CEO Fought His Way In to Lead Battle Vs. Colds

DOYLESTOWN, Pa. (MainStreet) -- Ted Karkus is a newbie when it comes to running a public company.

The 52-year-old gained control of ProPhase Labs ( PRPH) in June 2009 after an all-out proxy fight as one of the medical science company's largest investors. But Karkus had never been a CEO in charge of dozens of people.

Ted Karkus, CEO of ProPhase Labs, has taken tough steps on personnel and getting the company's products on store shelves.

ProPhase is the maker of Cold-EEZE lozenges, which is made of zinc gluconate. The formula essentially shortens the length of a cold by releasing zinc ions that attach to receptors in the upper respiratory system, blocking the cold virus from expanding. The medicine has proven to be effective in several clinical studies by Dartmouth College and the Cleveland Clinic, according to the company.

ProPhase recently released a mouth spray version of the medicine as well.

"We really don't have competitors," Karkus says. "We are the only clinically proven cold remedy to shorten your cold."

The company sees makers of cough drops and symptom relievers such as aspirin and ibuprofen as their biggest competitors.

"Those products -- they make you feel better for an hour or four hours," Karkus says. "When the product wears off you're as sick as you were. Cold-EEZE actually cures your cold. So you can take the symptom relievers to feel better while you take the Cold-EEZE to shorten your cold."

ProPhase Labs, originally called Quigley, had faced years of revenue declines after Karkus' original investment in the late 1990s. He waged his proxy battle against the original board of directors when he saw a lack of focus on the Cold-EEZE brand and too much energy expended on an unpromising pharmaceutical division.

Karkus acknowledges that when he first took over, he had a lot of work to do on improving the company's bottom line, and, frankly, in learning how to be an effective chief executive.

"When I first took over as the CEO, the company had declining revenues for several years ... morale wasn't good, we were quickly becoming unimportant in the minds of the retailers and consumers were forgetting who we were," Karkus says. "We were in bad shape and in dire need of change."

"I didn't have a lot of confidence going in as CEO," he admits. "I had to learn on the job. I had to learn the consumer packaged goods business. I had to learn how to manage other people. It was really an overwhelming task to start out."

Karkus says he immediately hired management consultants, and one of his first initiatives was to give employees personality assessments to find out the strengths and weaknesses of each. That assessment led to dismissing 10 of the original 25 employees at the company's headquarters. Today only five of the original 25 still work for ProPhase Labs, he says.

"We've reduced a couple million dollars of overhead at our company," he says. "We're a more efficient company. I think we're operating better with less people and less overhead."

But Karkus' mission is to get retailers comfortable with the product again. To do that, he has taken to personally going on sales calls to its retailers because shelf positioning is "critical."

"Your retailers are your partners," he says. "It's your retailers that determine how much shelf space you get and what the positioning is on the shelf. If you don't have good positioning on your shelf you're going to become irrelevant -- consumers are not going to be able to find you. If they don't notice you on the shelf they're going to buy your competitors' item."

To get prime shelf space, retailers want to know that the company is growing and spending money on advertising to promote the brand, he says.

"It's kind of self-fulfilling: As you get more shelf space, you're going to sell more product. You sell more product, the retailers feel good about putting you on the better shelf position, they're going to give you more displays," he says.

According to the company's latest quarterly report, net sales - which includes sales of the over-the-counter product as well as private-label commissions -- rose 58% for the six months ending June 30, to $4.9 million, versus the year-earlier period.

So far the biggest lesson Karkus has learned as CEO is the critical importance of hiring good employees and being able to delegate tasks.

"You can have the best product in the world, if you don't have good management and you don't have good employees and a good staff working with you there is no way the product is going to be successful," he says. "There are a thousand decisions I have to make every day, and I rely on my entire team to make them."

-- Written by Laurie Kulikowski in New York.

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