NPS, Iroko show how companies can grow sales, not staff

Big Pharma has been whacking a lot of jobs in the last couple of years, part of its periodic boom-and-bust cycle of hiring when times are good and firing when they are not. But some small drug companies have been trying a different model: Just don't add employees in the first place.

When NPS Pharmaceuticals ($NPSP) reports its earnings on Tuesday, it is expected to show a profit for the first time in its 27-year history. The Bedminster, NJ-based company snagged FDA approval in late 2012 for Gattex, its short bowel syndrome drug. While it is an orphan drug with a small patient pool, its $295,000-a-year cost is pumping up revenues for the company. And it managed to get the drug approved with a staff of 5 dozen people. "We were able to take two products to the finish line with about 60 people, which is unheard of," NPS CEO Francois Nader told Investor's Business Daily.

Those 60 represent an expansion from the 16 Nader cut the company to in 2007 after the FDA turned down Preos, a drug for osteoporosis that was approved in Europe. With money running short, he did what many small biopharma companies have done: cut wherever he could, letting go most of its 200 employees. He outsourced everything from R&D to human resources. But afterward, Nader decided to try a new approach to building a company: Do it with almost all contract operations, IBD reports.

But what NPS did out of desperation, others have done by choice. Iroko, the Philadelphia-based company that specializes in making low-dose versions of nonsteroidal anti-inflammatory drugs (NSAIDs), is one. In October 2013, the FDA approved its drug Zorvolex (diclofenac) as a pain treatment. It is approved at a dosage that is 20% lower than other products, helping doctors address the concerns over cardiovascular risks tied to NSAIDs. In January, the FDA accepted a Supplemental New Drug Application for the drug as a treatment for osteoarthritis pain in adults.

The privately held company is just 6 years old, and CEO John Vavricka said in an interview last month at the J.P. Morgan Healthcare Conference that the company started as a "virtual company to the extent that we could be." It had bought some legacy products to offset expenses while it developed its low-dose NSAID treatments. It had fewer than 50 people selling those drugs in nearly 50 countries. "We hire the best in each category," Vavricka said, be it regulatory, finance and development, manufacturing or clinical trials. When the company takes one of its drugs into a new region, like the Middle East or Asia, it finds partners with local knowledge and expertise, he added.

With the marketing of Zorvolex, the company has taken a more traditional commercial approach, Vavricka said, but even then the 300 sales reps it hired are contract employees. That has allowed the company to identify the doctors who are more likely to prescribe low-dose NSAIDs and focus its sales emphasis. "Primary care physicians write most of the prescriptions for NSAIDs and we wanted to identify the bull's-eye, a group of doctors who are early adopters that our message will resonate with," Vavricka explained. "We identified 70,000 doctors who write 45% of the prescriptions, and that is the target our 300-person sales force is dedicated to."

Even with expansion, Iroko still has fewer than 150 employees--141 to be exact.

- read the Investor's Business Daily story

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