Glaxo OTC chief: When it comes to consumer health, pharma has the edge

GSK consumer health CEO Emma Walmsley

Lately, pharma companies have dominated the over-the-counter drug rankings, capturing the top 7 spots in the field and taking pure-play consumer companies down a notch. And according to Emma Walmsley, the CEO of GlaxoSmithKline ($GSK) and Novartis' ($NVS) consumer health JV, that should come as no surprise.

Compared with consumer-only companies like Reckitt Benckiser, the leader in that department and No. 8 overall in the market, pharma companies that have OTC businesses can boast scientific know-how, regulatory management and access to healthcare professionals--all "very important capabilities that sit with pharma companies," she told investors on a recent call led by Bernstein analysts Tim Anderson and Andrew Wood.

But drugmakers have another key weapon in their arsenals, too, and that's the prescription-to-OTC switch.

"That's a key driver for growth in the category," Walmsley pointed out. "And, as far as I know, over the last 10 years, that's only ever been done by pharma companies."

GlaxoSmithKline knows a thing or two about the process; its allergy spray Flonase made the transition after nabbing the FDA's green light in July of last year. Since then, the OTC version has been gaining ground, recording sales of £110 million in the first half of 2015.

Plenty of Glaxo's Big Pharma competitors have taken their products to drugstore shelves, too. Take Sanofi ($SNY), which launched prescription-free Allegra in 2011 to the tune of €211 million in revenue that year. Or Pfizer ($PFE), which has an OTC version of AstraZeneca's ($AZN) Nexium boosting its consumer health ops after inking a 2012 agreement with the British company.

With so much pharma competition at the top, the question is whether Glaxo will be able to stay there. Bayer, for one, has said it's eyeing that position, and it's made some big deals over the past couple of years to back up its claim.

But GSK has a lot to lose if it falters in the consumer health department. The company has put its faith in the field to help make up for declining pharma revenues, banking on a volume-based strategy to offset traditionally lower OTC margins.

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