When someone co-founds two medical companies it should not be a shock to hear that same person has started a third one with a partner and returned to the highly successful field of generics. Carl Whatley’s latest co-venture, which was 13 months old in June and was expected to hire its first full-time employee the same month, is in a highly specialized area. The company, Vitruvias Therapeutics, is “developing generic products that have a moderate to high barrier to entry,” Whatley said. In layman’s terms, that means products that are difficult to formulate or difficult to manufacture. Vitruvias will develop products that fit into both categories. He said it’s a higher risk, higher reward market. It costs more to develop these type of generics “and the number of people out there who do the formulation work in the products that we’re (involved with) is low,” Whatley said. “In the generic business, it’s supply and demand, so the more participants you have selling a generic product, the lower the price. The fewer you have – the higher the price.”

The company is developing generic creams and ointments – no pills. The products will be used for fungal and bacterial infections. “We’re looking at some interesting opportunities in the wound care space,” said Whatley, who co-founded ProEthic Pharmaceuticals which was sold to Kowa Pharmaceuticals. He was also co-founder of Midlothian Laboratories, a generic drug company which was a wholly owned subsidiary of ProEthic. “It was immensely profitable,” Whatley said. “We made money from day one with the business.” Midlothian was sold to an Australian company. His partner, Bryce Harvey, retired from Midlothian last January and “identified” opportunities in the generic topical products that are both difficult to formulate and manufacture.

The “wound care space” is a $350 million-a-year market, according to Whatley, and he projects that Vitruvias will grab 10 percent to 15 percent of the market share. His conservative forecast is $30 million a year in sales for the company’s first products, which took 10 months to develop. “We had to essentially reverse engineer every component in these products,” Whatley said.

It will take two more years for the company’s first generic products to reach market, all the while there has been quite a lot of money outgoing. Whatley called it “an expensive endeavor.” About $5 million has been raised from investors, including “a considerable amount personally,” Whatley said. He hopes to raise more seed money.
The company has developed three products and is in the process of getting FDA approval. With a new FDA user fee of $64,000 per product under review, the approval process has been cut from three years to two years with a goal of 10 months by 2017.

When Whatley first started in the generic business, brand names ate up more than 90 percent of the market. Now generics are 85 percent of the market and prices are increasing because:

  • Production has declined in India after increased regulations and inspections.
  • The Affordable Care Act will increase the number of people using generic products.
  • Consolidation in the industry.

Two more areas that Whatley is looking at are eye products and injectables. The company is looking at four potential opportunities in the “very attractive” eye market, Whatley said. “Just going through the diligence of trying to determine if this is something you want to do takes several months,” he said. “You have to look at markets; you have to look at competition; you have to look at potential development costs; potential barriers.” He said that most of the current drug shortages are for injectables because there are not a lot of manufacturing facilities. The company is considering generic steroid products.

Whatley said that one of the advantages of the generic market is that the products are automatically substituted for brand names at the retail level. “You could cover the whole country with three or four account representatives in the generic business,” he said. You just need to have the product in distribution facilities.”

Article appeared in Montgomery Business Journal Summer 2014 Edition