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HI-TECH PHARMACAL BRANCHING OUT OF PRIVATE LABELS WITH BRANDED OTC PRODUCTS

This article was originally published in The Tan Sheet

Executive Summary

HI-TECH PHARMACAL BRANCHING OUT OF PRIVATE LABELS WITH BRANDED OTC PRODUCTS that will be marketed by a new subsidiary, Health Care Products. Based in Amityville, N.Y., Hi-Tech Pharmacal manufactures private label over-the-counter and prescription products in liquid and semi-solid dosage forms. With the establishment of the OTC division, Hi-Tech expects to develop "unique," not "me-too," products under its own brandnames. Hi-Tech Pharmacal President and CEO Bernard Seltzer is overseeing the new division. The first products to come out of the OTC division are Sooth- It Cleansing Hemorrhoidal Pads and Sooth-It Plus Pain Reliever Hemorrhoidal Pads. Both products began shipping at the end of April and are currently available on retail shelves. At a suggested retail price of $ 6.92 for a 100-pad box, Sooth-It Plus pain reliever pads contain pramoxine hydrochloride 1% and are premoistened with witch hazel. A company release maintains that providing "long-lasting pain relief in a pad form" is a "category first" and that "pain relief, together with a convenient, nonmessy application, are two benefits hemorrhoid sufferers have long desired." Sooth-It Plus packaging promises that the product "stops the pain and itch of hemorrhoids fast." Sooth-It cleansing pads contain witch hazel and carry a $ 5.85 suggested retail price for 100 pads. Sooth-It is "gentle enough to become part of a daily cleansing regimen to help prevent hemorrhoids," the release says. Sooth-It packaging claims the product "relieves painful burning and itching fast." Packaging for both Sooth-It items emphasizes that use of the products "cools and comforts" and points out that they contain aloe vera and are unscented. The firm maintained that "Sooth-It also provides great consumer value by offering a significant price advantage versus competitive hemorrhoid pad remedies" such as Parke-Davis' Tucks and Whitehall's Preparation H pads. Hi-Tech Pharmacal estimates sales of the OTC hemorrhoid market at $ 229 mil. Health Care Products is in the process of evaluating advertising agencies to handle the Sooth-It account. The firm expects that broadcast ads will begin airing in the third quarter, as will cross-merchandising promotions with other new Health Care Products brands. The OTC unit is planning to launch its second brand -- a cough/cold product -- in mid-July. Sooth-It consumer education pamphlets on hemorrhoids will also be available in the pharmacy section of drug stores by the third quarter. An eight-piece counter display containing four packages each of Sooth-It Plus and Sooth-It has already been shipped to drug stores. In addition to its foray into the branded OTC market, Hi-Tech Pharmacal continues to pursue private label versions of Rx-to-OTC switch products. In a May 1992 preliminary prospectus for an initial public offering, Hi-Tech Pharmacal noted that it was targeting generic Rx-to-OTC switches as a "significant opportunity for growth." The firm speculated that expansion would come through "the introduction of generic products for which patent protection is expiring or, in some cases, 'prescription only' status is being changed to over-the-counter status." Hi-Tech said it is actively pursuing several ANDAs for both prescription and Rx-to-OTC switches. Hi-Tech completed its initial public offering of 1.15 mil. shares at $ 6 per share in August 1992. Most of the proceeds went toward manufacturing facility expansions.

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