Santarus Takes on Marketing Goliaths With Faster-Acting Heartburn Drug

10/17/08Follow @xconomy

If you own a television, you’ve probably heard of the purple pill. It’s a marketing hit for chronic heartburn, sold under the name Nexium, brought to you by pharmaceutical giant AstraZeneca. Calling this a tough market to crack would be an understatement, but the folks at San Diego-based Santarus are willing to play the role of David against this particular Goliath.

Santarus (NASDAQ: SNTS), a specialty pharmaceutical company with 340 employees and a market capitalization of less than $100 million, sees itself grabbing more of the market than it already has for chronic heartburn meds with its product, Zegerid. CEO Gerry Proehl explained he intends to grab more market share with an alternative that goes to work faster than the others, and may last longer.

Chronic heartburn is one of the more common diseases in this pizza-and-fast-food-loving nation. The leading treatments for this condition are proton pump inhibitor drugs that work by stopping the secretion of excessive acids that can wash up the esophagus, causing the painful, burning sensation of heartburn. These drugs, sold as AstraZeneca’s Nexium, Takeda Pharmaceutical’s Prevacid, Wyeth’s Protonix, and Johnson & Johnson’s Aciphex, among others, generated a whopping $14 billion in U.S. sales in the preceding 12-month period through July, according to IMS Health. Zegerid, which came late to this party with FDA approval of its initial form in 2004, has captured just a tiny sliver of the market. Santarus expects total revenues this year of $115 million to $125 million, mostly driven by Zegerid.

“These drugs generally work fairly well,” Proehl says. Yet he adds, “We think we have a better mousetrap.”

How’s it different? That requires some explanation. The standard treatments all have a coating that protects them in the highly acidic environment of the stomach, which sheds off in the more neutral pH environment of the small intestine, where they get absorbed, Proehl says. One catch is that drugs in this class, like the now-generic Prilosec, can take as long as 90 minutes to three hours to get to their peak concentration in the blood, Proehl says.

Zegarid works like the other proton pump inhibitors, but it doesn’t have that protective coating. Instead, it’s combined in a capsule, or a powder form, with an antacid. That makes the environment in the stomach a lot friendlier for the drug to sneak on by for about 30 minutes without danger of being prematurely degraded, Proehl says. This way, Zegerid can get to peak blood concentration in 30 minutes, he says.

That sounds fine, but since most patients take these heartburn drugs every day instead of when they have an episode of heartburn, I wondered why that matters much. This is a key question, which a lot of doctors have as well, and Proehl made it clear they’ve been working hard to answer it. The answer is that the other drugs often go to work after a meal, but aren’t as good with treating heartburn at nighttime, on an empty stomach. Zegerid has been shown in clinical trials to control stomach acid better through the night when taken before bed, Proehl says. On an investor presentation slide, he sums it up: “Zegerid provides night and day continued acid control.”

Proehl also hopes to take advantage of an opportunity being created as these drugs switch to generic forms. The big drugmakers are spending less money promoting them than they once did, and are now sitting back reaping the profits. That’s fortunate for a small company trying to get in the door with busy doctors.

Still, the years of marketing proton pump inhibitors has helped cement physician habits over the years in writing prescriptions for the big guys, Proehl says. So Santarus hopes to sell its product to patients who don’t respond well to the other products, and to new patients. Santarus plans to counter the threat from cheap over-the-counter meds by emphasizing that its higher-dose prescription works better on tough cases of heartburn.

In a very interesting twist, Santarus has formed a partnership with pharma heavyweight Schering-Plough to market an over-the-counter form of Zegerid, and the FDA’s deadline to complete its review of the drug is set for January, Proehl says. Instead of cannibalizing sales of the higher-margin branded drug, Proehl says it will be a boost to his company’s bottom line. Santarus will get royalties on sales generated by Schering Plough, without any added expenses on its part. It hopes that the bigger company’s ad campaign raises awareness about over-the-counter version of Zegerid will rub off on its brand-name original product. “These guys are going to do significant marketing,” Proehl says.

It may not ever be as big a brand as Cheerios or the purple pill, but it sounds like Zegerid will soon be entering the public vocabulary and will see its opportunity grow. I suppose people might get off the couch and eat more vegetables, decreasing demand for these drugs, but I wouldn’t bet on it.

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