Claritin Growth Plateaus As Schering Moves Ahead With Consent Decree

Sales of Schering-Plough's Claritin (loratadine) appear to have leveled off following a strong 2003 campaign for the over-the-counter antihistamine.

Schering-Plough followed a double-digit gain in the second quarter with flat sales of $110 mil. in the subsequent period.

The Kenilworth, N.J.-based firm attributed the decline to "increased private label competition." Heavy pressure from generics also has adversely affected Wyeth's Alavert .

Claritin sales had risen 22% to $117 mil. in the second quarter due to inventory adjustments (¹ (Also see "Sales & Earnings In Brief" - Pink Sheet, 26 Jul, 2004.), p. 9). That spike followed a first quarter in which year-to-year sales were down 9% to $117 mil. (² (Also see "Claritin Sales Raise Questions About Growth Opportunities For Switches" - Pink Sheet, 26 Apr, 2004.), p. 7).

Schering's prescription follow-on Clarinex (desloratadine) did not fare much better in the third quarter, losing overall market share and increasing sales only 3% to $175 mil. Although international revenue rose 39% to $57 mil., domestic sales fell 8% to $118 mil.

Schering attributed Clarinex' decline to the continuing contraction of the Rx allergy market due to the 2002 Rx-to-OTC switch of Claritin. During an Oct. 21 earnings call, Global Pharmaceuticals President Carrie Cox noted that "the total prescription volume in the NSA market has declined nearly 14% year-to-date."

Despite Schering's deteriorating share, Cox maintained that the desloratadine/loratadine Rx franchise "remains the market leader in most countries around the world," and that Clarinex "is generally at parity" with competing allergy products on managed care formularies.

Schering recently has attempted to boost its loratadine and desloratadine offerings with new indications.

The firm received FDA approval for a common cold usage claim for Claritin-D in August and a pediatric rhinitis indication for Clarinex syrup last month (³ (Also see "Claritin-D Braces For Winter With Common Cold New Use Claim" - Pink Sheet, 9 Aug, 2004.), p. 5 and ⁴ , p. 8).

Cox maintained the desloratadine syrup approval is "an important step towards making Clarinex a more competitive brand."

Schering has experienced difficulty supplying the allergy brands due in part to supply pressures caused by its consent decree with FDA.

CEO Fred Hassan said the firm has achieved marked improvements in its supply chain, which previously had seen "disruptions" caused by the consent decree work. Hassan noted the firm has "reduced back-orders and improved responsiveness to our customers."

The exec pointed out that Schering has completed 142 of 212 "significant steps" under the consent decree through the third quarter, as well as 20 of 33 "validation actions."

Challenges posed by the consent decree "will continue to be very steep during the remainder of this year, and we have big challenges ahead of us through 2005," Hassan cautioned.

Schering's consumer health care business was flat with sales of $239 mil. in the third quarter. In addition to Claritin's stagnant performance, the results reflected drastically lower sun care sales, which declined 79% to $3 mil. compared to the prior-year period due to lower sales of sunless tanning products.

Foot care revenue rose 9% to $89 mil. on the strength of higher sales of Dr. Scholl's Freeze Away wart remover. That product currently is the target of a lawsuit filed in Pennsylvania federal court by OraSure Technologies (⁵ (Also see "Orasure Aims To Freeze Schering Wart Removal Product In Patent Suit" - Pink Sheet, 2 Aug, 2004.), p. 11).

Schering's overall sales also were roughly flat at $1.9 bil.; net income available to shareholders was $14 mil. versus a $265 mil. loss in the comparable period last year. A decline in gross margin was attributed to lower production volumes and increased spending associated with the consent decree.

The firm announced an agreement with Bayer in September under which Schering will acquire a portion of Bayer's sales force and market Bayer's primary care products in the U.S. (⁶ (Also see "Schering Will Leverage Consumer Marketing Experience In Bayer Deal" - Pink Sheet, 20 Sep, 2004.), p. 7).

Cox noted overlaps between Schering and Bayer brands and customers, maintaining that Schering now has "more products to bring to the same customers." Schering is finalizing plans for sales force allocation for 2005.