Perrigo: Already-strong private label growth will get additional boost from Rx-to-OTC switch

Perrigo chief Joe Papa predicts $10 billion worth of Rx revenue will make the switch in five years

ALLEGAN, Mich. — Perrigo chairman, CEO and president Joe Papa on Friday shared with analysts that private label OTCs are trending strong and that growth will be sustained going forward with the number of projected Rx-to-OTCs on the horizon. 

"The mega trend shift from national brand to store brand continues," he said. "The overall OTC consumer market was up more than 2% versus last year. National brands were down almost 2%, but store brand gained 9.7% on the strength of new product launches, national brand recalls and increased store brand acceptance and nearly every category store brands drove the growth." Two high points were diabetes and gastronintestinal. "The diabetes category experienced growth of more than 14% [and] the gastrointestinal market, the category was flat while store brands grew 12.2%," Papa said. 

"Sales in the analgesics category were up more than 8% year-over-year led by sales in children and infants liquid analgesic products in a period where a specific branded competitor has not fully returned to the market," added Judy Brown, Perrigo CFO and EVP. 

Perrigo in January launched the store brand version of Nicorette Mini Lozenges and is preparing for the launch of the store brand version of Mucinex 600 milligram, which the company noted has annual branded sales of approximately $135 million. "As of today we currently expect to launch this product in our fiscal year 2013 and specifically March 2013," Papa said. 

That likely places a Mucinex launch after the critical cough-cold season. "Relative to the question of whether we miss the season or not, we look at Mucinex as being certainly important for cough/cold/flu season but also obviously for the allergy season," Papa said. "The bottom line is, as we look at our revenue guidance for consumer healthcare for a 16% to 20% growth for the full year, we did that with the knowledge of how we will probably realize the launch of all of our products and certainly the Mucinex 600 milligram was front and center in [that calculation]."

Looking forward, Papa projected that $10 billion in branded prescription sales would likely switch in the next five years, not including statins, with half of that dollar volume switching in the next three years. "Just take the example of what happened in the past week, the fact that Oxytrol has moved from prescription to OTC, that’s an important product not just for that individual product but it’s a brand new category with overactive bladder," Papa said. "There are some big products in that category: Detrol, Detrol LA, Ditropan, are all examples of products that are in that category. … I am not suggesting today all those will move, but certainly it is another potential example of what we are expecting."

Papa didn't include statins in those Rx-to-OTC calculations, however. "I do believe that statins are something like a 60:40 probability, that would be 60% positive, 40% negative, but because of the size of the statin category we do not include it in our numbers," he said. "It’s just too uncertain at this time.

Papa expects that Oxytrol will get a three-year exclusivity barring store brand competition through 2016. Papa also expects another likely switch candidate — Pfizer's Nexium — will be granted a three-year exclusivity if approved by the Food and Drug Administration. Papa estimated the soonest Pfizer could bring that to market is 2014, which would push the introduction of a store brand equivalent out to 2017. 

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