There's irony in the fact that Sergio Martines keeps a model sailboat on his desk at the bustling Pickering, Ont., headquarters of NSP Pharma.

He is more than capable of acquiring the real thing these days. But as president and CEO of a company that has doubled its revenue every year since he founded it in 2000, and as the main architect of a recent initial public offering that raised $8 million, Martines is far too busy for sailing, even though it's been his passion since he was a boy.

So the tiny sailboat drydocked beside his computer doesn't serve as an incentive to do better. Instead, it's a reminder of its owner's two crossings of the Atlantic Ocean delivering 60-ft. yachts to American buyers - and of the fact that inspiration regarding his future struck him during one of those profitable larks.

What he really wanted to do, Martines realized amid the choppy waves, was to stake a claim in what promised to be the newest gold rush: Anti-aging products.

Ken Kerr, Business Edge
NSP Pharma's Sergio Martines says analysts value the North American cosmeceutical industry at $29 billion US.

That meant packing in his job as a European pharmaceutical rep, becoming the first entrepreneur in his traditional Italian family, saying ciao to Rome - and then trying his luck on the west side of the Atlantic as the licensee and distributor of the skin-enhancing creams, masks, eye, lip and body treatments that are known as cosmeceuticals.

Already big in Europe by then, the fountain-of-youth products Martines chose as his company's stock-in-trade were just beginning to be discovered by aging New World consumers.

Today, Martines says financial analysts have pegged the North American cosmeceutical industry at $29 billion US. And an Industry Canada report released in July predicted that domestic sales of cosmeceuticals will be brisk for the foreseeable future.

What exactly are cosmeceuticals? An elision of the words cosmetics and pharmaceuticals, they are therapeutic, drug-like products that actually alter the structure and function of the skin from within. Some cosmeceuticals are naturally derived, while others are synthetic. All focus on stimulating the production of collagen, a cell component whose function is to act like mortar binding cells together. Wrinkles appear when age depletes the natural production of collagen.

In the case of the Italian Modele line, for which NSP Pharma has exclusive North American rights, the main ingredient is a patented, all'-natural blend of amino acids that stimulates collagen production, which in turn plumps up - or, in beauty-speak, volumizes - skin tissue.

The appeal of cosmeceuticals to wrinkle-conscious consumers, especially females of Baby Boom vintage, is mainly that the advanced skincare products are seen as a safe and effective alternative to surgery, dermabrasion, injections of collagen or botox and less-effective, old-style face creams.

That much Martines says he knew from living in Europe, "where people take looking as good as they can very seriously.”

But awareness in North America about the better way to look younger was still nearly nil. So he signed a partnership with a European consortium and emigrated to Canada, arriving in Toronto in 1999.

Martines says he chose Modele's cosmeceuticals line because of the "superior quality" of its products, which are used not only in skincare but also in pharmaceutical items used to repair damaged cartilage and ligaments in humans, and tendons and ligaments in racehorses.

Even though he was confident about the edge that would come from getting in on the ground floor with proven products, Martines started out small - small enough to fit his entire operation into his own walk-in closet while researching the market and developing fresh packaging to appeal to North American tastes. But he needed bigger digs after landing his first major account in the fall of 2001.

It was Shoppers Drug Mart, Canada's largest pharmacy chain, and he recalls that it took some doing to successfully pitch his first product - Modele's collagen lip treatment, which, at a whopping $30 a tube, shocked buyers whose usual stock was pretty much limited to products such as Chapstick and Lobello that retail for about $1.99.

But when Martines's market research convinced the powers-that-be at Shoppers of an unfulfilled demand, the chain accepted 70,000 units of the collagen lip treatment on a 12-month trial basis. Every single tube sold out within the first three months. Shoppers demanded not only more of the same, but also Modele's entire line, which it has continued to stock and prominently display ever since.

NSP Pharma's next big coup was snagging CVS, the largest u.s. pharmacy chain, in 2003. Once again, the foot-in-the-door product was Modele's lip treatment. And once again, actual sales exceeded the initial target - this time by 300 per cent - leading to a decision by CVS to carry Modele's complete line.

Today, all or some of Modele's 16 products are now on sale at 9,100 pharmacies across North America, including Shoppers, Pharma Plus, Sears and Jean Coutu in Canada and CVS, Albertsons and Rite Aid in the United States.

There's a solid explanation as to why so many pharmacies are scooping up NSP Pharma's products, says Sylvia Lai, a sales analyst in the Toronto office of Octagon Capital Corp.

"Cosmeceuticals are not only products with a high profit margin, but they are very much in line with the trend among drugstores to put more emphasis on upscale beauty products. Canada is currently leading this trend with chains like Shoppers revamping their stores and staffing beauty consultants. But American pharmacies also seem to be catching on to the potential of cosmeceuticals as well, particularly CVS and Albertsons."

NSP's revenue for 2004 was $5 million, but that figure was matched in the first quarter of 2005, a coup that Martines says was three times what had been projected. He is now forecasting sales of $50 million for 2007, which would represent a 500-per-cent increase over 2005.

NSP Pharma plans to include a bigger promotional budget and "a lot more R&D" leading to more product expansion, probably into injectable items to complement the work of plastic surgeons. The creation of its own lab and less dependence on European facilities will likely be the next step.

"And then we will probably go into acquisition mode starting next year," he says.

Asked what he plans to acquire, Martines reveals a strategy that makes him chuckle. "We like to do things differently. So instead of starting out in Europe and then expanding to North America, I think we might fly under the radar (of larger competitors) by doing things the other way around."

Hence his plan to acquire one or two smallish European cosmeceutical companies "while the euro is still low" compared with the Canadian dollar.

No matter how big his company eventually becomes, Martines says he's committed to staying in touch with consumers as directly as possible. Not only does he routinely have copies of every customer e-mail routed to his computer, he frequently visits pharmacies that stock his products.

His reasoning? "You can understand more things by talking to your consumer than by talking to your vice-president."

Sounds good. But the bad news for Martines is that unless age-conscious consumers suddenly decide that wrinkly countenances are desirable, it's going to be many a moon before he has time for sailing anything but his company.

(Terry Poulton can be reached at poulton@businessedge.ca)