AstraZeneca ($AZN) has been pulling out all the stops in trying to preserve blockbuster Nexium's revenues for as long as it can. Now, the FDA has approved an over-the-counter version of the drug--but thanks to a 2012 agreement, those sales are on their way to Pfizer ($PFE).
Late Friday, the U.S. agency green-lighted OTC Nexium 24HR, the nonprescription product Pfizer bought from AZ for more than $250 million. Pfizer expects launches in other markets in Europe to follow this year.
OTC Nexium should beef up Pfizer's consumer business, the fifth-largest in the consumer healthcare segment. Analysts once thought the unit could be on its way out, like Pfizer's spun-off animal health unit and the baby formula business it sold to Nestlé. So far the company has hung on to the division, which grew 4% last year to rake in $3.3 billion.
Meanwhile, AstraZeneca is in line for milestone and royalty payments based on performance. This means that if Pfizer can win over some would-be generics users, AZ will see some returned revenue for the stomach drug, which tallied $3.87 billion in 2013 sales.
On the prescription-strength front, the ailing AstraZeneca has been working tirelessly to protect its Nexium billions. The company has been waging a losing legal battle with Korea's Hanmi Pharmaceuticals over its copycat version. More recently, the company launched a direct-to-patient delivery program designed to keep some U.S. patients loyal to the original. And it's no wonder: Assuming the U.S. launch of a Nexium generic at the end of May, the British drugmaker predicts a double-digit percentage drop in core earnings per share for 2014, with revenue sliding by a percentage in the low- to mid-single digits.
The new approval comes as the FDA is considering allowing more prescription-to-OTC switches. "Switching medicines, whenever appropriate, from prescription to nonprescription status improves access, empowers consumers to care for their own health and is an important strategy for Pfizer," Pfizer Consumer Healthcare President Paul Sturman said in a statement. "The FDA approval of Nexium 24HR is a significant milestone in executing against our plan."
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