Perrigo’s Full Range Of Pseudoephedrine Stand-Ins Must Wait For Next Year

Perrigo will not have a complete phenylephrine portfolio available to replace pseudoephedrine products until next year's cough/cold season, the company said during a fiscal 2006 first-quarter earnings call.

"In this fiscal year we do not anticipate phenylephrine having a major impact on the drop in pseudoephedrine products because so many of the phenylephrine products are coming out in the third quarter, at the tail end of the season," Perrigo CEO David Gibbons said Oct. 27.

"So by the time we get them out there and on the shelf, they're just not going to have a big impact."

The Allegan, Mich.-based firm is aiming to have its full array of phenylephrine products ready to ship for the 2006-2007 cough/cold season.

Many OTC firms including Johnson & Johnson and Pfizer, maker of Sudafed, have scrambled to conform to state laws restricting the sale of pseudoephedrine due to its role in methamphetamine production (¹ 'The Tan Sheet' Oct. 24, 2005, In Brief and ² (Also see "Sinusitis Indication Removed From OTC Decongestant Monograph" - Pink Sheet, 17 Oct, 2005.), p. 3).

Perrigo announced in September that it was in the middle of reformulating its cough/cold products (³ (Also see "Pseudoephedrine 2006 Sales To Decline 35%, Perrigo Projects" - Pink Sheet, 12 Sep, 2005.), p. 4).

Gibbons cited "political pressure" as the driving force behind retailers' decision to "accelerate the move of pseudoephedrine to behind the pharmacy counter."

"Our largest customer, for example, is dropping most of their pseudoephedrine tablets, and leaving only liquid [products] out on the shelf," he said.

The environment is "constantly changing," the exec noted, as retailers continue to comply with state legislation to regulate the sale of such products.

"We've seen some retailers move some liquid products back out on to the shelf from behind the counter, in states that allow it, as other retailers respond to state-by-state legislation and continue to move products behind the counter."

The legal and retail environment contributed to a $23 mil. decrease in pseudoephedrine product sales for the private labeler, which is on track for the firm's projected impact for the year of $60 mil.-$70 mil., according to Gibbons.

The $23 mil. drop was partially offset by a $19 mil. increase in other OTC product sales, which the firm attributed to new brands acquired through the 2004 Agis acquisition.

As a result, Consumer Healthcare division sales were flat, up 1% to $228.6 mil.

"Sales of new products, particularly smoking cessation, helped make up the remaining shortfall," CFO Doug Schrank said.

In the meantime, Perrigo announced plans to work with retailers on consumer education and merchandising programs to help support behind-the-counter pseudoephedrine purchase.

Overall, net sales increased 40% to $319.7 mil., the company reported, reflecting the addition of Agis' product sales. The new Rx Pharmaceuticals and API segments also recorded strong results for the quarter.

Rx Pharmaceuticals reported sales of $29.1 mil. while API contributed $26.8 mil. Separately, sales from Israel Consumer Products and Israel Pharmaceutical & Diagnostic Products segments were $35.2 mil.

While the private labeler maintains interest in Rx-to-OTC switches, the firm stated that it is not yet ready to commit to a project.

"At this point there is nothing we are ready to announce today," Schrank said. Switch "certainly continues to be a major area of focus, and, over the long haul, we do see continued opportunities. And we plan to be there on the major switch opportunities."

When asked if the firm would pursue an equivalent to Procter & Gamble's Prilosec OTC , the firm implied that it was not likely in the near future, citing patent protection as the major obstacle.

"Next to the Claritin switch, Prilosec is probably the big market opportunity," Gibbons allowed.

"There are a lot of other ones, but not of that magnitude. Prilosec is a great product, protected by a lot of patents, and so it is a complex one to manage through and get out to market."

- Melina Vissat