Dr. Reddy's Laboratories' foothold in the U.S. OTC drug market appears ready for expansion after the firm signed an exclusive 15-year OTC product development and marketing agreement with Leiner Health Products.

The Hyderabad, India-based drug firm estimated that OTCs currently account for less than 5% of its sales, but said it expects revenues from nonprescription drugs to grow "significantly" as a result of the deal.

According to a joint statement released Feb. 24, the agreement will enable the firms to take advantage of: "an exclusive marketing partnership...to distribute OTC products; a comprehensive Rx-to-OTC product pipeline; development of innovative private label OTC products; and establishment of an executive steering committee to manage product development."

The deal only applies to the U.S. distribution of Dr. Reddy's OTC drugs. Under the agreement, Leiner will handle distribution, sales and marketing of the OTCs, while Dr. Reddy's will oversee product development, the companies reported.

Treatment categories the firms said they expect to target over the next few years include antacids, second generation low- and non-sedating antihistamines and cholesterol-lowering medications such as statins.

The firms likely will introduce a private label version of AstraZeneca/Procter & Gamble's Prilosec (omeprazole 20 mg) in about four years, assuming FDA approves the drug for OTC use and grants it three years of Hatch/Waxman exclusivity.

Dr. Reddy's was one of three firms found by a New York federal court to be infringing on two of AstraZeneca's formulation patents for Prilosec in 2002 (¹ 'The Tan Sheet' Oct. 21, 2002, In Brief). The company said it is appealing the decision.

Carson, Calif.-based Leiner already markets several products for Dr. Reddy's, such as generic famotidine 10 mg (J&J/Merck's Pepcid AC ) and generic ranitidine 75 mg (Pfizer's Zantac 75 ) (² Also see "Leiner" - Pink Sheet, 27 August, 2001., In Brief). Leiner said its relationship with Dr. Reddy's extends over the past five to six years.

Leiner also has plans to ship a private label version of Schering-Plough's Claritin (loratadine 10 mg) tablets in July through an agreement with Genpharm and Pharmaceutical Resources, Inc. Leiner expects its loratadine business to earn about $100 mil. in sales in 2003 (³ 'The Tan Sheet' Feb. 17, 2003, In Brief).

While the agreement with Dr. Reddy's stands to give the Indian firm a larger U.S. presence, it also will enable Leiner to solidify its place in the OTC market.

The company noted the majority of its business still comes from dietary supplements, but said OTC sales should grow "markedly this year" and "dramatically" in 2004 as it works with Dr. Reddy's to bring an increasing number of products to market.

Leiner compared the growth potential for private label OTCs to the private label vitamin market, where it already has a significant stake.

Approximately 30% to 35% of vitamins are private label products, Leiner said, adding it will work to achieve the same ratio in the OTC market, where it estimated private label products account for only 20% of total offerings.

One strategy the firms may use to introduce new products could be the filing of 505(b)(2) applications, Leiner said. Wyeth Consumer Healthcare successfully filed a 505(b)(2) application to bring its Alavert loratadine product to market.

Wyeth's 505(b)(2) filing could lead to an increase in the number of companies submitting similar applications. The infrequently used "paper NDA" allows for the filing of an application that refers to studies conducted by a third party for which the applicant has not received a right of reference.

To help implement the companies' distribution strategy and oversee U.S. operations, Dr. Reddy's CEO & Vice Chairman G.V. Prasad will join Leiner's board of directors effective March 27, the firms announced.

The deal could expand to other markets as well. Although the agreement currently applies only to the U.S., Leiner said it is helping Dr. Reddy's coordinate the distribution of products in Europe. However, the firm said plans are still in the formative stages and details have not been ironed out.

Dr. Reddy’s Stakes Claim In U.S. OTC Market With Leiner Deal

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