Schering-Plough, Novartis and Foradil: Measuring the Need for New Products

Schering's willingness to take over the marketing responsibilities for Novartis's Foradil respiratory drug, which has been largely superseded by combination products, to some degree measures the depths of Schering's troubles. But it also indicates the kinds of competition small-company in-licensers are likely to face. A whole industry of in-licensing focused players has grown up to sell the non-core products of Big Pharma: if Schering is any indication, the competition for these products is likely to get even more intense.

Much of the attention in licensing circles goes to the big deals with big dollars attached to them. But another way to measure the desperate need for late-stage products among Big Pharma is to look at the deals for drugs with only middling commercial prospects.

Novartis AG had spent quite a lot developing its long-acting beta agonist, formoterol fumarate (Foradil) for the American market—including an expensive COPD study pitting Foradil against ipatropium plus theophylline. The problem was that the standard of care was changing. Indeed, several trials indicated that long-acting beta agonists shouldn't be used to treat COPD alone, but in combination with an agent, like a steroid, to treat the underlying inflammation.

But Novartis was late to the combination party. GlaxoSmithKline PLC had just launched Advair, a combination of its long-acting beta agonist salmeterol xinofoate (Serevent) and the steroid fluticasone propionate (Flonase). AstraZeneca PLC was already selling in Europe a formoterol/steroid combination, (Symbicort), and the product was in phase III trials in the US for asthma. Pfizer Inc. would soon be joining the fray, co-promoting Boehringer Ingelheim GMBH 's once-a-day bronchodilator tiotropium (Spiriva) and selling Altana AG 's PDE-4 inhibitor roflumilast, rights to which it had picked up in its acquisition of Pharmacia Corp. [See Deal].

Novartis didn't want to compete rep-for-rep with GSK and Advair, says Paulo Costa, president and CEO of the company's US unit, Novartis Pharmaceuticals Corp. "We thought Advair would take the majority of the market share." Instead, he says his company decided on a limited introduction to "specialists and GPs who behaved like specialists," testing a full GP launch. "We learned," he says, "what it would take to launch this to the primary care market on our own—and it just didn't make sense to do it unless we had other GP-oriented respiratory products." And Novartis didn't. It had sold its old short-acting bronchodilator, terbutaline, to the NeoSan Pharmaceuticals Inc. specialty drug unit of aaiPharma Inc. [See Deal]; meanwhile, its specialist-oriented anti IgE antibody for allergic asthma, omalizumab (Xolair), has been significantly delayed by the FDA.

But Novartis seemed to have few out-licensing options. Formoterol is a generic and its aerolizer delivery device may not provide significant advantages. Most of the respiratory specialists with GP-sales capabilities were either marketing competitive products or unwilling—for reasons similar to Novartis'--to expend the marketing resources required.

But not Schering-Plough Corp. Respiratory medicine remains Schering's biggest business—and with mometasone (Asmanex), its new steroid, the company does have a potential combination COPD play.

But overall, respiratory has not been a good news area for Schering. Asmanex still awaits US approval, two years after receiving an approvable letter. Meanwhile, its most important product, the allergy medicine loratidine (Claritin), is going off-patent and over-the-counter simultaneously—too soon for it to switch entirely its huge patient base to its next-generation prescription product, the Claritin look-alike desloratadine (Clarinex). A much hoped-for combination of Claritin and Merck's leukotriene blocker, montelukast (Singulair) failed to show any efficacy in allergic rhinitis trials.

Schering may not have paid a lot for exclusive US marketing rights to Foradil, but sources indicate that the current agreement sets up other, future product deals between the companies [See Deal]. Perhaps most importantly, says Costa, Schering has committed GP-level sales resources to the product.

In short, the deal to some degree measures the depths of Schering's troubles. But it also indicates the kinds of competition small-company in-licensers are likely to face. A whole industry of in-licensing focused players has grown up to sell the non-core products of Big Pharma: if Schering is any indication, the competition for these products is likely to get even more intense.