Cold Medication Offers More Hype than Health
At 10 minutes to opening bell, with the champagne chilling in a corner alcove, the man of the moment has finally arrived. Don Cherry - hockey authority, lunch-pail hero and tireless pitchman for Cold-fX - has fitted himself in black today, forgoing his customary 150-decibel jacket in favour of a comparatively modest three-button ensemble. But Grapes is a man who likes to stand out, and now, as he poses for pictures with a group of market types at the Toronto Stock Exchange, his white head bobs theatrically. "I guess I should have worn my plaid," he says, cocking an eyebrow at the dark suits around him. Laughter rises from the crowd.
It's the first day of trading on the TSX for CV Technologies Ltd., a company close to Cherry's heart because it makes the elixir he claims has spared him but a single cold in the last two years. More to the point, it pays him to pitch Cold-fX and, while he won't say how much (neither will the company), it's enough to make Cherry roll out that stage voice familiar from Saturday night instalments of Coach's Corner, a kind of cracked baritone delivered in the staccato bursts of a drill sergeant. "Let's get those thumbs up!" he orders, and a cluster of grinning company officials draws tighter for a snapshot. When it comes time to raise a mimosa to the company's future, Cherry leads the toast.
For CV Technologies, this is a badly needed pick-me-up - well worth whatever the man in the three-inch collar is charging. In the run-up to today's launch, while preparing to announce a $30-million U.S. expansion plan, the Edmonton-based upstart had suffered its first real spell of bad press. A Vancouver newspaper questioned the clinical trial data surrounding Cold-fX, citing a review by two researchers from the University of British Columbia. The researchers' argument was rooted in confusing math, but boiled down to its essentials, it suggested that the ginseng-based product is a lot less effective than the marketing material indicates, that there's little evidence it fends off colds any better than a placebo. When you're the maker of the country's leading cold and flu remedy, those are serious charges.
For days leading up to its March stock launch, the company floundered. First, CV executives hid behind a press release defending their clinical practices. Then they waged a war of whispers, painting the UBC researchers as sloppy and motivated by ill will, a response that made them look childish. Today, Cherry is showing them how to stand up for themselves. In interview after interview from the TSX's in-house television studio, he scowls at the camera as if daring his questioner to ruin CV's big day. "You wouldn't be asking me about it if the story had been positive," he snaps to Maclean's during a break in an anteroom. "I've been in the [media] business for 23 years, and I know that anything negative people write about. If it were the coming of Lord Jesus, you'd ask what took him so long. That's the way the media is." As for concerns about Cold-fX's science, the big man sneers. "It works for me. I take two every day."
Maybe. But even Cherry admits that Cold-fX has enjoyed an unprecedented honeymoon since it became nationally available three years ago. Blessed with patient financial backers and moving largely under the radar of the scientific establishment, the remedy has gone from a well-kept secret among athletes to a staple of medicine cabinets across the country. Last year, Cold-fX accounted for nearly all of CV's $32 million in sales, more than quadruple its previous year's total. In the first quarter of 2006, the company's revenue soared to almost $19 million, as Cold-fX outsold established competitors like Nyquil and Tylenol Cold & Flu. To put that in perspective, consider that the leading equivalent in the U.S. averaged $25 million per quarter last year. Then consider that the U.S. market is 10 times the size of Canada's.
It has been, in short, a sales and marketing coup - the kind of story that makes celebrities out of the lonely visionaries who dream up the big idea. At CV Technologies, that role is filled by Jacqueline Shan, president, CEO and "chief scientific officer," a woman whose winsome features now appear throughout the company's promotional material. Doll-like in appearance but possessed of grim tenacity, Shan came to Canada from China in 1991, armed with a doctorate in pharmacology and an abiding faith in the restorative powers of panax quinquefolium, or ginseng. While obtaining a Ph.D. in physiology from the University of Alberta, she helped devise a method to identify the chemicals in natural compounds, which CV later trademarked under the name ChemBioPrint. From there, it was a question of applying her methods to develop an alternative remedy of her own. In 1996, Cold-fX was born.
It was a long shot of sorts because, if the truth be known, even herbologists didn't regard ginseng as a cold fighter. Panax is recommended in traditional Chinese medicine to enhance energy and memory, or, if you're a man, to maintain your erection. Shan and her team were drawing from more recent studies suggesting an extract from the root might bolster the immune system. Moreover, she says, their use of clinical trials sets them apart from most other makers of natural remedies. "We're considered a bit of an oddball, because we were sort of sitting in two worlds. We're producing a natural health product, but using a pharmaceutical approach. There's not much understanding on the part of the public or business firms."
Of course, "understanding" and "buzz" are two different things, and Shan's real talent turned out to be getting her product into the right hands - the type of people with profile and influence. In Canada there is no one more influential than a hockey star, something Shan learned after taking her Cold-fX to Ken Lowe, the Edmonton Oilers' trainer in the mid-1990s. Lowe had reached the limit of his patience fighting the respiratory ailments that spread uncontrollably in the fug of an NHL dressing room over the course of a long hockey season. So he allowed CV to test its products on the Oilers over a couple of seasons. The experiment proved a turning point, providing Shan preliminary test subjects and her brand with cachet. If Cold-fX was good enough for high-performance athletes, a cold-sufferer might reason, could the rest of us go wrong?
Soon, word that Cold-fX is both safe and effective took off in the echo chamber of top-flight hockey, eventually leading to its most important endorsement deal. Don Cherry had learned of the remedy from the Oilers' general manager, Glen Sather, and quickly became a convert. The irascible commentator had been taking it for three or four months when his on-air sidekick, Ron MacLean, passed word back to CV that they had a potential spokesman in Cherry. It was as if Shan had dropped a pebble into a pool of free publicity.
There now seems no end to the luminaries willing to sing the product's benefits. Literary legend Margaret Atwood told an interviewer last year that she swears by it. "It's used by hockey players," she said, as if the statement were self-explanatory. Michael Burgess, the Broadway performer; Yanic Perreault, a centre with the Nashville Predators; Todd Marchant, a forward with the Anaheim Mighty Ducks; Graham Rynbend, the trainer for the Montreal Canadiens; the entire Edmonton Eskimos football team - all have provided testimonials on the company's website. In February, when the Canadian men's Olympic hockey team boarded the plane for Turin, they carried the remedy amid their bundles of sticks and sock tape.
Why the preponderance of athletes? "Not getting sick is our biggest challenge," explains Clara Hughes, the Olympic speedskater who won a gold medal in Turin, and a frequent user of Cold-fX. "We're stressed out, we're travelling on airplanes right after having done hard training sessions. We basically have no immune system." Hughes claims no expertise, but describes herself as "a pretty good guinea pig" for Cold-fX, which she's been using for three years. "If I do happen to get sick, it helps me get over the illness a lot faster," she says. "That's key."
Given this kind of testimony, and given the recent wave of press stories crediting Shan with bringing clinical rigour to the woolly business of natural medicine, it required a certain level of nerve to question the slogan that appears on every bottle of Cold-fX - "Trust the Science." Enter James McCormack and Peter Loewen, two pharmaceutical researchers from UBC with a background in testing drug companies' claims. They were intrigued by the success of Cold-fX, and Shan's claims to have proven the product in clinical trials. So they decided to parse the results of three of CV Technologies' studies. They wanted to test the validity of that catchphrase.
To put it mildly, their conclusions, first published in the Vancouver Sun, diverged sharply from the popular folklore surrounding Cold-fX. In two of the trials, the ginseng constituent in Cold-fX failed to overcome what is known as the p-value, they said, or the probability that chance explained the reductions in lab-confirmed respiratory illnesses. The company's response to this roadblock was to combine the two studies to produce a statistically significant result, a method McCormack denounced as "data mining." "It's torturing the data until it confesses," he said. A third trial, intended to determine whether takers of ginseng extract caught fewer colds, also underwhelmed the UBC duo. In a final sample of 279 subjects, those on the ginseng contracted 0.25 fewer colds on average than the placebo group over a four-month period. That's an improvement, the professors agreed. But it's not the surefire "cold and flu fighter" customers have come to expect.
The message encoded in the McCormack-Loewen findings seemed devasting. Not only did it challenge CV's claim to a science-based operation, it highlighted how heavily Cold-fX and all so-called "preventative" remedies rely on consumer faith - from vitamins on down. If someone suffering sniffles decides to take Cold-fX, we might ask, can we really credit the medicine when the symptoms pass? How do we know the virus didn't merely run its course? Such common-sense questions had been lost in the excitement surrounding the remedy. Given the UBC team's findings, they suddenly seemed relevant.
Perhaps more importantly, the study served as a reminder that CV has never clinically tested Cold-fX the way most people take it. All of the company's formal trials to date have seen subjects taking regular doses over extended periods. But apart from a few true believers like Cherry, who swallow one or two capsules daily, most customers use it as a rapid-response treatment, purchasing the special, three-day dosage as soon as they feel a tickle at the back of their throats. Following instructions on the label, they take nine capsules on the first day, six on the second day and three on the third. But CV tested this regimen on an informal basis only, during its early experiments with the Edmonton Oilers. Shan says the company will at some point subject it to full trials. But she can't say when.
The questions raised by McCormack and Loewen also added to general concerns experts have about research in alternative remedies. Ronald Turner, a pediatrician from the University of West Virginia, has a background in the testing of echinacea, and wrote an accompanying commentary when CV's most recent trial was published in the Canadian Medical Association Journal. "My tone was somewhere between cautious and skeptical," he recalls. "I was not convinced." While Turner credited CV Technologies with proper blinding methods (essentially, ensuring the smell, taste or feel of the product being tested don't give it away), he wanted a better explanation of what makes Cold-fX work. The researchers cited past studies indicating certain polysaccharides in ginseng enhance the immune system, Turner acknowledged. "But it is not clear how these relate to viral respiratory infection," he wrote in his commentary. "The proposed mechanism of action of ginseng is unclear."
For a company like CV, which has staked its identity to science, such talk could be a deadly contagion. If it taints the views of institutional investors needed to back a U.S. expansion, the company could be stopped in its tracks. "Sooner or later [people] will get a cold and stop taking the product," predicted one bearish trader on Stockhouse.com, an investor chatroom. "I think the company is grossly overvalued." Claude Camire, a pharmaceutical and biotech analyst for Toronto-based Paradigm Capital Inc., was among several Bay Street analysts who questioned CV's long-term viability after hearing about the UBC review. Natural remedies don't enjoy the same kind of patent protections as mainstream drugs, he noted; as a result, they are too reliant on marketing. "If you tell me their clinical trials don't back the product up, well, they'll have very few analysts to take a gamble on perception."
But as the weeks go by, a curious tension has emerged between these naysayers and the believers who have brought Cold-fX prominence - a contest, if you will, between rational skepticism and native intuition. For now, the believers appear to have the upper hand. Cherry's tongue-lashing cowed the media and inspired his friends at CV to pen lengthy responses to run in the Sun and its sister CanWest papers. The company reports that March sales have been as strong as ever. At the same time, high-profile patrons have leapt to defend the product, questioning the McCormack-Loewen study instead of CV's therapeutic claims. "You can make statistics say whatever you want," says Lowe, the Oilers' trainer. "The thing that's always impressed me about Cold-fX is that they put their [information] on the table. I have no problem saying this stuff works."
Hughes, who says she receives a small amount of financial support from CV, acknowledges the uncertainty surrounding preventative remedies. But she suggests that people trust their own judgment. "Of course I can't say whether it's scientifically proven," she says. "But you know whether something works when you use it more than once. I've been using [Cold-fX] for about three years now, and I believe it's more than coincidence when I see something work three or four or five times."
As for skeptical investment houses, CV has at least a couple of cards up its sleeve. One is an influential stable of backers, as useful in the financial world as athletes are in the marketing sphere. Cherry himself owns an undisclosed number of shares, while the company's board features some heavyweights of Alberta industry, science and academe. They include Bruce Buchanan, the former owner of Sunpine Forest Products, whose 19 million units make him CV's largest single shareholder; Gordon Tallman, chairman of the Enbridge Income Fund; Patricia Trottier, a founding director of the Canadian Investor Relations Institute. These stakeholders are prepared to ride out the bumps, say company officials, while CV works to soften up the analysts on Bay Street.
Another is the company's plan for further, much more extensive, testing. Shan's continental expansion plan calls for some $30 million worth of clinical trials in the United States, which are required by that country's Food and Drug Administration to sell Cold-fX as an over-the-counter medicine. The firm has also begun a study involving 720 subjects in Vancouver, Edmonton and Toronto. Positive results in these trials would do much to silence the critics, smoothing CV's way into the $4-billion U.S. cold and flu market. Ever the optimist, Shan speaks of potential partnerships with established pharmaceutical companies, and of marketing Cold-fX globally.
The alternative, of course, is too chilling to contemplate: negative or even inconclusive results would likely trigger a sell-off of stock, eating away at the $350 million in market capital CV racked up as a junior player on the TSX Venture Exchange. Even if it was still allowed under U.S. law to market Cold-fX as a cold remedy, CV would then have to answer to thousands of mom-and-pop investors who have banked on its future. (This may explain why the market has greeted the firm so coolly: after debuting on the main TSX at $3.50, CV's stock was hovering last week around $2.60.)
Suffice to say, Shan appears to have banished such thoughts from her mind as she stands amid supporters in the TSX's television studio, preparing to enter the financial big leagues. Looming before her is a 10-m wall of tickers and monitors, which now forms the backdrop for financial channels going live from the exchange. Her duties on this day involve passing her hand across an electronic screen, which will unleash a frenzy of sirens, applause and flashing lights to signal the start of trading. The whole thing's for show, of course: computers long ago dispensed with the need for an actual trading floor. But it's a pleasing distraction - perfect for a day when Shan would just as soon have the media, the market and consumers refocused on her hard-won success. Selling cold remedies, after all, is not always about curing the tickle at the back of your throat. Sometimes, it's about stopping the one at the back of your mind.
Maclean's May 8, 2006