GlaxoSmithKline's OTC Garage Sale Includes alli, FiberChoice
This article was originally published in The Tan Sheet
Executive Summary
GlaxoSmithKline includes the alli weight-loss brand in its planned divestment of international OTCs worth about $813 million in 2010 sales, or 10% of the firm's total Consumer Healthcare business.
|
GlaxoSmithKline includes the alli weight-loss brand in its planned divestment of international OTCs worth about $813 million in 2010 sales, or 10% of the firm's total Consumer Healthcare business. The U.K. firm April 14 announced a total of 19 products on the chopping block, including U.S. brands FiberChoice and Beano for digestive health, Tagamet for heartburn and BC and Goody's analgesic powders. The full list also features the antacid Zantac OTC marketed in the U.K. and Australia. CEO Andrew Witty in February sketched out Glaxo's OTC divestment intentions. With Pfizer also said to be unloading some or all of its own consumer business, 2011 could become an OTC shopping spree for firms with enough cash on hand and a desire to diversify in consumer health care (Also see "Freed From Pfizer, Capsugel May Find More Market Opportunities" - Pink Sheet, 11 Apr, 2011.).
U.S. brands slated to remain in Glaxo's portfolio include digestive health OTCs Tums and Citrucel; smoking-cessation products NicoDerm, Nicorette and Commit; and the oral care lines Sensodyne, Biotene and Aquafresh. "Consumer Healthcare is a key growth driver for GSK," Witty said. "But it is important that we focus this business around product categories, brands and markets where we have most depth and competitive advantage, with the best prospects for strong growth." The firm will begin taking offers for its specified brands over coming weeks, with the goal of divesting them all by year's end. Alli Failed To Sustain Launch Momentum GSK's desire to part ways with alli (orlistat 60 mg) speaks to the brand's fall since its heralded U.S. launch in 2007 as the first approved OTC drug for weight loss (Also see "Alli Sales Slender On Lower Retailer Demand, Flatten GSK Consumer Sales" - Pink Sheet, 28 Jul, 2008.). Sales have stagnated in both the U.S. and Europe, where it switched to nonprescription sale in 2009 via the European Commission's centralized approval process. GSK accounting indicates alli is losing value. In its 2010 annual report, Glaxo stated the OTC rights to alli represented a value of about $390 million, compared to $402 million the prior year. U.S. sales of the drug fell 33.9% to $62.1 million in the 52 weeks ended March 20, according to SymphonyIRI Group data from supermarkets, drugstores and mass-merchandisers, excluding Walmart. Alli has cycled through a number of marketing campaigns, the latest of which launched in early 2011, encouraging consumers to pair use of the drug with healthy dietary and behavioral choices in order to avoid the gastrointestinal side effects of orlistat (Also see "Alli Campaign Seeks To "Drive Behavior Change," Stresses Healthy Choices" - Pink Sheet, 17 Jan, 2011.). Additionally, concerns about hepatotoxicity linked to orlistat led GSK to add a liver warning to alli in 2010, another red flag potentially keeping consumers away.
For Sale By Owner: Glaxo OTCs
For any company interested in acquiring alli, the weight-loss drug represents a challenging OTC fixer-upper opportunity. Alli has patent protection until Jan. 6, 2018, according to FDA's Orange Book. Nutritional Health Care Brands Held Though the divestment list includes a few supplement products that are grouped in the OTC business – among them FiberChoice, Beano and Abtei vitamins sold in Germany – GSK retains its core nutritional health care brands. Glaxo acquired the U.K. Maxinutrition sports nutrition portfolio in late 2010, adding to a growth platform that also comprises Lucozade energy drinks and Horlicks nutritional drink mixes (Also see "Glaxo Beefs Up Nutritionals Business With Maxinutrition Buy" - Pink Sheet, 20 Dec, 2010.). GSK's Consumer Healthcare sales increased 7.2% in 2010 to $7.75 billion, with most growth coming from nutritional and oral care brands. OTC sales were up 5% to $3.8 billion, driven by Panadol analgesics, smoking-cessation brands and dermatologicals. GSK Sale Offers Prime Bolt-On Opportunities With the geographic breadth of Glaxo's OTCs up for sale, the opportunity seems prime for smaller pharma or consumer health care companies seeking to bolt-on established brands. Meda Pharmaceuticals would be an obvious candidate, given the Swedish firm's clear interest in U.S. consumer portfolio expansion and its recent purchase of Geritol, Feosol and Palafer supplements from GSK (Also see "Alli Campaign Seeks To "Drive Behavior Change," Stresses Healthy Choices" - Pink Sheet, 17 Jan, 2011.). Prestige Brands Holdings has been busy in the OTC realm since late 2010, adding PediaCare and NasalCrom, among others, from its acquisition of Blacksmith Brands, and buying Dramamine from Johnson & Johnson (Also see "Prestige CEO Mannelly Sees Change In Retail "Headwinds" Giving Brands More Shelf Space" - Pink Sheet, 28 Mar, 2011.). The Irvington, N.Y., company could make a play for some of Glaxo's non-supplement U.S. brands, such as Tagamet, Debrox earwax remover, Ecotrin coated aspirin and Nytol sleep aid, none of which appear to overlap with products in Prestige's portfolio. Another medium-sized OTC player, Insight Pharmaceuticals, might also bolster its broad collection of products, which already includes Sucrets sore throat lozenges, Anacin pain relievers, and e.p.t. pregnancy test kits recently purchased from J&J (Also see "J&J/McNeil Divests E.P.T. Pregnancy Tests To Insight Pharmaceuticals" - Pink Sheet, 7 Mar, 2011.). By Dan Schiff |
