SANDOZ TAVIST RX-TO-OTC SWITCH IS KEY TO PLANS TO GROW U.S. OTC PRESENCE; TAVIST-D PATENT EXPIRY, NONSEDATING COMBOS THREATEN $ 115 MIL. FRANCHISE

Executive Summary

An Rx-to-OTC switch for Sandoz' Tavist (clemastine fumarate) is a key component of the company's plan for expanding its U.S. OTC business, according to reports from a presentation by the management of the Swiss company to financial analysts in New York in early November. The Tavist line of products (two tablet dosages, a liquid and an antihistamine/decongestant combo) has been a fast-growing prescription franchise for Sandoz in recent years, but an important patent expiration and the introduction of the first non- sedating antihistamine/decongestant Rx combos threaten that growth. According to estimates by the consultant firm POV Reports, the full Tavist line was growing in the annual range of 11-15% at the end of the 1980's. By 1990, the line had annual U.S. sales of more than $ 115 mil., POV estimates. The top product in the line is the clemastine-phenylpropanolamine extended-release combo, Tavist-D, POV estimates that that product alone had sales of $ 68 mil. in 1989 and $ 75 mil. in 1990. Tavist-D had a market leading share of the Rx cough-cold market in 1989 and 1990. Tavist-D is the product facing an upcoming patent expiration. FDA's "Orange Book" lists the patent expiration for the product as one-year away -- Jan. 20, 1993. A successful Rx-to-OTC switch prior to patent expiration could help Sandoz protect Tavist-D sales against generic Rx competition. Tavist-D is also experiencing new competition in the prescription cough-cold market from Marion Merrell Dow's recently introduced Seldane-D. In an early public report on Seldane-D's performance, MMD told financial analysts on Dec. 3 that its combo product had surpassed Tavist-D for the top spot in the prescription anti-allergy field within six weeks of U.S. marketing ("The Pink Sheet" Dec. 9, p. 13). Seldane-D marketing began around Labor Day. One probable target for Sandoz is the introduction of Tavist-D into the market before the arrival of the non-sedating antihistamines. MMD had to withdraw its OTC switch application for terfenadine (Seldane) in mid-1990, but the company reported in early December that it will try to resubmit an application during the first quarter of calendar 1992. For Sandoz to make an impact in that market with an older product, it appears important for Tavist to get there first. Worldwide, Sandoz' OTC sales in 1990 were in the $ 400 mil. range, the company is telling the financial community. The firm sees the potential for a "strategic synergy" between its OTC/consumer drug business and its $ 964 mil. (1990) nutrition business. Thirty percent of the nutrition business is in the areas of clinical nutrition, adult dietetics and sport foods which border closely on the drug business. The company told the U.S. analysts in early November that it was looking for nutritional and OTC acquisitions or joint venture partners in the U.S. The Tavist switch at FDA may have one hurdle to overcome from a previous effort by Sandoz to promote the product directly to the consumer. During the middle of the autumn allergy season in 1987, Sandoz ran major newspaper ads in the form of an open letter to doctors describing the low-dose Tavist-1 brand as "an effective alternative" to current antihistamine therapies ("The Pink Sheet" Sept. 24, 1987, p. 3). Although Sandoz had checked the campaign with FDA's drug ad division before beginning it, the company quickly ran into trouble with FDA's new drug review division and Capitol Hill. The ad's claim of "high effectiveness" and, particularly, of "low drowsiness" drew objections from FDA. FDA said at the time of the debate over the newspaper ad that it had rejected a 1985 OTC application for Tavist-1 because of an unsubstantiated low-drowsiness claim. FDA said the firm would have to show comparative data on drowsiness of antihistamines to make the claim. The company said that the drowsiness claim derived from a supplemental application filed for Tavist-1 in 1982. Any attempt to switch Tavist OTC now will probably have to address concerns raised by the situation four years ago.