Developer of Today Looks to Tomorrow
Next Thursday, as the rest of the nation celebrates the country’s birthday, Bruce Vorhauer will be talking birth control with a group of family-planning officials from China.
But there is no reason to feel sorry for Vorhauer because of his all-work, no-play schedule. If the discussions go well, VLI Corp., the Irvine company Vorhauer founded, will be taking its contraceptive sponge to China, a market that is not only the world’s most populous, but also among the most anxious to control its birth rate.
Clearly, things are looking up for VLI. Two years after its much-ballyhooed introduction, the company’s one-of-a-kind “Today” contraceptive sponge has finally won the acceptance it had expected to win far more easily, and far earlier.
And now, after overcoming apparently unfounded reports of a link to toxic shock syndrome, belatedly establishing a consumer-oriented advertising campaign and becoming the best-selling non-prescription women’s contraceptive in America, the question is not whether there is a tomorrow for Today, but rather what VLI can do for an encore.
VLI officials already have an answer. “We need to diversify out of Today,” says VLI President Robert Elliott of the one-product company. “We have nearly a 25% share of the market, and share points above that are hard to win.”
The diversification strategy calls for VLI to capitalize on the growing acceptance of the sponge by introducing feminine-hygiene products and as many as half a dozen sponge-delivered drugs for vaginal infections. The goal, says Vorhauer, is to turn VLI into a “broad-based feminine products company.”
That VLI is planning its next moves and attempting to manage its destiny represents a distinct departure from its earlier habits.
“A year ago, they were flying by the seat of their pants,” recalls Edward Gomoll, an analyst at Pacific Securities in San Francisco.
Relied on Publicity
Adds VLI marketing vice president Mary George, a bit more delicately: “Initially, because of all the publicity the sponge got, we depended on the media to get out our message. We didn’t build our own consumer franchise and we didn’t control our own communications to the consumers.”
When the company introduced the sponge in mid-1983, it presented women with the first new option in birth control in two decades. The internally worn, spermicide-soaked polyurethane sphere has the same effectiveness rating as the diaphragm--about 90%--and, because it works for up to 24 hours after insertion, allows for spontaneity as does use of the birth control pill.
But by late 1983, the company was badly wounded by reports linking its sponge to the potentially lethal toxic shock syndrome. Although the reports were later proved unfounded by laboratory tests, sales of the sponge sputtered and consumer confidence fell.
At about the same time, the company discovered that its marketing efforts were aimed wrong. After pitching its messages to physicians, Elliott says, the company realized that doctors have far less sway over their patients’ choices of birth control methods than marketing executives had originally thought.
“Women make up their own minds on this subject, and we found that women talk to their friends more about contraception methods than their doctors,” Elliott explains. “Word of mouth is very important.”
Last June, VLI unveiled its new advertising campaign, a promotion directed at women and carried in newspapers, magazines, radio and television. The campaign, which stresses the unique qualities of the sponge, has been effective. Sales, which hit $12 million last year, are expected to reach $20 million this year.
High Advertising Costs
The promotion has proved costly, however. In 1984, the company spent $6 million on advertising in the second half of the year alone, an amount equal to its losses for the year. This year, advertising expenses are expected to reach about $5 million, but analysts are predicting that the company could break even, or perhaps turn its first annual profit.
Even if VLI doesn’t earn a profit this year, Elliott says the diversification strategy should put the company into the black next year.
That strategy calls for VLI to introduce the first of its line of feminine hygiene products before the end of the year. Although the company would not describe any of the items for competitive reasons, VLI officials say the new products will complement the sponge, will be aimed at the same affluent, educated, women, and may carry the same Today name.
Furthermore, Vorhauer promises the products, just like the sponge, will be “unique--not me-too items” that would put VLI into direct competition with behemoths like Johnson & Johnson or Bristol-Myers.
And that’s just the half of it.
At the same time that the company is pursuing new consumer products, Vorhauer, a biomedical engineer by training, will lead a team of researchers in developing new ways to use the vaginally inserted sponge to deliver drugs other than spermicides.
Two months ago, the company won U.S. Food and Drug Administration approval to conduct human clinical trials of a sponge-delivered treatment for two vaginal infections.
“It’s a shame to let such a strong delivery system like the sponge lie fallow,” Vorhauer says, noting that at any one time, about 25% of the female population in the United States is suffering from a vaginal infection. “We’re looking at a potential $1-billion market.”
Hopeful of Approval
According to marketing vice president George, the woman generally credited with spurring sales of Today, the company’s strategy calls for it to concentrate on the cash-generating consumer products until the new sponge-delivered drugs can win FDA approval.
Although FDA approval is far from assured, VLI executives are not overly worried; the drugs they propose using in the sponge already are approved for oral use, and the sponge method has been approved for birth control use.
George predicts that by the time the FDA approves the new medication sponges, an estimated 18 to 24 months, VLI will be enjoying “balanced growth” and acceptance in the feminine hygiene market.
At the same time, Vorhauer and George will be pushing the sponge into foreign markets. Currently, the sponge is sold in England and Switzerland, and over the next 18 months it will be introduced in several Scandinavian countries.
And then there’s the China connection.
Vorhauer predicts that the company will know by the end of the year whether Chinese women will accept the sponge. If they don’t, Vorhauer says, VLI will survive nicely. But if they do, “The possibilities are exciting.”