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Executive Summary

Rugby Labs is preparing to sell generic versions of Cardizem (diltiazem) and Carafate (sucralfate), riding regulatory approvals granted to the U.S. brandname marketer, Marion Merrell Dow. MMD is making the two products available to Rugby through an agreement between a new MMD subsidiary, Blue Ridge Laboratories, and the generic distributor. Blue Ridge Labs will be the manufacturer of the finished dosage forms for Rugby. MMD describes Blue Ridge Labs as a new affiliate established in 1991 in the Kansas City area specifically to manufacture generic diltiazem and sucralfate. Through Rugby's purchases from Blue Ridge, MMD will be able to participate in the new generic diltiazem market when Cardizem and Cardizem SR come off patent on Nov. 5. The diltiazem deals follow the model of the SmithKline Dyazide arrangement with Rugby and ICI's recent decision to supply Goldline with generic atenolol from its Puerto Rican manufacturing subsidiary, IPR ("The Pink Sheet" Feb. 17, p. 8). With its second big authorized generic deal, Rugby is emerging as the first-choice outside marketer for brandname firms that want to create a position in the generic market for products which they manufacture but cannot, or will not, market in-house. Much of Rugby's appeal derives from its large existing generic business (estimated at almost 84 mil. prescriptions in 1991). MMD and Rugby reached the diltiazem/sucralfate accord toward the end of 1991. By establishing a new subsidiary to handle the manufacturing for Rugby, MMD is mimicking the atenolol arrangement established by ICI last year. Rugby can assure its customers about the quality of its generic diltiazem and sucralfate because the manufacturing and quality control will be supervised by an MMD affiliate. By creating a separate name for the manufacturing entity, however, MMD can also maintain that the generic versions are not directly available from the brandname manufacturer. The exact date of the Rugby launch has not been disclosed. It may, however, precede patent expiration. Rugby says that it has not yet begun taking orders for the product but that it has been contacted by a number of wholesalers about upcoming availability. Mylan Labs received ANDA approval for four dosage forms of diltiazem on March 16 ("The Pink Sheet," March 23, T&G-10). While introduction of the Mylan product is delayed until patent expiration, the fact that it definitely will be available at the beginning of November may prompt MMD to permit Rugby to get a head start in the marketplace with a launch prior to Nov. 5. Mylan has said that the company will "do their pre-marketing work in preparation for the launch." The sucralfate part of the deal appears to be insurance by MMD against the pending NDAs and ANDAs for generic versions. A recent SEC statement by Marion notes that generic copies could be approved this year. Rugby should be able to start marketing quickly if another company nears approval or announces clearance. MMD may still maintain some exclusivity in that market from a pending application for a suspension product and from the effort (with Schering-Plough) to develop an OTC sucralfate. At a recent meeting with wholesale customers, MMD execs explained that the diltiazem deal is part of an overall aggressive marketing strategy to help MMD weather the difficult three-year period of patent expirations for its two major products: Cardizem and Seldane. MMD President Fred Lyons acknowledged the challenges create by the expirations, but said: "This is no surprise to you or us. We have known from the early 1980's that 1992 was going to come. We don't predict the calendar; it is already there. We know it is going to happen. We are ready for it; we have been getting ready for it. You are going to see some very aggressive competition by us and by this team to see that take place." MMD Prescription Products Division President David Roche told the wholesalers that "we currently have an arrangement with Blue Ridge Laboratories to make generic diltiazem, and Blue Ridge Labs will be selling generic diltiazem to Rugby Labs." He explained that would allow MMD to attack the full market with two prongs: "on the brandname front; and on the generic front." On the branded side, MMD sales were bolstered by the end-of- year approval for the once-daily Cardizem CD. The new dosage (priced about 25% below Cardizem SR at daily therapy costs) generated $33 mil. in sales between approval Dec. 27 and the end of February. MMD has recently begun a consumer-directed effort to change existing Cardizem patients to the once-daily dosage, including letters to 400,000 Cardizem patients. Cardizem was the 13th largest product by prescription volume in 1991 with 14.53 mil. Rxs, according to Pharmaceutical Data Services. That figure was down slightly from 14.65 mil. in 1990 as the effect of Pfizer's successful Procardia XL campaign was felt along with the addition of new entries into the calcium channel blocker class. According to MMD figures, Cardizem new Rxs recovered in December to 383,000 after a weak performance in November (351,000). MMD also faces potential brand competition for its once-a-day diltiazem from Rhone-Poulenc Rorer which says it hopes to enter the U.S. market with Dilacor later this year ("The Pink Sheet" Feb. 17, p. 10). Lyons suggested to wholesalers that the RPR product launch could help Caridzem CD by getting more marketing effort behind the diltiazem compound in the crowded calcium channel blocker field.

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