Omega Pharma Acquires Six Glaxo OTC Brands, But Alli Lingers

Omega Pharma will pay $619 million for GSK’s Lactacyd feminine wash products, Abtei supplements, Solpadeine analgesics, Zantac antacid, Nytol sleep aids and the allergy drug Beconase. The deal is part of Glaxo’s plan to simplify its consumer business by selling 19 OTC brands.

European consumer health care products firm Omega Pharma NVbolsters its already broad OTC portfolio with six brands fromGlaxoSmithKline Inc., but GSK’s sluggish consumer business remains saddled with the once-prized weight-loss drug alli.

Omega Pharma will pay €470 million ($619 million) for six brands – Lactacyd feminine wash products, Abtei supplements, Solpadeine analgesics, Zantac antacid, Nytol sleep aids and the allergy drug Beconase, the firms said March 15.

The combined sales of the Glaxo brands exceeded €200 million in 2011 ($284 million based on mid-2011 exchange rates), and “will significantly strengthen Omega Pharma’s product portfolio and will create critical mass for the company in key markets including Germany, the U.K., Poland and Italy,” the Belgian firm said.

Omega Pharma had $1.15 billion in 2010 sales, the most recent annual total available, with a portfolio of 2,000 European OTCs, including Wartner wart remover and 60 brands acquired from Pfizer Inc. in 2004.

Omega Pharma CEO Marc Coucke, through his investment vehicle Couckinvest, launched in December a takeover of the firm and in February owned 99.26% of all shares, which were delisted from the NYSE/Euronext Brussels exchange (Also see "In Brief" - Pink Sheet, 2 Jan, 2012.).

As part of its agreement with Glaxo, Omega will acquire the Herrenberg manufacturing site in Germany, which makes many of the brands sold in the deal. Omega says it anticipates retaining the facility’s 110 employees.

The deal is part of GSK’s plan to simplify its consumer business by selling 19 OTC brands worth about 10% of the firm’s total consumer business at the time of the announcement last April (Also see "GlaxoSmithKline's OTC Garage Sale Includes alli, FiberChoice" - Pink Sheet, 18 Apr, 2011.).

GSK originally wanted to sell the brands to a single global buyer, but parceled out 17 North American OTC lines to Prestige Brands Holdings Inc. in December (Also see "Prestige Acquires 17 Glaxo OTC Brands, Enters Analgesics Market" - Pink Sheet, 2 Jan, 2012.).

Prestige paid $660 million for brands, including Gaviscon antacids and Tagamet heartburn treatment. While the brands’ impact was neutral on Prestige’s earnings per share in the third quarter of fiscal 2012, the Irvington, N.Y., firm expected $30 million in sales from the products in the fourth quarter (Also see "Sales & Earnings In Brief" - Pink Sheet, 13 Feb, 2012.).

Glaxo’s consumer health care sales grew 5% in 2011 despite the divestment of the brands to Prestige. Those brands would have contributed only 2 percentage points in consumer sales for the year, the U.K. firm said.

Efforts To Sell Alli Stall

GSK says it “remains in active discussions” about the sale of the few lingering brands it wants to sell outside of Europe and North America. The brands generated about £60 million in sales in 2011 ($96.6 million based on mid-2011 exchange rates), GSK touts.

Alli is among the remaining brands, but the cards seem stacked against GSK to sell it.

The firm wants to sell the brand but has delayed divestment plans pending the resolution of a temporary interruption of Roche’s supply of the active ingredient, orlistsat, GSK says. Alli is a lower-dose version of Roche’s prescription weight-loss drug Xenical.

GSK is working with Roche to resolve the issue, and notes the interruption is not safety related. However, recent safety concerns have tarnished alli’s reputation and likely contributed to further sales declines.

FDA said in January it is monitoring whether adverse event reports of kidney stones by alli users could signal a serious risk, though the agency has neither identified a causal link between the drug and the ailment nor that the drug poses a risk of kidney stones (Also see "FDA Evaluates Alli For Potential Serious Risk Of Kidney Stones" - Pink Sheet, 16 Jan, 2012.).

The investigation follows two others by FDA – one into whether orlistat was connected to “rare reports” of hepatitis and liver injury, and another into reports of rectal bleeding by orlistat users .

While GSK assures the drug is safe, FDA added a liver warning to the OTC product anyway in May 2010 and the investigation generated significant negative press.

More recently, the European Medicines Agency determined the benefits of orlistat weight-loss drugs outweigh the risks and underscored a lack of evidence that the ingredient increases the risk of liver injury (Also see "Regulatory News In Brief" - Pink Sheet, 20 Feb, 2012.).

Alli’s problems are reflected in its sales, which have fallen steadily and sharply since its much-anticipated and briefly successful launch in 2007. Within weeks of launching, the drug sold $150 million, but by the end of last year sales had plummeted to $48.3 million in 2011. This was down 35% from the previous year, which was down 23% from 2009, according to Chicago-based SymphonyIRI.

GSK tried to boost sales through a variety of marketing campaigns, including one that tried to educate consumers about healthy weight-loss habits and another that featured country singer Wynonna Judd (Also see "Alli Marketing Stresses Education, With Emphasis On Minority Groups – GSK" - Pink Sheet, 28 May, 2007.).