a committee in the House of Representatives. Even though he was very young, he already knew how to demonstrate his intelligence and creativity. He drafted significant legislation affecting the Healthcare industry. By 1982, he obtained a J.D. from Georgetown University Law Center. As most of his classmates would go on to do, he became a partner in a law firm, which represented more than 30 pharmaceutical clients. While working with these pharmaceutical companies, particularly with Key Pharmaceuticals, Jonah developed a deep understanding of pharmaceutical business.
He spotted a gold mine.
In his early thirties, he was sharp enough to see the opportunities in the niche sector – dermatology, which were invisible to most people at that time. He pointed out that “dermatology was more insulated to cost containment in that regulatory barriers to the introduction of new products were fewer”. This knowledge could be attributed to his years of legal practice in the healthcare sector. He also said that dermatologists were extremely receptive to new products, and that “the dermatology market was $4 billion at that time, booming each year”. He accumulated this knowledge of marketing from years working experience with big-pharma. Obviously, he was a born entrepreneur and he differentiated himself from his legal colleagues by looking beyond mere legal work, to how pharmaceutical companies were being run and making money.
Aside from being an astute observer of the market, Jonah had the courage to get his hands dirty and practice his dream. In 1988, he quit practicing law and founded Medicis Corporation. He was only 33-years-old then, was well aware of the huge difficulties ahead, but he was full of confidence to tangle with them fearlessly. In its first two years, Medicis lost more than $2.5 million. He believed the key elements that he had identified to be successful in this industry – new products launching and marketing. However, the huge capital was needed to get this driving force into motion. In 1990, Medicis made its first public offering, raising $7.4 million.
Stocked with sufficient cash, Medicis launched its new sales force, which would regularly visit dermatologists to update them on new products, backed with training, promotional events, brochures… a marketing practice common to big-pharma. In 1990, a new product Dynacin , which treats acne, was approved by the FDA, and was introduced to the market in 1993. Revenue of 1992 reached $7.7 million. In 1994, Medicis recorded profits of more than $650,000 for the first time. Looking at $715.2 million total revenue and $112.7 million net income in 2010, you would have to admire the greatness of this company and the founder behind it. The stock price has climbed up significantly since 1996, accompanied by an average revenue growth rate of 45% per year between 1996 and 2001.
Having a successful marketing strategy is one of the two keys Jonah identified. The Bio-pharm industry’s marketing strategy is unique. Although patients are the ultimate consumers of its products, big distributors like McKesson Corporation are listed as customers in its annual report, while the real purchasing decision makers are dermatologists. Sales force set dermatologists as their targets. Jonah correctly recognized that dermatologists are more receptive to new products than other doctors, he also led the 229 (as of end of 2010) lean sales force in Medicis to work effectively. They brought in huge revenues and update management with the latest information on market trends and customer demand.
Marketing always needs to be current and creative, which Jonah knows for sure. As the FDA got DTC (direct to consumer) restrictions eased up, big firms were able to start advertising to consumers through TV, print, radio and other forms of mass and social media. Medicis hired Gerbir Snell/Weisheimer & Associates to launch a big campaign for the drug Lustra. There weren’t significant sales after this campaign. However, Jonah catches up with trend fast. He is very distinctive in this area. Under his command, sales representatives treat doctors to sports games, SPA certifications, and even weekends at the beach. Jonah personally entertains “important high prescribing doctors” to his mansion in Coronado. The public image of Jonah has been criticized as “rip the patient, grease the doctors”, however, his strategies have always led to profit.
The capability to launch new products that continually fit the market is any company’s biggest challenge. Records show that Medicis has achieved great success on the acne market. In 1993, Dynacin pushed the company onto the upward track. The new product Solodyn, which is the extension formulation with same chemical compounds as Dynacin, has become the top seller for this company. Looking at the pipeline with bunch of FDA approved drugs, you have to admit Jonah’s super capabilities to seek out the right partners and identify potential products while they are still in the research phase. In 2003, Jonah Shacknai spent $160 million dollars to acquire HA North America Sales AB with dermal filling products, ready for the aesthetic market. Strategically, Jonah was considering expansion into this larger cosmetic market back at that time. His other big move was to seek a wrinkle treatment product, to compete with the blockbuster drug Botox, and Jonah did so by employing a comprehensive, thoroughly considered plan.
Dysport , which was developed by IPSEN S.A. and approved for cosmetic applications in Germany early in 2002 appeared on Jonah’s radar. He might have already sensed the huge exponential sales Botox could achieve when Botox was approved by the FDA in 2002 (Botox brought in $1.42 billion dollars for Allergan (NYSE: AGN) in last year, while the total revenue of Medicis is only $700 million). It was until 2006, he found IPSEN as partner who licensed Medicis the rights to commercialize Dysport in Japan Canada and the United States. The initial payment to ISPEN was high as $70 million. Jonah had been courageous and confident enough to make this strategic decision at that time. Again, he bet on two key elements: exceptional judgment on FDA approval and existing marketing/sales capabilities to compete with the giant Allergan.
He turned out to be completely right on the FDA aspect again. Dysport, which was submitted an application in Mar 2008, was approved by the FDA in Apr 2009. In Jun 2009, Medicis launched the marketing of Dysport, directly targeting Botox as its competitor by offering lower prices and even a rebate if consumers claimed it was not as effective as Botox. Advertising, sales representatives, promotions…huge resources and money were spent. Jonah was proud and was even bragging about orders being doubled in only a few weeks while on an interview program with Jim Cramer. However, the quarterly report revealed that the non-acne segment revenue in the third quarter of 2009 was $ 35.5 million, which slowly climbed to $49.5 million in 2010, and furthermore to $ 57.7 million in the second quarter of 2011, some of which were contributed by other drugs Vanos and Restylane. The fiscal year report shows that revenue from non-acne dermatological products increased from $133.6 million in 2009 to $175 million in 2010, growing at a rate of 31%, while the acne segment grew at a rate of 21%. No matter how impressive these numbers may look to some people, Jonah might not have been happy. With this small piece of pie grabbed from Botox, it would take Dysport 9 years to reach $70 million in revenue, which only could payback the initial $70 million payment to IPSEN. It’s not lucrative for any sensible business person.
Jonah overestimated his marketing capability in the aesthetic area and underestimated his competitor – Allergan. What’s more, an outrageous mishap happened to Jonah Shacknai this year. His six-year old boy fell down from stairs and was badly injured, 2 days later, while the boy still was alive in the hospital, his girlfriend Rebecca committed “suicide” (this was claimed by local law enforcement) by hanging herself. Her hands and feet tied, and was naked in the mansion at that time. His son finally was deceased too. No matter how strange and creepy these tragic stories about Jonah may be, nobody knows the whole truth behind them yet. However one thing is for sure – his tenacious aggression and creativity is reflected in his personal life too. Is he fulfilled by his philosophy and value? Will he continue to lead Medicis into further prosperity?