Cough strips could soothe InnoZen's need to please its backers.

Those melt-on-your-tongue cough strips tucked in your back pocket are poised to become a lucrative investment for the financial backers of InnoZen Inc.

InnoZen, a Woodland Hills-based oral film strip developer, was spun off by drug developer Zengen Inc. in 2003 to more effectively commercialize the company's innovative technology for the pharmaceutical and nutraceutical markets. The company's first product, an over-the-counter sore throat reliever, was licensed later to what is now Prestige Brands Inc. to market under the Chloraseptic brand name.

InnoZen has since launched a cough suppressant strip under its own Suppress brand, but its core strategy seems to be paying off: developing products for third parties who shoulder most of the considerable distribution and marketing costs.

Coming is a nutraceutical strip now in testing that provides electrolytes such as potassium and sodium, holding potential as an alternative to sugary athletic sports drinks and in the Third World where mortality is high from diarrhea-related dehydration.

And in the food market, the company is developing for a Japanese client flavored food seasoning that resembles crunchy Nori seaweed.

"We're really good at formulating and manufacturing film," said chief operating officer Matt Burns. "For us that's a great way to keep money coming in instead of money going out. If we can get these other large pharma companies to market strips and build the market for film, we're going to win no matter what."

Notable innovations

The company is growing rapidly. Revenues were just under $2 million in 2005 but are projected to hit $4 million to $5 million this year. That kind of growth is consistent with the entire sector of oral strips and related fast-dissolving pills. They are among the few notable innovations in the more than $20 billion oral segment of the worldwide drug delivery industry, where pharmaceutical companies extend well-known brands with new products.

The strips present an advantage over regular pills and syrups for administering medication to very ill patients, seniors, children, and even pets. (The company plans to launch a veterinary product line given the difficulty in feeding pills to pets.)

While InnoZen has several competitors in the oral strip market, including Pfizer Inc. and its Listerine Pocketpack breath strips, Burns said his company's patent-pending method for making strips more effective and easier to use is driving drug and food companies to discuss potential partnerships, and one private label deal could close this month.

The company so far has focused on the over-the-counter market, but InnoZen is tweaking its technology for prescription medication.

New technology

To make the strips, vats of syrup are mixed with active ingredients--benzocaine and menthol in the case of the Chloraseptic strips--and spread to harden into the films. Traditional monolayer strips generally require a layer of plastic between each layer to prevent them from sticking in humid conditions.

InnoZen's proprietary bi-layer system coats the film in a powdery outer layer that adds flavor and eliminates the use of irritating solvents. The company also has developed other processes to protect active ingredients from degrading and to lengthen shelf life.

"Not only were we impressed by the management team's track record, but they have a tremendous delivery vehicle that's easy to use and convenient," said Steve Pfrenzinger, a member of the angel investor network Tech Coast Angels. He became interested in funding the company after a Suppress cough strip quieted his coughing during his first meeting with company executives. "The whole concept of medicine on a strip makes sense."

The company received nearly $3 million in September from the Angels and some related investors to help its expansion, including the construction of its own manufacturing plant in Woodland Hills. InnoZen has been contracting with third-party manufacturers for its products.

Chief Executive Rob Davidson, a Zengen founder, said he has been impressed by the technical help provided by Pfrenzinger, now a board member, and other TCA network members, who tend to be experienced executives who now focus on funding and mentoring young companies.

"We're always developing our technology to increase its efficacy and that's the key for our growth," Davidson said. "But the advice that (TCA members) have been able to provide in areas like marketing and supply chain management has been very useful."

Deborah Crowe Staff Reporter