Sanofi-Aventis will need to build an infrastructure geared to Rx-to-OTC switch in order to make a successful U.S. consumer business out of its planned acquisition of Chattem and become established as a switch player.

Sanofi says Chattem would provide a U.S. platform for future OTC switches, beginning with its Rx antihistamine Allegra . Sanofi has offered $1.9 billion for the Chattanooga, Tenn.-based firm.

Drug development experts say while Sanofi's planned switch for Allegra (fexofenadine) should present few regulatory hurdles, other products the firm identified as possible switch candidates would challenge even the most experienced switch hands.

An Allegra switch in the U.S. should be relatively simple because other non-sedating antihistamines have already switched to OTC: Merck/Schering-Plough's Claritin and Johnson & Johnson/McNeil's Zyrtec .

"It is not a category buster and ... I expect that there is a good deal of safety data," said pharmacy expert Randy Juhl, a former FDA Nonprescription Drug Advisory Committee chairman.

However, Sanofi's other potential switches - Penlac Nail Lacquier (ciclopirox) antifungal topical treatment, BenzaClin Topical Gel (clindamycin-benzoyl peroxide gel) acne medication and Nasacort (triamcinolone acetonide) nasal spray for allergy relief - could be more complicated.

"Those would be a little more challenging. Maybe by the time they're ready to switch those, they would have some sort of regulatory and clinical switch team in place," said a research and development executive with another firm, who asked not to be named.

Juhl, vice chancellor and distinguished service professor of pharmacy at the University of Pittsburgh, observed that safety likely will be FDA's only concern for an Allegra switch.

"Given the similar, already-marketed OTC antihistamines, the FDA may not even bring it to an advisory committee," he said.

Penlac most likely would be the least complicated of the three potential switches Sanofi identified, but BenzaClin and Nasacort likely would generate more questions.

Officials at the agency have had concerns about making antibiotics OTC due to the possibility of over use creating microbial resistance to the drug. While other countries allow nonprescription sale of steroid-based nasal sprays like Nasacort, switches have failed in the U.S. and all of the products are approved only for Rx sales.

Establishing a switch team, Juhl observed, would be worth it for Sanofi. In the U.S., Paris-based Sanofi will compete in an OTC market with not only product innovators, but also companies focused on marketing drugs developed by other firms.

"They would need to compete with the more experienced switch companies that license products from Rx-only" firms, Juhl said in an e-mail. "But, if they can get two of the three [products in addition to Allegra], they will have established a reputation that could make them a credible switch player with momentum."

Sanofi Chooses Acquisition Over Partnership

No matter the challenges, Sanofi CEO Chris Viehbacher says the firm's strategy is clear.

"We've got 7.8 million people in the U.S. who still are taking Allegra, and this is what you really need for an Rx-to-OTC switch," Viehbacher said during a Dec. 21 conference call announcing the deal (see ¹ Also see "Sanofi Eyes Chattem As Key Building Block For Global OTC Growth" - Pink Sheet, 4 January, 2010. ).

However, as neither firm has switch experience, Sanofi must build an infrastructure for switching products that would leverage its base of prescription drug customers. That effort is contingent on developing both a regulatory team tuned to the specific challenges of switch applications, and a marketing group that can navigate channels beyond advertising - such as outreach to managed care and physicians.

Chattem has a solid track record marketing well-established or acquired OTC brands, but lacks experience needed to execute an Allegra switch without outside help, says Donald Riker, president and founder of On Point Advisors and a former research and development VP at Chattem.

Likewise, Sanofi is inexperienced in U.S. switch, but obviously experienced with drug applications.

Sanofi opted to acquire Chattem instead of licensing Allegra OTC sales to another firm because it was unwilling to give away "a significant chunk of profit" or "play a completely passive role" in the switch, according to Viehbacher.

"We had significant interest from all of the major players in the OTC sector to switch this for us," but "could not find a company that had the skills of competency to help us launch Allegra ourselves, and that is when we found Chattem," he said.

Sanofi has already deployed a transformation strategy to create a viable OTC division that would help lessen its dependence on blockbuster medicines. As part of that strategy, the firm has built a division to run its global OTC business and will soon announce a supervisor for its OTC business worldwide.

Hanspeter Spek, Sanofi's president of global operations, noted during the Dec. 21 call that Sanofi recruited a leading manager from another OTC company to run its European OTC and consumer care business and supervise worldwide development. The firm will name the manager in January.

Outside Help Key To Building Capability

Experts predict Sanofi will likely rely on outside help in building its capabilities, both during the new drug application process and in developing a promotional plan.

If the current staff at Sanofi and Chattem could not prepare a new drug application to switch Allegra that would satisfy FDA's criteria, multiple contract research organizations could efficiently complete the work.

"It will require more muscle," Riker said. "Either Sanofi having to ratchet up its support in the alliance or outsourcing jobs to third parties."

"I would think that that's not something they would be hurting on, to not have so-called switch expertise for Allegra," the pharma R&D exec said.

Juhl pointed out many veterans of switches who previously worked at other drug firms probably would be interested in working for Sanofi.

"There are also a hoard of consultants who haven't had much to do lately related to switch. So, I am sure they could put together a team," he said.

In an interview, Riker said input from marketing professionals outside Chattem will be critical as Allegra would face an "uphill slog" coming to the OTC market after Claritin and Zyrtec.

He said switched products that are the third or fourth to enter a category can struggle in the marketplace, pointing out the failure of a number of non-steroidal anti-inflammatory drugs launched in the 1980s following the introduction of the initial products in the market.

Riker added that considering the challenges Sanofi will face in the marketplace and in building a switch infrastructure, if the planned Allegra switch is a success, it could be a model that "blazes a new path in transnational partnerships."

Claritin achieved sales of $74.4 million and Zyrtec sales reached $69.9 million in the 52 weeks ending Nov. 1, excluding sales at club stores and Walmart, according to data compiled by Information Resources Inc. The overall cold/allergy/sinus relief category was worth $761.3 million in the period, IRI notes.

According to Sanofi, net sales of Allegra in the firm's fiscal 2008 were 688 million euros - $888.3 million at Feb. 11, 2009, exchange rates.

Ingredients For Successful Allegra Switch

Chattem's sales and distribution know-how in the U.S. mass market would be a major benefit to Sanofi. Specifically, the company's savvy in competing against J&J and Procter & Gamble and its ability to effectively distribute to Walmart and other big chains are attributes "you really need for an Rx-to-OTC switch," Riker said.

While Sanofi could be at a disadvantage in coming to the OTC market late, it could work that timing to its advantage by gleaning lessons learned by competitors, particularly the nuances involved in marketing OTC switch products in the U.S.

For example, in launching OTC Zyrtec, McNeil learned leveraging some traditional pharmaceutical marketing methods - such as engaging health care professionals and managed care organizations - is beneficial to the switch process (² Also see "Zyrtec Model Shows Managed Care’s “Softer” Side For Switching Patients" - Pink Sheet, 1 December, 2008.).

McNeil has found OTC switch programs that engage professionals generate two to three times the consumer awareness of those that do not.

When sponsors simply launch without adequate marketing support they risk a substantial drop in sales because consumers feel abandoned and will opt for other Rx products covered by insurance or OTC competitors, the company has found.

Chattem Grows Brands

Firms launching switches primarily have used large advertising agencies, but Chattem is accustomed to using boutique agencies on smaller campaigns behind its more traditional brands.

Riker says Sanofi may be making the mistake of assuming that the "advertising and marketing of a company that is very, very good at reinvigorating older or abandoned or divested brands can apply that same model on a very different job of launching a huge new brand in the marketplace."

"That is not what Chattem has done. That is not their model," he said.

Sanofi could also look to examples of other categories of switch products that have benefited from successful marketing campaigns, including GlaxoSmithKline's alli weight-loss drug.

The alli campaign took a personal approach to speaking to consumers by centering on word-of-mouth and user-to-user communications, particularly online, that speak honestly and openly about the drug, its performance and expectations (³ Also see "GSK Alli Strategy Relies Even More On Users Spreading The Word" - Pink Sheet, 7 July, 2008.).

That approach targeted making consumers more confident about trying 60-mg orlistat alli. Roche Pharmaceuticals continues marketing the 120-mg Rx version of the drug, Xenical .

Marketing for an OTC Allegra could appeal to consumers by differentiating the product from Claritin and Zyrtec. Sanofi promotes Allegra as the only Rx antihistamine that does not have sedating effects.

While both products are approved as non-sedating antihistamines, Claritin makes a non-drowsy claim. Zyrtec does not make a non-drowsy claim, but claims faster onset than Claritin, which Merck/Schering has challenged (⁴ 'The Tan Sheet' Dec. 21, 2009, In Brief).

However, the pharma R&D exec pointed out any differentiator most likely would already be used to market Rx Allegra, and no data appear to be available from clinical studies on which Sanofi could base a differentiating claim for Allegra.

Instead, Sanofi may look for data and other evidence to support a claim such as being the "most prescribed of its kind of the last five years," the pharma research veteran said, pointing out that Novartis is using a similar claim in the launch of its proton pump inhibitor Prevacid 24HR (lansoprazole 15 mg). "That becomes a claim by itself," he added.

"Anybody that's taking prescription Allegra would be an automatic candidate to be targeted to buy the OTC version, just like what Prevacid is doing in the PPI category."

But while moving prescription Allegra users to an OTC product will create some market share, Sanofi also will have to take share from competing products for the switch to succeed.

"How much of the market share can they steal from the other products by promotion and business rather than regulatory acumen?" the R&D veteran said.

One element for building market share would be a period of market exclusivity for a switched Allegra. FDA has discretion to grant exclusivity of up to three years if it requires new studies from a sponsor to support a switch.

However, with Allegra as the third switch in a category with proven safety and efficacy, FDA probably would not ask for additional studies.

- Eileen Francis ( ⁵ e.francis@elsevier.com ), Elizabeth Crawford ( ⁶ e.crawford@elsevier.com ) and Malcolm Spicer ( ⁷ m.spicer@elsevier.com )

Sanofi Needs Switch Skills To Span Gap Between Rx And OTC Divisions

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