ViewPoints: Pfizer eyes OTC opportunities both home and abroad

The announcement that Pfizer has acquired the marketing rights for over-the-counter (OTC) Nexium from AstraZeneca is unlikely to garner as much focus or as many headlines as a product acquisition in the prescription pharmaceutical space. This is understandable, given the revenue and margin expectations of the consumer healthcare segment; nevertheless the deal is an interesting one.

Insight, Analysis & Opinion

Nexium remains a strong and highly successful prescription brand in the gastrointestinal market and would appear to be well positioned for success in the OTC segment.

AstraZeneca's predecessor proton pump inhibitor (PPI) franchise – Prilosec – was launched as an OTC product by Proctor & Gamble a number of years ago and subsequently provides a reference point for Nexium's potential status switch.

Furthermore, the number of prescription-to-OTC product switches has declined in recent years, blamed on a lack of 'low hanging fruit'. Pfizer would appear to have circumvented this trend with the deal for Nexium, which could be launched in the US in 2014 the company confirmed.

Sales of Proctor & Gamble's OTC Prilosec reportedly peaked at $387 million in 2006 and analysts at UBS suggest that US sales to date are in excess of $750 million. Competition in the OTC PPI market – enhanced by the launch of products from Novartis and Merck & Co. – has seen Proctor & Gamble's sales of OTC Prilosec decline over the past couple of years. Pfizer will be hoping to replicate AstraZeneca's success (in the prescription market) of promoting Nexium as the most effective PPI product in the OTC space, supported by its considerable sales and marketing capabilities. Analysts at Goldman Sachs estimated peak US sales for the product at $500 million.

The broader implication is Pfizer's growing interest in the OTC space, confirmed not only by the $250 million it will pay AstraZeneca for Nexium marketing rights but confirmation it has secured first refusal on other potential prescription-to-OTC switches within AstraZeneca's portfolio.

Pfizer has already stated that it anticipates making a future move to reposition its statin product Lipitor in the OTC space (see ViewPoints: Pfizer app steps up preparations for OTC Lipitor?), while analysts have also highlighted Celebrex and Viagra as potential future switches. The FDA has yet to approve the switch of a statin and has previously rejected a number of applications.

However, industry experts – such as Kline Group's Laura Mahecha – believe that Pfizer is the company best positioned to succeed where others have failed. Nevertheless, she suggests that challenges still remain, despite the FDA announcing earlier this year that it is considering proposals to make more medications for chronic conditions available without a prescription. See Spotlight On: Potential acceleration of Rx-to-OTC switches in US market.

Motivation behind the FDA's thinking is clear says Mahecha, both in terms of improving patient adherence and reducing cost burden. Others suggest that rapid improvements in technology – such as the proliferation of smart phone apps designed to help patients manage various health conditions – could facilitate and support the FDA's proposals.

Away from the US, OTC products are playing an increasingly important role in Big Pharma's efforts to drive penetration in emerging markets. Speaking to FirstWord recently, Sanofi highlighted the importance of a broad portfolio as part of its own emerging markets strategy. OTC products are not only often among the key entrenched brands in emerging markets but they are also positioned outside of the price cutting policies which have become increasingly frequent in these markets over the past few years, Sébastien Martel, vice president – head of investor relations at Sanofi – told FirstWord. See Spotlight On: Diversification remains key to Sanofi's emerging markets strategy.

In contrast, the decision to divest Nexium OTC rights is further confirmation that AstraZeneca will remain focused almost exclusively on the prescription pharmaceutical market as it looks to implement a number of bolt-on acquisitions over the next few years to bolster its late stage pipeline and offset exposure to generic competition. See ViewPoints: AstraZeneca's thirst for M&A remains unquenched.

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