by Maureen Flanagan
IGI, Inc., a diversified pharmaceutical and consumer company, has positioned itself to forge ahead with products for the poultry, pet care and consumer skincare industries. The New Jersey-based company is also exploring additional applications of a patented technology which it developed and already uses in products for prominent skincare companies. This technology enhances the performance of a product's active ingredients and is adaptable for use in chemicals, pesticides, fuels, vaccines, medicines, foods, beverages, pet care and many other products. With the recapitalization of the company which included $7 million investment by American Capital Strategies, Ltd. (Nasdaq:ACAS) and Fleet Capital Corporation (Glastonbury, CT), IGI is developing its market position on three different business fronts while leveraging its unique technology -- Novasome® micro-encapsulation -- for a wide variety of users.
"With this recapitalization, IGI is better positioned to exploit its versatile base in developing our technologies to meet our customer's needs," said Paul Woitach, IGI President and COO. "The company has a strong base in creating our technologies to meet customers' needs. We expect the properties of the ® technology will serve to further enhance products in many different markets," Woitach said.
IGI's largest and oldest division, Vineland Laboratories, has been a pioneer in poultry disease prevention since 1914 and now produces and sells some six dozen poultry vaccines licensed by the United States Department of Agriculture (USDA). Vineland Laboratories holds more USDA licenses for production of poultry biologics than any other American manufacturer and produces a broad line of vaccines, nutritional, anti-infective, and sanitation products for poultry producers throughout the world. The company has 65 USDA licenses as well as 700 product registrations in more than 70 other countries. With a history spanning 80 years, Vineland Laboratories is one of the most well recognized brands in the industry and has been a technological and innovative market leader, the first to introduce a number of vaccines on the market today.
IGI's pet care products division manufactures and markets veterinary pharmaceuticals, pet care supplies and grooming aids under the EVSCO and Tomlyn brand names. The division sells through veterinarians, mass market distributors and local, regional and national pet stores. EVSCO and Tomlyn are both well-recognized brands in the market, with some products that have captured more than a 60% market share.
The company's consumer products division is focused on expanding the commercialization of its Novasome® micro-encapsulation technology. IGI contracts with companies such as Est�e Lauder and Revlon to manufacture Novasome® -based products and also licenses the technology for use by companies such as Johnson and Johnson and Kimberly Clark. In the skincare market, the Novasome® technology has advantages over competitive liposome products, delivering active ingredients to the skin more rapidly and with less irritation.
IGI was originally founded as an animal health products company by Dr. and Mrs. Edward B. Hager. An eminent kidney specialist and highly regarded scientist and pioneer in the medical profession, Dr. Hager was also a member of the team that performed the first successful human kidney transplant. In 1981, Dr. Hager took the company public, and in 1982, IGI purchased the animal and health division of Damon Corporation, which included Vineland and EVSCO.
The company, however, faced challenges in 1997 when the USDA ordered a stop shipment of some of its poultry vaccines -- the result of mismanagement by the company's former president. In response to this regulatory action, Dr. Hager and the Board of Directors promptly took corrective actions to remedy the situation. He installed new management, restructured the company, and settled the USDA and regulatory issues. The company retooled its methods to ensure compliance with government requirements and in addition implemented new cost savings programs.
Despite the temporary setback in the poultry business, IGI's vaccine division has bounced back and is in position to become more productive and profitable than before. The company's other divisions remained healthy and strong, buoyed by IGI's excellent customer service and reputation. In the pet care division, the new leadership introduced new products, and the consumer division experienced rapid growth and high margins with increasing licensing and royalty revenues from the Novasome® technology. As a result, IGI is now poised to expand and take advantage of the potential for growth in its markets. To actualize this opportunity, it teamed with American Capital which provided $7 million in senior subordinated debt financing and enabled IGI to restructure its balance sheet.
American Capital, a buyout and specialty finance company, has helped the management of many middle market companies recapitalize their businesses. It has recapitalized companies as diverse as The Inca Group, a manufacturer and processor of steel products; the Aeriform Corporation, an employee-owned specialty gas producer in Texas; the Lion Brewery, a Pennsylvania manufacturer of beer and malted beverages; and the well-known Piper Aircraft small plane manufacturer. As a one-stop financing resource for the middle market, American Capital provides equity, subordinated debt and senior debt to companies in need of capital for growth, acquisitions, employee buyouts, management buyouts, liquidity and restructurings.
"IGI is a an excellent investment. We are impressed with the high quality of its management team, its well-established brand names that go back some 80 years, and the potential for growth in all of its business lines," said John Freal, American Capital Principal.
IGI's animal products are important for the health and well-being of poultry and pets worldwide. Its poultry vaccines, which prevent disease transmission and combat new disease strains, have become essential for poultry producers as they increase efficiency by growing more birds faster and in smaller spaces. The vaccine industry is expected to expand along with the worldwide rise in poultry demand. Growth in the United States, the largest poultry producer in the world, is projected to increase by more than 3% through 2002, reflecting a continuing preference for poultry compared to other meat products in addition to steadily increasing exports. The market in developing countries has grown as well, as these countries implement vaccination programs to support a 3% to 4% annual growth in poultry consumption.
The market for pet care products has grown even faster -- about 8% a year, increasing to more than $12 billion in the United States and $18 billion worldwide. More people own pets than ever before, with pet ownership on the rise in Latin America, Europe, and Asia. In the United States, the percentage of pet owners grew from 56% to 61% over the last decade. And expenditures in this area are impressive -- the average dog owner, for example, spends almost $1,000 a year on products for his or her pet.
The skincare industry is also booming. As the population ages, analysts expect that consumers will increasingly purchase anti-aging skincare products, leading to growth in volume and value for the overall market. IGI's consumer products are on the cutting edge in this competitive market, which makes up approximately 18% of the roughly $28 billion personal care market. Three of the top categories -- facial care, hand and body care and medicated skincare -- are all areas where Novasome® micro-encapsulation has been shown to be beneficial and superior to other delivery systems. In fact, an increasing number of products sold by IGI divisions, such as its pet care grooming aids, are based on the Novasome® technology.
IGI has many intangible assets that continue to serve the company well in its domestic and foreign markets. These include the large number of foreign licenses or registrations and broad product lines for its poultry vaccines, its well-established distribution channels and highly regarded brand names in the pet care products business. Added to this is its exclusive right to the Novasome® technology sold to premier skincare companies which are using this type of new technology to strengthen brand recognition and capture global market share.
"IGI has a world of opportunity to make a mark in many different markets," Woitach said. "We anticipate the company's products will have wide-ranging benefits - for poultry producers , pet owners, skincare consumers, and many others - as IGI pursues technology-based solutions to yield further enhancements for our customers."
