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LILLY/WHITEHALL OTC NIZATIDINE (AXID) DEAL

Executive Summary

LILLY/WHITEHALL OTC NIZATIDINE (AXID) DEAL -- publicly disclosed by the two companies on March 5 -- has been in place for two-and-a-half years. Signed in August 1989, the deal calls for the American Home Products OTC subsidiary, Whitehall Labs, to have exclusive rights to over-the-counter formulations of Lilly's nizatidine. The two companies joined together in the project four months after the announcement of the J&J-Merck joint venture in the OTC business. That joint venture is developing an OTC famotidine (Pepcid) as one of its lead projects. The OTC formulation of the H[2] antagonist is in clinical trials; Lilly is not projecting a target date for submission of the Axid Rx-to-OTC switch application to FDA. The patent for the prescription drug expires March 1, 2002, Lilly said. Axid was introduced in the U.S. in 1988 and is now sold in 26 countries. Worldwide sales passed the $100 mil. mark in 1989. The product ranks fourth in the H[2] antagonist ulcer field in the U.S. Axid is indicated for the short-term treatment of duodenal ulcers and for treatment of gastroesophageal reflux disease (GERD). Axid caught up with other H[2] antagonists, Glaxo's Zantac (ranitidine) and SmithKline's Tagamet (cimetidine), when it received approval for the GERD indication in July. That indication appears to be one of the keys to the OTC switch applications for the H[2] products. The products probably will be used for heartburn in the OTC market. SmithKline Beecham, first into the Rx market with Tagamet in 1977, may have a leg up on the race for the OTC version. The company reported filing an NDA for an OTC formulation of cimetidine for episodic and nocturnal heartburn in early December ("The Pink Sheet" Jan. 13, p. 3). J&J-Merck has been more close- mouthed about OTC famotidine. However, that product switch may be aided by the ingredient's relatively high potency at lower dosages. Glaxo has the most successful commercial compound in ranitidine (Zantac). The firm lost ground when its development agreement with Sandoz was revised in October; Glaxo is now developing an OTC version on its own ("The Pink Sheet" Dec. 23, p. 6). The attempts by the prescription firms to find marketing partners for OTC H[2] antagonists have been jinxed. SmithKline's original deal with Bristol-Myers also fell apart. The J&J-Merck deal differs in that it ostensibly represents the formation of a full new company. The Whitehall deal is the first time Lilly has licensed OTC rights to a currently marketed prescription product. Lilly declared the deal indicates "the way the company will do business in the future." Both companies apparently used the announcement of the deal to try to answer questions about weak areas in their corporate product mix: Lilly's lack of an OTC outlet and AHP's recent difficulties with Whitehall sales growth. Whitehall brings to the agreement valuable experience with marketing Rx-to-OTC switches. The firm was the major winner in the race for OTC ibuprofen (Advil) in 1984. Whitehall has experience in the antacid field from selling its line of Riopan products.
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