Xenical OTC Switch Plans Underway; GSK Pays $100 Mil. For Rights

Roche and GlaxoSmithKline appear to be moving quickly on an Rx-to-OTC switch application for the anti-obesity agent Xenical (orlistat).

"Roche and GSK have already begun work to develop an OTC orlistat formulation in the U.S.," the companies said.

Roche announced an agreement to license OTC rights for Xenical to GSK's Consumer Healthcare division July 19, the same day the Swiss company divested its global OTC business to Bayer for approximately $3 bil.

GSK agreed to pay $100 mil. up front for the OTC rights, a figure that rivals Roche's estimate of current U.S. sales ($120 mil. per year).

The size of the payment suggests that GSK considers the brand a relatively near-term opportunity.

Xenical has patent protection until at least 2009. However, the dynamics of a switch for the product likely mean that the patent expiration date is less of an issue than in other categories, such as antihistamines.

Xenical is already almost exclusively an out-of-pocket expense for consumers, since most insurance does not cover obesity medicines.

One potential timeline would be to attempt to launch an OTC version of Xenical ahead of the expected 2006 launch of Sanofi's Acomplia (see ¹ (Also see "Medicare Obesity Policy Change Will Help Acomplia Launch, Sanofi Says" - Pink Sheet, 26 Jul, 2004.)).

Roche's attempts to market the product directly to consumers have also been hampered by the risk disclosure requirements for prescription drug advertising.

Xenical's non-systemic mechanism of action (blocking the absorption of fat) makes it in many ways an ideal candidate for an OTC switch - but not for lengthy discussion of side effects in the GI tract.

GlaxoSmithKline's smoking cessation program Committed Quitters could serve as a model for weight-management consumer education efforts accompanying a switch of the drug.

"GSK's experience in OTC switches, their marketing capability and expertise in consumer communications were the factors that helped us identify GSK as our preferred partner," Roche said.

The Committed Quitters program for nicotine-replacement therapy products is a 12-week program that begins with a phone call. Consumers are then sent customized materials to aid their attempt to quit smoking.

Roche's recent focus has been on establishing a case for reimbursement for Xenical by generating data on the health impact of weight loss, particularly on endpoints like lipids and glycemic control.

However, efforts to win a broad morbidity claim in labeling have not been successful so far (² (Also see "Roche Xenical Diabetes Data Could Provide Reimbursement Opportunity" - Pink Sheet, 2 Sep, 2002.), p. 15).

The announcement of the licensing agreement indicates that Roche foresees the potential to continue marketing a prescription-only version of the drug by describing the switch candidate as a "new formulation."

"Roche has also concluded an agreement to supply GSK with the active ingredient for the new formulation," the company said.

"Roche retains all rights to market Xenical as a prescription drug in the U.S. and all rights (prescription and non-prescription) outside the U.S."

Retaining an Rx-only version of Xenical could be an important opportunity for Roche if the U.S. reimbursement climate for obesity therapies changes.

As a practical matter, Roche is not currently in a position to market a broad primary care obesity agent.

The company has dramatically scaled back its sales force infrastructure in the U.S., in part due to the disappointing performance of Xenical (³ (Also see "Roche Specialty Market Focus Provides Refuge In “Unstable Environment”" - Pink Sheet, 28 Jul, 2003.), p. 26).

Roche expects to reconsider its level of investment in the primary care market towards the end of the decade.

Xenical has been on the market in the U.S. since 1999. One concern that delayed the approval was an apparent impact on the breast cancer detection rate in women treated with the drug.