Preventive, multisymptom options trending
The 2013-2014 cough-cold season has been characterized as a moderate season with $7.5 billion in sales across total U.S. multi-outlet channels for the 52 weeks ended Jan. 26, according to IRI. Like last year, the season peaked around the New Year with a 4.6% incidence of influenza-like illnesses, according to the Centers for Disease Control and Prevention, above the national baseline of 2%. But the 2012-2013 season peaked at an almost 6% rate of ILI.
And the 2013-2014 season was approximately five weeks shorter than the prior season. This year, ILI reached above the national baseline in week 48, peaked in week 52 and fell below the national baseline in week 9 of 2014. Last year’s season stretched from around week 47 of 2012 to week 13 of 2013.
The net result was a slight uptick in cough-cold sales for the trailing 52 weeks. Sales of cough-cold tablets were up 2.2% to $4.2 billion, and liquids were up 4.3% to $1.1 billion.
Sales of flu relief and multisymptom solutions have been trending particularly well this season. There were several new product launches that helped drive some of that growth, including Bayer’s new Alka Seltzer Plus and Reckitt Benckiser’s Mucinex Fast Max line extension. Also making a return to shelves was McNeil’s allergy mainstay Benadryl.
Prevention also has played a strong role for the season. Tracked within liquid vitamins, Pfizer’s core Emergen-C brand generated $109.6 million in sales, up 17.3%; Emergen-C Immune Plus added another $17.2 million in sales, up 37.5%; and Reckitt Benckiser’s Airborne franchise generated $10.5 million across its shot format, up 46.5%, while Airborne effervescents were up 14.7% to $110 million in sales.
The recent launch of Chattem’s Nasacort Allergy 24HR nasal spray, the first nasal corticosteroid to reach the market, is cause for excitement for what is expected to be a strong spring and summer allergy season. Analysts peg Nasacort’s annual market potential at $200 million.
Springtime allergy season was delayed a few weeks this year, having kicked into high gear in early April as opposed to late March due to a 2013-2014 winter characterized by extremely low temperatures and heavy snow storms.
“Theoretically, the colder it is, the more delayed the pollen season may be,” Myron Zitt, former president of the American College of Allergy, Asthma and Immunology, told DSN. “[But] global warming, with higher concentrations of carbon dioxide in the air, predisposes … a longer pollen season and significantly heavier pollination — higher pollen counts.”
That means once the spring allergy season arrives, with tree pollens predominating, incidence may seem heavier than ever. In addition, there are more allergy sufferers. According to ACAAI, 23.6 million Americans were diagnosed with hay fever in the last year. The prevalence of allergies is surging upward, with as many as 30% of adults and up to 40% of children having at least one allergy.
Suppliers counteract generic margin compression with targeted mergers, acquisitions
By adding complementary specialty medication offerings to their generic drug businesses, manufacturers can add instant value and counteract the margin compression that is currently occurring as a result of high generic drug utilization.
As growth prospects in the generic sector wane, Pharma will look to complex specialty products to provide some financial stability and boost earnings. New market entrants with very few competitors are ideal candidates for large generics firms. Many firms have already picked up on this trend; Bloomberg estimates that the amount spent on specialty pharmaceutical deals in the past year has totaled nearly $60 billion.
In addition, increased margin compression could be a consequence of changing generic drug sourcing practices, recent wholesaler agreements and contract arrangements between Walgreens Boots Alliance Development and AmerisourceBergen, McKesson and Celesio, and Cardinal and CVS Caremark.
“Several factors, including acquirers’ desire to offset slower organic growth and margin compression in their generic drug businesses, are driving the current deal-making,” said Jessica Gladstone, VP and senior credit officer of Moody’s. “Companies also are looking to reduce their effective tax rates and drive earnings accretion.”
One of the most recent transactions in the generic/specialty sector is Mallinckrodt’s announcement about the purchase of Questcor Pharmaceuticals for $5.6 billion, which follows their Cadence Pharmaceuticals acquisition last February. Other notable transactions include Mylan’s purchase of Agila, Actavis’ deals for Warner Chilcott and Forest Labs, Valeant’s buy of Bausch & Lomb, Perrigo’s purchase of Elan, Endo Pharma’s acquisition of Paladin Labs, and Par Pharma’s play for JHP.
Another influence driving acquisitions is the reduction of effective tax rates, according to the Moody’s report, “Rising M&A Among Generic Drug Makers Increases Uncertainty for Creditors”. It states that pharmaceutical manufacturers acquire foreign companies in order to be “redomiciled” into lower tax jurisdictions. Such tax inversions as these are especially attractive to generic pharmaceutical manufacturers because “these companies have limited opportunities to place intellectual property assets in off-shore tax jurisdictions.” In short, overseas acquisitions can expedite the inversion process, saving companies money much more quickly.
“There is a land grab occurring in the specialty pharmaceutical space,” Michael Zbinovec, senior director of corporate finance for Fitch Ratings, told Drug Store News. In addition to attempting to lower tax burdens and increase shareholder profitability, drug makers are expanding their geographic presence by acquiring assets in new territories, he noted. “Companies are purchasing new medicines to bolster their current drug portfolios and offer a more comprehensive product offering to third-party payers.”
Many of the challenges associated with the adoption of this type of acquisition strategy are primarily related to deal execution, as integration activities will be significant, added Jacob Bostwick, director of Fitch Ratings. “Another potential problem could be patent cliffs (i.e., Teva’s Copaxone) — though for now, for specialty drugs, these are more appropriately called patent ‘slopes,’” Bostwick said. “Having significant exposure to relatively steady top-line and cash-flow producing generics businesses should help offset the risk from patent expiries over time.”
Overall, it will be favorable for generics firms to add specialty drug companies, Bostwick concluded. “Diversifying their business models away from increasingly commoditized generic drugs and adding presence in the fast-growing and much higher-margin specialty drug space should aid margins, cash flows and growth prospects,” he said. “Opportunities to leverage specialty R&D for the development of biosimilars in the medium-to-longer term also are compelling.”
Discovering the beauty within
Walgreens is on a mission to go big in beauty. With a robust army of 26,000 beauty advisers, in-store Look Boutiques and the Boots No7 line rolling out to more stores, Walgreens is well on its way. Now that effort has shifted into high gear as the retailer debuted in March an exclusive beauty publication called Discover Beauty Within.
Lebhar-Friedman Publishing, in collaboration with Walgreens, launched the quarterly magazine — marking the first exclusive beauty publication for the mass retailer. Discover Beauty Within debuted at all Walgreens (except Puerto Rico) and Duane Reade stores at the end of March.
To celebrate the launch of the beauty publication, Walgreens executives, beauty suppliers, bloggers and fashion media gathered at the posh The Fourth in New York City on April 3 for a VIP reception. Also in attendance was Gabrielle Reece, former Women’s Beach Volleyball League star and fitness icon. Reece is featured in the debut issue of Discover Beauty Within.
During the reception, DSN sat down with Shannon Curtin, group VP of beauty and personal care at Walgreens, to talk about why Walgreens is getting into the magazine business and how Discover Beauty Within fits into Walgreens’ larger beauty vision.
To check out photos from the reception, click here.