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Executive Summary

Alza is making between 60,000-70,000 Nicoderm patches per week at full, 24-hour capacity but may have to work to increase that output in the next two months to help meet the unexpected initial surge in consumer demand for the prescription smoking cessation patch products. Marion Merrell Dow, which markets Nicoderm, informed the trade in the middle of March that demand for the patch was outstripping initial supplies and the company put wholesalers on temporary allocation. Similarly, Ciba-Geigy is experiencing pressures on its self- manufactured Habitrol patch. Ciba-Geigy sent a letter to wholesalers March 26 telling them that shipments of the 21 mg Habitrol patch (the beginning therapeutic dosage) could be delayed by a week or more. Ciba-Geigy has not gone to an allocation system yet. The company reports that it has sold $150 mil. worth of Habitrol since its launch in December and that it estimates that about one million patients have filled prescriptions for the product. Elan has reported that it is "stepping up production" of ProStep for Lederle to meet the demand. Elan says it shipped more than 4 mil. once-a-day patches during the first month of Lederle's U.S. marketing. The Elan product comes in weekly packages of seven patches each. The early sales figures for the leading patch products indicate that the market demand is running about double the forecasts by the companies. MMD said that it sold about $49 mil. in the first ten weeks of marketing. That number is about half the company's first-year projections of $95 mil. in sales. A new advertising campaign by Lederle may help to keep demand hot. Lederle launched its media campaign for ProStep the week of March 31 with ads in The Wall Street Journal and USA Today. Television spots for the product aired during the semi-final and final games of the NCAA basketball tournament. One New York area wholesaler reported going through over 18,000 Habitrol patches from a single-house distribution center in the first two months of availability. The wholesaler said that Habitrol is taking about 80% of the market that he is supplying. He noted that the patch is an important new product to pharmacies bringing in customers from an age group (25-40) that does not use pharmacies as frequently as elderly patients. Explaining the MMD allocation plan at an April 1 meeting with wholesale customers, MMD Prescription Products Div. President Dave Roche said: "Right now we are able to manufacture somewhere in the area of sixty to seventy thousand units per week." He acknowledged that "we are experiencing sporadic shortages of the product." The Nicoderm allocation formula will permit wholesalers to buy quantities based on their 1991 second half purchases from MMD. If, for example, a wholesaler's purchases of MMD products in the second half of 1991 represented 20% of MMD total product sales, that wholesaler would be allowed a 20% allocation of Nicoderm during the shortage period. Under this system, Roche said, "every customer will receive a supply of Nicoderm each week" although "your allocation may vary from week to week depending on our accumulated inventory." He emphasized that "our primary concern is the avoidance of therapy interruption for those patients who are already using Nicoderm." As with Habitrol, the shortages are reportedly most severe with the initial dosage patches -- thus affecting the number of new patients more than patients already receiving treatment. Nicoderm's success is both a major success and a challenge for Alza. The specialized dosage development firm is a relative newcomer to large-scale production. Alza's first experience in large-scale patch production was the Duragesic fentanyl patch it began making for Janssen in 1990, but that product, indicated for chronic severe cancer pain, was for a specialized market. Alza's success at picking up the production pace for Nicoderm could color the nature of its future agreements with other marketers. Alza has been trying to evolve from the developer and licenser of technologies to a full-service production and marketing firm. The shortages also are promising for the fourth patch product waiting on the sidelines. Warner-Lambert is waiting for FDA approval to launch the Nicotrol 16 patch made by Cygnus and licensed from Kabi. If the market continues to run ahead of supply, there should be more room for a fourth entry to help fulfill demand. Warner-Lambert said that an "NDA Day" was held for the product at FDA in February. Those days are scheduled by FDA to try to resolve pending issues on an NDA near the end of its review.

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