GF Capital Private Equity Fund is overhauling Airborne Inc. to steer the firm clear of the regulatory issues that have plagued it.

In purchasing the maker of Airborne dietary supplement Oct. 12 for an undisclosed sum, GF Capital is taking on a company that has put its troubles with the Federal Trade Commission behind it, maintains Airborne's new CEO, Marti Morfitt.

Airborne is shedding much of its past, said Morfitt, who previously headed consumer health care firm CNS. In 2006, GlaxoSmithKline acquired CNS, gaining brands including Breathe Right nasal strips and FiberChoice dietary supplements (¹ Also see "GSK Merger Helps CNS Breathe Easier About Breathe Right Patent Expiration" - Pink Sheet, 6 November, 2006.).

Minneapolis-based Airborne learned about FTC enforcement the hard way, agreeing to pay up to $30 million in consumer redress as part of an August 2008 ² settlement and agency ³ order regarding unsubstantiated sickness-prevention claims (⁴ Also see "FTC Settlement Looks To Ground Airborne Claims" - Pink Sheet, 18 August, 2008.).

"I actually consider crystal-clear clarity from the FTC to be a gift," Morfitt in an interview.

"We do feel fortunate that all of that is behind us and that the rules of operating in the immune-support segment are made that much clearer to us."

GF Capital's acquisition comes a year after another private equity firm, Summit Partners, sold Airborne back to its founder, Victoria Knight-McDowell.

Airborne has re-launched its ⁵ Web site scrubbed of language relating to reduced risk of colds and infection, protection against germs in crowded places and shorter duration of colds. Instead, the firm highlights how "the key ingredients in Airborne have been shown to support the immune system, as shown in scientific studies and medical journals."

Food and drug attorney Marc Ullman said the focus on the benefits of ingredients such as vitamin A, zinc and riboflavin - rather than the overall product's performance - makes for specific and conservative claims.

Additionally, previous claims of boosted immunity in crowded places have been replaced by much broader language. An Airborne TV spot now airing features a cartoon man touting the product for "whenever life gets a little out of control."

"They seem to have been very careful," said Ullman, of Ullman, Shapiro & Ullman.

Although the overhauled Airborne Web page appears "very mainstream," Ullman warned that any attempt to harken back to old advertising or graphics could hit a regulatory wall.

"They'd risk the regulators saying, 'No, that doesn't work, because you're making an effort here to have the consumer recall all of your noncompliant advertising,'" he said.

FTC has not forgotten Airborne. Discussing FTC's tighter scrutiny of claims, Bureau of Consumer Protection Director David Vladeck made an example of Airborne's past noncompliance at the National Advertising Division's annual conference in New York Oct. 5.

Focus On The Core

Morfitt said her nine-year experience leading CNS has applicable lessons for Airborne's current situation. For one, CNS' restructuring plan included scaling back new product development, as Airborne is doing (⁶ Also see "CNS Restructuring Plan Focused On Bolstering Breathe Right Sales" - Pink Sheet, 2 July, 2001.).

"We've focused our efforts around the core business" of Airborne effervescent tablets and on-the-go powder packets, she said. Under-performing stock-keeping units - including pixie sticks, chews and gummi lozenges - have been discontinued.

There will be line extensions and Airborne will seek opportunities to tweak its existing formula.

"As science demonstrates immune capabilities of various herbs and minerals and vitamins and other ingredients, we'll just continue to assess whether or not they find their way into Airborne as it evolves over the long term," Morfitt said.

Airborne supplements grew from $13.2 million in U.S. sales in 2003 to $187.5 million in 2007, before dipping to $174.6 million in 2008, according to data from market research firm Euromonitor International.

Manufacturers launched private-label versions of Airborne in 2005 (⁷ Also see "Rapid Release, Rapid Success: Tylenol Launch Spawns Generic Imitators" - Pink Sheet, 13 June, 2005.).

- Dan Schiff ( ⁸ d.schiff@elsevier.com )

Acquisition Primes Airborne For Claims Overhaul

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