Perrigo forecasts sunny days now and in the future for private-label OTC

NEW YORK — Over the past year, store-brand sales of over-the-counter products have helped maintain a slight growth through the sector, and with the number of proposed prescription-to-OTC switches on the horizon, the future looks especially bright, Joe Papa, Perrigo chairman, president and CEO, told attendees of the 30th Annual J.P. Morgan Healthcare Conference held here Monday.

According to Papa, total private-label OTC sales were up 6.4% through Dec. 18, versus a 2.5% decline in the sale of branded items that netted a plus-0.3% in overall category growth. A lot of that can be attributed to the McNeil Consumer recalls in the past two years, and McNeil has reported its brands would fill shelves and supply chains once again no later than mid-2012, Papa reported. "They’ve talked about reentering into the liquid market in October, November December of 2011 and they said they would reenter in the oral solid market January, February March of 2012 with a complete return sometime around midyear 2012," Papa said. "I will say that the liquids at this time, they’re not fully back … they’re not completely back at this time for example in the Tylenol suspension."

And while McNeil's return to market is expected to be charged by a significant consumer ad spend later this year, a factor that may turn sales of branded OTCs overall favorable, Papa was still bullish regarding store brand OTC products for two reasons — profit margins and switch. Papa noted that typical private-label margins exceed 50% versus 20% yielded from the branded equivalents. "Critical to this equation though is also the saving for the consumer. Usually there’s about a 25%, 30% saving for the consumer and this is in essence the reason we exist. We are same quality and effectiveness in terms of our manufacturing capabilities, but offer the consumer about a 25% to 30% saving and obviously much higher margin for the retailers and this is really what’s driving the profitability for the retailers and why they continue to give us more shelf space for the products."

Looking forward, Papa said Perrigo has more than 45 new products in the hopper, representing more than $190 million of revenue for the company's fiscal 2012. "We have a generic version of Clarinex, [though it's] unclear whether that will be a prescription product or an OTC, he said. Other OTC store brands expected to launch in the next six months include Prevacid, Deson, Allegra D-12, Mucinex, Claritin D and Rogaine Foam.

Beyond that, Papa projected between $10 billion to $15 billion worth of prescription sales will transition to the over-the-counter market. "We are really excited about what it means for the future for us," he said. "We’ll launch our version of Prevacid later this year in May of 2012, but also then the rest of the proton inhibitors like Nexium, Protonix, Aciphex are all examples of potential switch candidates and then we think of some other exciting ones like potentially Voltar and topical gel Diclofenac Gel, all representing good switch candidates to move from prescription status to OTC that will help drive our growth beyond just the next 12 months."

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