Over-the-counter Prilosec to debut

updated 6:04 p.m. ET Oct. 15, 2003

CINCINNATI - Procter & Gamble Co. has set up a 24-hour command center and plans to send out a fleet of 1,200 delivery trucks nationwide for its rollout Monday of over-the-counter Prilosec, the heartburn medication.

The company is hoping Prilosec OTC achieves first-year sales of up to $400 million for what has been a blockbuster seller for its manufacturer, AstraZeneca PLC, as a prescription drug. Prilosec OTC offers consumers a lower-priced option to those versions already on the market, analysts say.

P&G is marketing Prilosec OTC in purple packages and drove a purple van through 24 cities in a “Burntown Challenge” promotion. But the Prilosec OTC tablets themselves are pink — the color of the magnesium salt used to make the tablets.

P&G expects to spend at least $100 million during the first year in marketing Prilosec OTC, including broadcast, print and billboard ads, some featuring a former daytime soap opera star.

Even before P&G gets the product out to retailers, it is facing a competitor’s challenge that its advertising makes false claims. A joint venture between Johnson & Johnson and Merck & Co. has sued P&G in federal court, saying P&G’s ads falsely suggest that the drug cures heartburn in a day.

Johnson & Johnson and Merck said the drug must be taken for 14 days, and the full effect doesn’t begin until the fourth day.

Cincinnati-based P&G responded that its claims are true and consistent with the federally approved packaging for its product. P&G is proceeding with its launch while its lawyers negotiate with the competitor, spokesman Greg Allgood said Friday.

In 2001, Prilosec was the world’s second-biggest selling drug, with revenues of $5.7 billion. U.S. sales totaled $3.7 billion.

The broad trucking distribution and command center is reminiscent of P&G’s all-out effort to quickly ship out Iams pet foods products three years ago when P&G expanded their distribution from specialty stores to general retailers.

William Steele, an analyst with Banc of America Securities, said he expects sales of Prilosec OTC to at least reach $300 million and possibly the top-line forecast of $400 million. That would compare with P&G’s expected total revenues of $49 billion this year and the $650 million annual sales for Actonel, the company’s prescription medicine for treatment of osteoporosis.

Prilosec OTC is the latest entry in an increasingly crowded market for competitors of Prilosec. The $12 billion market for the drugs — known as proton-pump inhibitors, or PPIs — makes it one of the most lucrative drug categories. Other branded versions on the market are Prevacid, Protonix, Aciphex and Nexium.

Prilosec sells for $116 for a month’s supply on Drugstore.com. P&G said Friday it will sell its over-the-counter version for less than $1 per pill.

A German company, Schwarz Pharma AG, began in December selling a generic version of Prilosec, called omeprazole, which costs about $100 for a month’s supply.

Swiss drug maker Novartis AG has said it plans to begin selling a competitor of Prilosec in the United States. Mylan Laboratories, of Canonsburg, Pa., said it may do the same thing.

P&G’s rosy expectations for Prilosec OTC haven’t prompted analysts to increase their prediction that the company will earn $1.23 per share for the quarter that ends Sept. 30. P&G said last week it hopes those earnings will be $1.24 to $1.27 per share.

Under an agreement signed seven years ago, P&G paid AstraZeneca an undisclosed amount of money upfront and will pay an undisclosed royalty to AstraZeneca on sales. AstraZeneca makes the Prilosec OTC tablets and ships them to P&G for marketing and distribution.

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