Two Deals Bolster Watson's Position In Branded Women's Health Products

Branded drugs may earn only a fraction of Watson's generics, but firm sees overlapping opportunity in urology and women's health care.

In an effort to grow its branded women's health care products line, Watson Pharmaceuticals made a pair of deals this week that add a marketed infertility drug and an investigational contraceptive to the company's portfolio. These products join another investigational contraceptive, which Watson in-licensed in February.

On March 4, Watson acquired from Columbia Laboratories exclusive U.S. commercial rights to Crinone/Prochieve , a progesterone gel currently indicated for infertility and secondary amenorrhea. The companies plan to grow the drug's market by adding an indication for prevention of preterm births in women with a short cervix.

Several days earlier, on March 1, Watson in-licensed North American rights to the Population Council's Phase III contraceptive vaginal ring. The ring, which is nearing the completion of pivotal trials, combines two hormonal products - ethinyl estradiol and Nestorone , a novel synthetic progestin.

While branded drugs remain a relatively small portion of Watson's overall business - President and CEO Paul Bisaro estimated that the firm makes about $2.3 billion annually from the sale of generics compared to about $450 million from branded product sales - the company thinks growing its women's health care line matches up nicely with its ongoing previous focus on branded urology drugs.

In an interview, Bisaro noted that Watson already sells Gelnique (oxybutynin chloride) in both the urology and OB/GYN settings and hopes to do the same with its Phase II interstitial cystitis candidate Uracyst (sterile sodium chondroitin sulfate).

"We have a very strong position already in the urology community, but we're bolstering our position in the female health care arena," he said. Watson addresses these markets with a 350-member sales force that is broken into three groups - primary care and urology; urology and gynecology; and strategic account specialists, who focus on institutional marketing (Also see "Reeling From Ferrlecit Loss, Watson Revamps Branded Sales Strategy" - Pink Sheet, 25 Jan, 2010.).

Last year, the company called upon more than 10,000 OB/GYNs, up from about 3,000 in 2008, detailing both Gelnique and Femring (estradiol acetate vaginal ring), a hormone replacement therapy co-promoted with Warner Chilcott.

Watson may be on the verge of providing an array of women's products, Bisaro said, as it has NDAs for both a novel oral contraceptive and an emergency contraceptive under review at FDA. The latter drug - ulipristil acetate, already marketed in Europe as ellaOne - was in-licensed from France's HRA Pharma on Feb. 1 at undisclosed terms (Also see "Gedeon Richter To Market HRA Pharma’s Novel Emergency Contraceptive, ellaOne" - Pink Sheet, 19 Feb, 2009.).

"So we've got four opportunities in the female health category that should come about over the next 12 to 24 months," Bisaro said. It's a field Bisaro is familiar with: Before becoming CEO of Watson in 2007, he had been COO and president of Barr Labs, now part of Teva Pharmaceuticals, where he played a key role in building that company's women's health business, including Barr's controversial emergency contraceptive Plan B. Now, Watson sells branded generic products that competed against the original Plan B and more recently, its successor, Plan B One Step .

Branded product marketing helps prepare for biosimilars

While Watson likes the potential of its current and investigational branded products, Bisaro explained that expanding that line also serves as a stalking horse for eventually moving into follow-on biologics. Based on the current shape of federal health care reform legislation and the follow-on biologics provisions it may include, if enacted, he added that he anticipates Watson will focus on biosimilars as opposed to biogenerics. Many biotech watchers believe that winners in follow-on biologics will have expertise in branded sales and detailing, skills that traditional U.S. generics companies don't foster.

"The biologic model that I see coming forth ... doesn't really resemble the small-molecule generic commercial model that we have today where we sell to pharmacy chains and wholesalers. It'll be more of a sale to the doctors and the institutions that handle these kinds of products," Bisaro said. "So, we're going to need sales forces and brand-like capabilities to not only be able to develop these products but to sell them."

In the Columbia deal, Watson will pay an upfront fee of $47 million to Columbia, in exchange for 11.2 million newly issued shares in that company along with the U.S. rights to Crinone/Prochieve. (The product currently is marketed under two brand names because Columbia previously out-licensed an indication, Bisaro said, but Watson plans to return to one trade name, likely Crinone.)

Columbia will be responsible for the ongoing preterm birth prevention development program, and will be eligible to receive up to $45.5 million in milestones pegged to clinical development, regulatory approval and product launch, along with sales royalties. But Columbia's development costs will be capped, with Watson reimbursing if those costs exceed an undisclosed limit.

Preterm birth prevention indication crucial to growing sales

The added indication is crucial to Crinone's sales potential, Bisaro said. Currently, the drug is about a $17 million $20 million product and Watson should be able to increase those revenues slightly in the existing indications, he said. But preterm birth prevention would offer "a pretty substantial opportunity for us. That's what made the deal so attractive to us," he added.

Watson cited estimates that about one in eight women have preterm births, with short cervix being the leading indicator of risk. The key to maximizing the opportunity, the company said, is to work with physicians to help identify at-risk women.

Financial terms of the deal with Population Council were not disclosed but include an upfront licensing fee and potential regulatory and sales milestones, plus royalties, Watson said. A long-term contraceptive ring, the product is designed to be self-administered by the patient and simultaneously release Nesterone and a small dose of ethinyl estradiol for up to 13 cycles, or one full year, Watson stated.

In a March 1 note, Collins Stewart analyst Louise Chen said the product, if approved, will compete against Merck's Nuvaring , which requires disposal every three weeks and application 13 times a year.

-Joseph Haas ([email protected])