No Heartburn for Santarus

• Email
• Share
• Print

I first wrote about Santarus (Nasdaq: SNTS) back in April as part of a series covering recent biotech IPOs. At that time, I thought Santarus held some appeal as its drug Rapinex seemed to have minimal development risk, was targeting a large market, and could launch quickly. On Tuesday, the company passed a major hurdle when the FDA approved the 20 mg dose of Rapinex for the treatment of heartburn, gastroesophageal reflux disease (GERD), erosive espohagitis, and duodenal ulcers.

Often after approval, investors can breathe a sigh of relief and enjoy a relatively calm period while sales ramp up. That is not necessarily the case here, as Santarus has to tackle the challenge of penetrating a market with very stiff competition. The market contains such drug titans as AstraZeneca's (NYSE: AZN) Nexium and TAP Pharmaceuticals' Prevacid. These drugs are both multi-billion dollar products that are supported by extensive direct-to-consumer ad campaigns costing several hundred million dollars per year.

As a small company, Santarus is definitely going to have its hands full marketing Rapinex against such well-known players. That being said, the firm's marketing strategy certainly seems reasonable. Between now and the fourth quarter, the company is going to hire and train 230 sales reps and unleash them on the group of physicians that writes the most prescriptions for this class of drugs. That's a common-sense approach employed by many small drug companies to help get the most bang for the marketing buck.

While success is never guaranteed in the drug industry, the next 18 months should, at the very least, be interesting. During this time, the company will hear whether the FDA will OK the 40 mg dose of Rapinex, and the company will also conduct late-stage trials for capsule and chewable tablet formulations.

I think the knee-jerk reaction amongst investors is that small drug companies cannot compete head to head against large pharma. We will find out soon enough if that conventional wisdom is correct.

To read more by Charly on the exciting biotech industry, check out his recent articles:

• Unraveling Biotech Potential
• Don't Be a Biotech Gambler
• Avoiding Biotech Land Mines

Fool contributor Charly Travers owns shares of Santarus, but no other companies mentioned.