Corrections or additions?
This article was prepared by Kathleen McGinn Spring for the March
9, 2005 issue of U.S. 1 Newspaper. All rights reserved.
When ‘Made in the USA’ Has Real Value
Apparently "Made in the USA" still has some value. While it is now
nigh unto impossible to find a sneaker, television, or a phone
legitimately carrying that sticker, and increasingly difficult to find
a sun dress or credenza made entirely on United States soil, there is
at least one industry where the moniker is worth something.
Medico, a young Hamilton-based pharmaceutical company specializing in
over-the-counter (OTC) remedies, finds that consumers in some of its
biggest markets, including Russia and Africa, and increasingly even
Western Europe, will pay more for cough syrup and similar products
that are made in the United States. Perceived quality and regulatory
standards are enough to make overseas customers open their wallets
wide enough to swallow a little more expense. This is one of the
reasons why the company, with facilities on Nottingham Way in Hamilton
and at Culbertson Avenue in Trenton, is quadrupling its revenues every
year and has just gone public to raise more cash for expansion.
Its products at first seem very familiar. They are, after all,
knock-offs of familiar brands like Tylenol, NyQuil, Robitussin, Scope,
and Vicks Vaporub. In English these products may carry a MediBest
label. Although they may not be exactly the same in every respect as
the trademarked items, they have the same active ingredients, and the
same high quality, taste, and appearance.
Medico was founded in 2001 by Kanneth Sugathan, who serves as its
president, and by Venkat Kakani, its vice president and general
manager. The two men met at the Sarva Dharma Service Center, an
interfaith spiritual and philanthropic organization to which they are
both deeply committed. A third active partner, Sunil Ambala, an MBA
and statistician who oversaw manufacturing operations, died recently.
The company is now looking for someone to take over his role.
Sugathan was born in Kerala, a region on the west coast of India that
describes itself as "God’s Own Country." The son of a chemist, he
earned a Ph.D. in organic chemistry from Kerala University in 1967. He
immigrated to the United States the next year on a two-year contract
with the Department of Agriculture as a research chemist. He did
post-doc work at the University of Mississippi and research for the
American Cancer Society before taking jobs with the chemical industry.
He moved to New Jersey in 1978, taking a job with Ziegler Chemical
before going to work for an industrial consulting company.
Working for a Brooklyn company, Polymer Research Company of America,
he led a teams of up to 18 chemists. The projects came from big
industrial companies with problems to solve or products to develop.
"It’s expensive to get a department to start or finish a product," he
says. So industrial giants often outsource the work. Working for a
client in short cycles, often three to six months, and never more than
nine months, he did everything from formulating or testing new
products to developing processes and solving problems.
The projects could involve rendering plastics soluble so that they
could be reused as lubricants, or improving coatings on industrial
products, or even improving appearances. "Anything where chemicals
were involved," says Sugathan. "I learned all of the techniques."
Lowering his already soft voice, he adds, "This is a secret: you learn
a lot more about a company when you work on a product. Everything you
do, you learn."
The knowledge would come in handy when he started his own company. But
he had no burning desire to become a business owner when he was
working on contracts for Polymer. "It was the best time of my life,"
he says, a broad smile emphasizing the point.
But he quit, without really knowing why. His wife quizzed him on his
reasons for leaving, worried that there had been problems on the job.
"I didn’t have an answer," he says. "I had just had enough." It turns
out, he continues, that providence may have been at work. "It turned
out to be the right time. She became sick soon after, and she needed
Sugathan is vague about his impetus for starting a pharmaceutical
company. "The idea came from all sources," he says. It began to take
form as he and his Sarva Dharma friend, Kakani, talked. The two have
similar backgrounds and complementary skills.
Raised in the Andhrea section of India, the son of a farmer, Kakani
studied genetics in his homeland, and then went to work for a bank,
where he assessed industrial clients applying for loans. He then
immigrated to the United States, earning an MBA from Rutgers in 1991.
Immediately after graduating he took $25,000 in seed capital and
started a trading business, importing and exporting chemicals,
pharmaceuticals, and engineering items.
"We were working on the importing and exporting of pharmaceuticals,"
he says, "so I thought we might go into manufacturing. There is good
Joining with Sugathan, he began to look for a location in 1998. A
Freehold resident, and the father of a nine-year-old daughter, he is
now looking for a home in Princeton, and says central New Jersey was
the logical place to site the new business. "This is the ideal place
for pharma," he says. "There is a large pool of technical people here,
and there is proximity to several multinational companies."
Sugathan, who recently moved from Piscataway to Lawrenceville, agrees.
The father of four grown children – including a doctor, a chemist, a
pharmaceutical industry employee, and a computer marketing executive –
all of whom live within an easy drive, he also has personal ties to
After narrowing their search for a facility to central New Jersey, it
took one year to find the location, a two-story 33,000 square-foot
space at 1000 Nottingham Way, just on the Hamilton side of the
Hamilton-Trenton border. The wait turned out to be worthwhile. "This
is the perfect spot," says Kakani, "because it was built to be a
pharmaceutical plant." The space was previously occupied by Elstim
Pharmaceuticals. The company has since added a 70,000 square-foot
manufacturing facility on Culbertson Street in Trenton, which operates
as Aum Nutra Pharm, a wholly owned subsidiary. Administration and the
formulation and manufacture of liquid products takes place in
Hamilton, while powders and capsules are manufactured in Trenton.
Start-up capital came from family and friends. The SBA guaranteed a
loan, but the company, which has 98 full-time employees and 100
seasonal employees, was unsuccessful in obtaining funding from the
state or the county, despite its fast growth. To feed that growth, the
company has just merged itself into a shell corporation, Satellite
Organizing Solutions, a portfolio company of New York-based Infinity
Capital, taking over its symbol, SOZG.PK (traded on the over the
counter bulletin board). Medico hired investment banking company
Berwyn Capital, of Berwyn, Pennsylvania, to put together the deal, and
paid for its ticker symbol and public status with stock. "It was
expensive," says Kakani, "but it was the best avenue to raise capital
without losing too much equity, and we thought we could withstand the
A table in the corner of Medico’s no-nonsense conference room is
chock-a-block with the boxes and bottles of OTC health aids that are
the engines of the company’s growth. A tall blue bottle stands out,
and demonstrates the myriad possibilities in selling over-the-counter
"It’s like Scope," says Sugathan, fetching the container. Actually,
the bottle is shaped more like those that hold Listerine, but the
Caribbean-blue color of the liquid within does strongly suggest Scope
mouthwash. "We developed it for a doctors’ group," he says,
"1-800-Best DDS." And indeed that name is displayed prominently on the
label. "It’s like an advertisement for them," he says. Clever. Anyone
buying the mouthwash would have the group’s name in front of them – in
big letters – while gargling once or twice a day.
In formulating the mouthwash, Medico simply took the active
ingredients in Scope, clearly listed on its label, and went from
"We start from scratch most of the time," says Sugathan. "The active
ingredient is written right there. We keep it as it is and formulate
to match the taste and the looks. We don’t match Scope; we build onto
Sometimes clients come to Medico bearing a bottle, maybe of Robitussin
cough syrup or Afrin nasal spray. "They say ‘I want something like
this,’" recounts Sugathan. The company can comply, supplying
everything from formulation to manufacture to packaging, as it did for
the 1-800-Best-DDS group. But, to date, such orders make up only about
5 percent of the company’s business, although this is a prime growth
Sugathan explains that most OTC medications are not covered by patents
and can be copied by anyone. "We have never come across one covered by
a patent," he says.
There are approximately 100,000 OTC drugs on the market, and Hollie
Gilroy, spokesperson for the Healthcare Institute of New Jersey, a
pharmaceutical trade group, says that many are former prescription
drugs that went off patent. "The only difference," she says, "is the
dosage." She gives Motrin as an example. Available not too long ago
only by prescription, it, and any number of copycats, are now sold in
newsstands and grocery stores everywhere.
Karen Mahoney, trade mission liaison for the FDA’s Center for Drug
Evaluation and Research, says, in an E-mail in response to questions
on how the FDA regulates these drugs, that the agency publishes
monographs listing active ingredients, allowed combinations, and
required labeling for each type of OTC drug. A manufacturer need only
comply with the monograph and produce the drug in a facility that
meets GMPs (good manufacturing procedures). There is no individual
testing process, as there is with prescription drugs. As for
oversight, Mahoney writes that the "FDA will go out and check samples.
It may only be one or two ingredients a year. Several products will be
A large potential business for Medico is providing private label
brands of OTC drugs to supermarket, drug store, and discount store
chains, and Sugathan says that his company is ramping up for it.
"We’re adding new high speed machines," he says. "We can now do 100
bottles an hour, but soon we will be able to do 400 bottles an hour."
"It will grow in the coming years," says Kakani of Medico’s private
label in-store sales in the United States. But meanwhile, 90 percent
of the company’s products are exported. Its aspirin, cough and cold
remedies, nasal sprays, ear drops, topical creams, and headache
remedies are sent overseas. Big customers so far are in Russia,
Lithuania, Belarus, and the Ukraine. From these former U.S.S.R. states
the OTC products move along to other Eastern European countries.
Medico has also found markets in Africa and is working on developing
customers in Holland, Germany, France, and other Western European
countries. Just back from a trade mission to Europe, Kakani is
optimistic about placing his products throughout the continent. OTC
products manufactured in the United States are more expensive than
those manufactured in cheap-labor countries, but this is one of the
increasingly rare cases in which cost is not a barrier to sales. "We
manufacture under FDA guidelines," says Sugathan. Overseas consumers
are willing to pay more for that guarantee, he says.
In addition to private label U.S. store products and exports, Medico
has its eye on at least two other major lines of business. The first
is contract work from large pharmaceuticals. So far it has not reeled
in any of this business, but it is set up to do so. The second is
original products, and the company is closing in on this profit
One of its first original products is aimed at the growing population
of Type II diabetics. It is a nutritional supplement tablet wholly of
its own design. The company plans not only to manufacture the
nutriceutical, but also to package and market it. Still unnamed, the
product is now in market tests and could be ready for sale within
three months, says Sugathan. Other original products under development
or consideration include multi-vitamins and sleep products, including
remedies for snoring.
While its current products are distributed by others, Medico would be
responsible for getting its original products to the marketplace.
Kakani is aware that marketing to consumers is difficult and
expensive. Advertising expenses typically make up between 20 and 30
percent of the sale price of an OTC drug, as consumers cling to the
brands they know. But, he says, "it’s worth the effort."
Meanwhile, the company is doing a brisk business in turning out what
its website describes as "products equivalent to Robitussin, NyQuil,
DayQuil, Benadryl Elixir, Debrox, Vicks Vaporub…," being careful to
note that each of these names is trademarked. It is a long list, and
includes many household names.
Kakani says that his company’s products are "equivalent to or better
than" the brand names. Gilroy, the spokesperson for the Healthcare
Institute of New Jersey, explains that generic OTC drugs are the
"bioequivalents" of brand name OTCs: that is, their active ingredients
are the same. Inert ingredients, however, probably would not be the
same. "There is never a complete equivalent," says Gilroy.
While the exact composition of each of Medico’s OTC drugs differs
somewhat from its brand name counterpart, the containers in which they
travel are also somewhat different. And, in Kakani’s opinion, at least
equivalent. "How you present the package is important," he says. It’s
a huge part of OTC marketing, and Medico strives to do it better than
the big guys. The company has in-house marketers who come up with
concepts and designs for each product, but the actual graphics work is
While Medico is far from alone in striving to put these off-brand OTC
packages on more and more shelves, its liquid products do have an
easier time competing in the marketplace. "Anyone can manufacture
pills," declares Kakani. "Aspirin is easy. You just buy a machine and
pop them out!" Cough syrups and throat sprays are a different matter.
Formulating and manufacturing liquids calls for very substantial
expertise, says Kakani, as Sugathan, the chemist with some 40 years
experience, nods in agreement. "We have very few competitors in liquid
products," he says.
It turns out that making liquid OTC products is not only difficult,
but is also seasonal. Demand spikes in the winter cold and flu season,
and stores order ahead of peak sniffle season. Medico hires 100 people
to work from June through December to meet the increased demand. It is
working on products with year-round appeal, vitamins for example, to
extend work for these employees.
Kakani says the company has had no trouble finding manufacturing
employees, seasonal or permanent, and has had little trouble staffing
its other positions. It has snatched up some employees laid off by big
pharmaceuticals, including Johnson & Johnson, he says. Central New
Jersey is rich in chemists, marketers, and packaging design people.
The only jobs that are hard to fill, he says, are those in mechanical
The fast-growing company expects to be up to 300 or 350 employees in
five years, and to have revenues of about "$100 million plus" by that
time, says Kakani. Revenues for 2003 were less than $900,000, and for
2004 were $4 million, a figure that is expected to grow to $16 million
in 2005. The company was "marginally profitable" in 2004. "We’re a
little ahead of the curve," he says. "Normally pharmaceuticals are
profitable in the fourth year. We’re about six months ahead."
Medico is fast outgrowing its two facilities, and will soon need more
space. The preference, says Kakani, is for more relatively small
Both men work long hours, and make no time for golf or gardening.
Kakani spends as much time as he can with his wife, a physician who is
not now working outside of the home, and his daughter. Sugathan sees
his grown children and their families, including his four
grandchildren, often, and has dinner with the whole family at least
once a week. Any other spare time goes to their spiritual
organization, including work in area soup kitchens.
Medico’s founders believe that their work benefits the community too.
"Starting from three people, we now support 200 people," says Kakani.
"We’re helping the community by giving jobs. We’ve done a lot in the
past three years."
08619. Also at 2670 Culbertson Avenue, Trenton. Kanneth Sugathan,
president. 609-890-1999; fax, 609-588-0550. Home page:
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