Tuesday, October 21, 2008

Andrew Witty Has Seen the Future and the Future Is Mouthwash

Biotene mouthwash. And toothpastes and gels and chewing gum to alleviate dry mouth. GSK bought the Biotene brand for $170 million, it announced today, from the private firm Laclede.

Biotene generated about $50 million in revenue last year, according to GSK's release, and joins a host of consumer oral-care brands at the Big Pharma, including Aquafresh. (For the low-down on all things consumer healthcare, visit our colleagues at The Tan Sheet.)

GSK's other news today is that it is opting out of its collaboration with Vitae Pharmaceuticals. The two firms were developing Vitae's preclinical renin inhibitors for hypertension under a deal signed in 2005. (Read about Vitae's strategy in this 2005 Start-Up article.) Vitae plans to continue development of the renin program on its own.

The timing of the two moves by GSK is certainly coincidental. Still their juxtaposition illustrates well where this Big Pharma--and probably a lot of Big Pharmas--are moving. Cardiovascular drug development isn't extremely popular these days, especially in areas like hypertension that are relatively well-served by existing (often generic) therapies; companies (like Pfizer) are opting out of that space in particular and much of the generic-heavy primary care areas in general.

And they're also diversifying into consumer medicine at an increased clip. Pfizer's likely kicking itself for offloading its consumer business to J&J--brands like Zyrtec helped boost growth overall at J&J despite a poor showing by the branded pharma unit in the last quarter's results. GSK's CEO Andrew Witty said on a recent earnings call that consumer medicine R&D is also more predictably successful. As Roger Longman wrote in the September IN VIVO:

At GSK's earnings meeting, Witty described OTC product development as the antidote to R&D attrition. Its Aquafresh White Tray tooth whiteners cost £6 million to develop and, in its launch year of 2007, did £21 million in sales. Its Commit smoking-cessation lozenges, launched in 2001, cost £26 million to develop and did £329 million in 2007 sales. Witty claims that 70% of GSK's consumer R&D projects end up creating marketed products. Meanwhile, he says, the average approved GSK drug takes two years to recoup its R&D costs – but that figure, he says, doesn't include the many projects which fail along the way (indeed Witty couldn't say whether pharmaceutical R&D was actually generating positive returns).
Of course not every consumer medicine story has a happy ending. Sales of GSK's own OTC weight-loss product Alli, for example, have fallen flat after a significant and expensive roll-out. But look for GSK and other Big Pharma to continue to diversify away from their traditional strengths in branded primary care medicines: into OTC, branded-generics, me-too biologics, etc.

You don't need Witty's crystal ball to see that it's in pharma's future.

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