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RHONE-POULENC’s TOPSELLING PRODUCT IS NSAID KETOPROFEN WITH$150 MIL. IN SALES IN 1989; OTC VERSION IS UNDER DEVELOPMENT BY RHONE FOR PAIN RELIEF

Executive Summary

Rhone-Poulenc's largest selling prescription drug over the last three years is the nonsteroidal anti-inflammatory agent ketoprofen, which generated sales of approximately $150 mil. worldwide in 1989 and accounted for about 8.7% of Rhone's total pharmaceutical sales volume. Ketoprofen sales have grown at a rate of "over 10% per year for the last five years" and are expected to be a major contributor to sales in the future, the company said in a recent filing with the U.S. Securities and Exchange Commission related to the French company's proposed acquisition of Rorer. Despite the product patent having expired in 1988 in most major markets, the NSAID retains "sufficient" protection in the form of process and/or slow release formulation patents, according to Rhone-Poulenc. Rhone-Poulenc characterized ketoprofen's "key advantage" as its relative safety. The company noted that among the "numerous" new ketoprofen formulations in development is an OTC version of the NSAID for pain relief. In the U.S., prescription ketoprofen is licensed to Wyeth-Ayerst, which has marketed the drug since 1986 under the brandname Orudis. Currently available in t.i.d. and q.i.d. forms, a supplemental NDA is pending for a once-a-day form, which would be marketed as Oruvail. Ketoprofen is sold in other countries under a variety of names, including Profenid and Keduril. The NSAID was licensed in Japan last year by a joint venture of Chugai, Hokuriku Kissei and other companies. * The Rhone-Poulenc tender offer statement, which was mailed out to Rorer shareholders on March 16, provides a unique glimpse into the largest of the French pharmaceutical companies. Rhone-Poulenc commenced its tender offer on the same day for approximately 21.6 mil. Rorer common shares at $78 a share following the signing of a definitive merger agreement on March 12 ("The Pink Sheet" March 19, p. 15). Wyeth-Ayerst also licenses Sectral, the beta blocker acebutolol, for sale in the U.S. and Canada, as well as the prescription antihistamine Phenergan (promethazine). An NDA for Sectral is pending at FDA. A "mature" beta blocker, Sectral had 1989 global sales (excluding revenues from royalties) of about$65 mil. Rhone, however, is predicting possible European growth from the launch of a slow-release formulation in France that is slated for late this year. 1992 could mark a sea change in how Rhone-Poulenc markets prescription products in the U.S. The company's options are now constrained by licensing agreements, which have, to date, comprised Rhone's only American drug presence. However, in 1992 the first of the 15-year agreements begin to expire. Eight therapeutic categories contribute 86% of Rhone-Poulenc pharmaceutical sales: anti-infectives/anti-parasitics (24%); cardiovasculars (21%); "anti-rheumatics" (10%); psychotropics (9%); analgesics and anesthetics (7%); "digestants" (6%); anti-allergy products (5%) and anti-cancer drugs (4%). Flagyl (metronidazole), along with Orudis, is a key Rhone-Poulenc drug with international distribution. Searle has marketed the drug in the U.S. under the same brand name. Its licensing agreement expires in 1991. The tender offer statement also notes a licensing agreement with Kendall McGaw for an I.V. formulation. Recently, the drug has begun to face generic competition. Rhone-Poulenc's sales of Flagyl peaked in 1987 at FF 530 mil. (about$88 mil. in 1989 dollars). Last year, direct sales were approximately $70.8 mil. worldwide. Metronidazole's sales have "been relatively stable" lately, Rhone noted. The drug, which started off as an antiparasitic agent, is now used as a treatment for anaerobic infections and is sold primarily to hospitals in Western Europe and developing countries. Rhone-Poulenc's other principal anti-infectives include Rovamycine (the macrolide spiramycine) and Peflacine (the quinolone pefloxacine). Combined sales last year for the two were about $97 mil. The company is forecasting that Rovamycine sales in the long-run will get a boost from a new "lyophilisated" formulation for adults and children that creates a tablet that dissolves quickly without additional liquid. Rovamycine, one of two Rhone-Poulenc drugs in development in the U.S., is in Phase III clinicals as an orphan drug for treating chronic cryptosporidiosis in immunodeficient patients. The other drug in development in this country is the low molecular weight anti-thrombotic enoxaparin. Enoxaparin, used in injectable form in hospitals following surgery and as an outpatient treatment in follow-up therapy, was launched in France in late 1987. It is currently marketed in Western Europe as Clexane and, the SEC filing states, is expected to be introduced in North America and Japan in the "early to mid-1990s." Enoxaparin's 1989 sales were about $58 mil., mainly from the French market. The cerebral vasodilator Sermion, the macrolide antibiotic Josacine and Captolane/Captea (captopril) are in-licensed to the French market. The analgesic Doliprane and the anti-anginal product Risordan are considered to be "of more limited strategic long-term importance" because of the unlikeliness that their international markets can be expanded, Rhone-Poulenc noted. * Other Rhone-Poulenc pharmaceutical products include the benzodiazepine hypnotic Imovane (zopiclone), which had 1989 sales of about $22 mil., and Pentacarinat (pentamidine isethionate) for Pneumocystis carinii pneumonia, which is now being introduced internationally outside the U.S. A nebulized version is currently being launched in Europe and Japan. The proposed addition of Rorer to Rhone-Poulenc's health care operations adds nearly $1.2 bil. in 1989 sales to Rhone-Poulenc's $1.9 bil. in prescription drug sales (12.116 bil. French Francs; FF6 = $1). Most importantly, Rhone-Poulenc adds a major U.S. presence and established operations in Japan to its strong position in Europe, where it is among the top five prescription drug companies. Profiling its pharmaceutical business in the SEC filing, Rhone-Poulenc reported that health care sales last year grew a healthy 16.7% from 1988 to $2.02 bil., with 9.4% of the increase from volume gains, 5.4% from acquisitions and 1.2% attributable to price increases. Operating margins totaled FF1.54 bil., or $257 mil., and improved at an even faster rate than sales, up some 41% over 1988. While prescription drugs contribute the lion's share of sales, the segment also includes a European OTC business, nutritional/dietetic products and bulk pharmaceutical and other chemicals. Rhone's OTC business sells more than 20 brands, concentrated in multivitamin supplements, cough/cold products and digestive enhancers, the last of which are especially popular in Germany. Sales in 1989 from the OTC business were about $111 mil. Nutritional/dietetic product sales were about $63 mil. with 30% of segment sales from Gerble wheat germ-based food supplements. Bulk pharmaceutical and chemical sales were $128 mil. Reflecting Rhone's current European character, France accounted for 47.1% of the company's health care sales (roughly$1.4 bil.), followed by the rest of Western Europe, with nearly 28% of total sales. The U.S. and Canada accounted for 4% of sales in 1989 (roughly $81 mil.). In descending order of geographic contributors to Rhone-Poulenc's coffers in 1989 were Africa (7.6%), Asia, excluding Japan (7.2%) South and Central America (5%), North American and Australasia (Australia, New Zealand and South Africa), which contributed 1.5% of sales. Except for the recent ketoprofen joint venture licensing agreement in Japan, Rhone currently lacks a Japanese presence. Rorer, on the other hand, has operated independently in Japan since 1979. Rhone-Poulence has a number of drugs in development and spends more than 15% of its pharmaceutical sales on R&D. The company's 1989 R&D budget was about $285 mil. Ongoing projects are focused on areas including central nervous system disorders such as schizophrenia, neuronal degeneration and depression; cardiovasculars and anti-infectives for septicemias. The offer is contingent upon a number of conditions being met: the tendering of approximately 32.4 mil. Rorer shares, Rorer shareholders okaying the "opt out" amendment in the company's articles of incorporation; Rhone-Poulenc completing a restructuring and consolidation of its health care business; and the companies' health care subsidiaries completing financing agreements for an aggregate of $1.6 bil. The merger of the two health care operations, to be called Rhone-Poulenc Rorer, Inc. and headed by Chairman, President and CEO Robert Cawthorn, will put the firm into the ranks of the top 10 research-based pharmaceutical companies, with worldwide sales in excess of $3 bil. annually. The companies anticipate closing the deal by the end of June, a short six months after the deal was made public Jan. 18.
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