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WARNER-LAMBERT SPELLS RELIEF Z-A-N-T-A-C: Rx-to-OTC JOINT VENTURE WITH GLAXO

This article was originally published in The Tan Sheet

Executive Summary

WARNER-LAMBERT SPELLS RELIEF Z-A-N-T-A-C: Rx-to-OTC JOINT VENTURE WITH GLAXO would develop and market over-the-counter versions of the British company's prescription drugs, including the anti-ulcer drug Zantac (ranitidine). Announced on July 28, the letter-of-intent agreement initially will focus on getting OTC Zantac to market in the U.S. and other major markets such as Europe and Australia. Once approved, the drug will be marketed under the auspices of Warner-Wellcome Consumer Health Products, a recently forged joint venture conjoining the OTC products of Warner-Lambert and Burroughs Wellcome (see preceding story). Glaxo expects to file an NDA for low-dose ranitidine in late 1994 as an OTC treatment for episodic heartburn and dyspepsia. At a July 28 securities analysts meeting in New York City, Warner-Lambert Consumer Products Sector President John Walsh noted that Zantac is currently entering Phase III trials for the OTC indication and that Warner-Lambert is "just entering into a series of discussions with Glaxo relative to the development plans." Warner-Lambert, Walsh reported, "is excited by the prospects Zantac has as a next-generation OTC and we have the resources in place to take full advantage of such an opportunity." The proposed deal includes rights to the Zantac trademark for approved OTC claims and dosage forms worldwide except for Japan, where Glaxo has a pre-existing agreement with Sankyo. Worldwide sales of prescription Zantac exceeded $ 3.2 bil. in 1992, the firms said. Potential Glaxo Rx-to-OTC switch candidates on deck after Zantac include anti-inflammatory steroids Beconase and Beclovent (beclomethazone). Beclovent is one of several Rx drugs recently proposed for over-the-counter status in the U.K. ("The Tan Sheet" July 12, p. 1). Other Glaxo prescription drugs that may present switch opportunities further down the road include the migraine drug Imitrex (sumatriptan) and anti-nausea agent Zofran (ondansetron). Under the letter of intent, Warner-Lambert and Glaxo will share development costs and profits equally. Glaxo will also receive an unspecified royalty on all OTC sales by the joint venture. The Rx-to-OTC switch joint venture will be supervised by a six-member management committee with three representatives from each company. The committee members have not yet been named. Day- to-day management responsibilities for the new entity will fall on Warner-Lambert. Glaxo and Warner-Lambert said they expect that a formal partnership agreement will be reached in the U.S. later this year, followed by the establishment of a "series of joint venture companies in other countries to complete development, gain approval and market Glaxo's Rx-to-OTC candidates." Glaxo Chairman Sir Paul Girolami explained in a July 28 announcement that "the aim of this important joint venture is to maximize the potential of the OTC use of our products while allowing us to continue to focus sharply on discovering, developing and marketing prescription medicines, which is our mission." The deal with Warner-Lambert effectively resolves Glaxo's dilemma of how to fully maximize Zantac's long-term promise without diluting the company's emphasis on pharmaceutical R&D and the marketing of innovative new products. The Zantac switch apparently led to some corporate soul- searching at Glaxo as the company considered whether to outlicense OTC rights or to add an OTC business and pursue development and marketing of OTC Zantac in-house. In late January, Glaxo announced that Managing Director Arthur Pappas would conduct a review of the company's options in the OTC area. Reportedly, disagreement among top management over the appropriate OTC strategy for Glaxo was partly responsible for the departure of CEO Ernest Mario from the company in March ("The Tan Sheet" March 15, p. 3). Mario has since been appointed co-chairman and CEO of Alza ("The Tan Sheet" July 19, p. 14). As a result of Glaxo's ambivalence toward OTCs and an aborted development and marketing deal with Sandoz that was called off in 1991, Zantac has fallen behind the other H[2] antagonists in moving toward OTC status. SmithKline Beecham's Tagamet (cimetidine) is expected to be reviewed by FDA's Nonprescription Drugs Advisory Committee in early September ("The Tan Sheet" May 31, p. 1) and Johnson & Johnson-Merck submitted an NDA in support of an OTC switch for Pepcid (famotidine) earlier this year. At the July 28 meeting with securities analysts, Warner- Lambert Chairman Melvin Goodes said the joint venture "provides a strategic fit for both companies. For Glaxo, it furthers its plans to enter the OTC market, combining its scientific strengths and rich product pipeline with Warner-Lambert's OTC development and marketing capabilities."
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