Zyrtec Launch Brings Big Boost To Johnson & Johnson, But Competition Grows

Johnson & Johnson's OTC sales jumped 27 percent to $1.6 billion in the firm's first earnings period with allergy medication Zyrtec (cetirizine 5 mg) available over the counter, according to J&J.

The growth in OTC sales helped push up worldwide consumer sales 16.2 percent to $4.1 billion during the firm's fiscal 2008 first quarter, which in turn helped boost overall sales nearly 8 percent to $16.2 billion, Louise Mehrotra, J&J's VP of investor relations, said during an April 15 call.

A "major contributor to this increase" is "the successful launch of Zyrtec in the U.S. in January," Mehrotra said.

FDA in November 2007 approved J&J's switch application for Zyrtec and Zyrtec-D extended-release tablets (cetirizine 5 mg/ pseudoephedrine 120 mg). Zyrtec-D is sold behind the counter ( ¹ 'The Tan Sheet' Nov. 19, 2007, In Brief).

Dominic Caruso, J&J's chief financial officer and VP of finance, said Zyrtec's OTC availability "has been highly anticipated and its launch has gone very well."

The New Brunswick, N.J.-based firm's data shows OTC Zyrtec "reached 90 percent of U.S. stores in our first three months, and we are very encouraged by the response," Caruso said.

He added J&J views the switch "as an important growth contributor for our consumer business."

While J&J would not break out Zyrtec data, Caruso said sales of the product account for the bulk of the OTC category's growth in the January-March period.

"If we were to exclude Zyrtec from [OTC] sales, we would see ... low-to-mid single-digit growth in that category" instead of the 27 percent reached in the quarter, Caruso said.

However, he cautioned that "a good two-thirds of the initial sales in the first quarter" are due to initial stocking with retailers, which will likely "bleed off a bit in the remaining quarters of the year."

Nonetheless, the boost from Zyrtec sales in part prompted J&J to "review our annual results ... and slightly increase our expectations for this year," from $4.44 per share to "between $4.40 and $4.45 per share," Caruso said.

More OTC Growth Leaders

In addition to Zyrtec, J&J's OTC growth drivers include "both the adult and pediatric analgesics [which] achieved strong growth driven by an increased uptake in the rapid release gels and the later start to the winter flu season," Mehrotra said.

J&J's McNeil Consumer Healthcare markets the Tylenol and Motrin lines of pain-relief products.

Other products contributing to consumer sales growth were Listerine mouthwash and the recently launched Listerine whitening strips. Strong sales of skincare products including Neutrogena , Clean & Clear and Aveeno also helped.

Overall OTC sales growth dramatically outpaced prescription drug sales growth, which increased 3.3 percent to $6.4 billion worldwide compared to the first quarter of 2007.

"Generic competition has reduced the first-quarter worldwide pharmaceutical operational sales growth by approximately 3.5 percentage points with the U.S. impact estimated at approximately 1 percent and the impact outside the U.S. estimated at nearly 8 percent," Mehrotra explained during the call.

Shelves Crowded With Competition

Competition from private label products also could impact J&J's strong OTC drug sales in the future, especially Zyrtec sales.

Zyrtec faces competition from Perrigo, which beat J&J to store shelves with private-label cetirizine products available in stores last January. In addition, FDA has approved Perrigo's children's cetirizine hydrochloride oral solutions for allergies and hives, according to an April 9 letter from the agency (² (Also see "Perrigo Fuels “Growth Engine” With Spending On New Product Pipeline" - Pink Sheet, 11 Feb, 2008.), p.9 and ³ 'The Tan Sheet' April 14, 2008, In Brief).

Zyrtec is also up against Claritin , which became the first of the non- and low-sedating antihistamines available OTC in 2002, and private-label loratadine (⁴ (Also see "Schering OTC Claritin Post-Approval Filings To Include Hypospadia Reports" - Pink Sheet, 2 Dec, 2002.), p. 3).

McNeil's own Benadryl (diphenhydramine) also competes in the category.

Ads Take On Claritin, Tout Rx Heritage

J&J spent roughly $4.9 million advertising Zyrtec allergy remedy tabs/caps in January 2008, in an effort to set the product apart from competitors, according to Nielsen Monitor-Plus data.

This is only a fraction of the $8.8 million Schering-Plough spent on Claritin allergy remedy tabs/caps and the additional $7.7 million it spent on the rest of the Claritin line, including an allergy remedy, children's allergy remedy and Claritin-D allergy remedy tabs/caps/non-drowsy in the same time period, according to Nielsen Monitor-Plus.

In print ads, J&J emphasizes Zyrtec's prescription heritage as the "#1 prescribed allergy medicine" that is now available without a prescription, according to data from VMS, a media monitoring company.

Zyrtec also goes head-to-head against Claritin in a national television ad that positions J&J's product as "the fastest 24 hour allergy relief now without a prescription." The ad, which launched in mid-April, says Zyrtec "starts working two hours faster than Claritin and it keeps working."

J&J's marketing also stresses Zyrtec's ability to ease allergy symptoms both indoors and out.

However, the indoor/outdoor claim could lose some impact because days before Zyrtec hit the shelves, FDA gave Schering-Plough approval to make labeling claims that Claritin also relieves both indoor and outdoor allergies. Before, Claritin's label said that it relieved only outdoor allergies (⁵ 'The Tan Sheet' Jan. 28, 2008, In Brief).

S-P emphasizes Claritin's indoor/outdoor allergy indication in several national television spots.

S-P also highlights Claritin as a non-drowsy medication in several TV ads where the image is blurry at first before becoming clear to simulate the effects of the non-drowsy medication compared to drowsy drugs. While these spots do not mention Zyrtec, they ostensibly target allergy medicines that may cause drowsiness, such as Zyrtec.

- Elizabeth Crawford ([email protected])