Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Pain-Free Extrinsic Growth

Pain-relief specialist Alpharma (NYSE: ALO  ) has a sales force of 200 supporting just one drug. Rather than wait until the 2009 launch of its second drug to put its force to better use, the company went ahead and licensed a drug for its sales force to sell.

Alpharma announced yesterday that it licensed the Flector patch from privately owned Institut Biochimique SA. Alpharma will make an up-front $100 million payment and issue stock warrants for 1 million shares, with a three-year term and a $35 strike price. Alpharma will get to keep all the U.S. profits, since there aren't any royalty payments associated with the deal.

Flector was approved in January by the FDA, and it'll be the first topical NSAID patch available in the U.S. It has been marketed in Europe for many years by Institut Biochimique and Novartis (NYSE: NVS  ) .

The patch delivers the NSAID diclofenac epolamine directly to the site of acute pain, while keeping the overall level of diclofenac in the body relatively low. NSAIDs taken orally can cause both cardiovascular problems as well as gastrointestinal issues -- if you've ever taken Wyeth's (NYSE: WYE  ) Advil on an empty stomach, you know what I'm referring to. It's unlikely that the patch will gain widespread use like oral medications, but it's likely to be prescribed by doctors for elderly patients and those with previous gastrointestinal or cardiovascular problems.

To support the 2008 launch, Alpharma plans to double its sales force to about 400 sales reps, while adding further sales reps from a contract sales organization (CSO). It expects to ramp up sales and show positive earnings from the patch in the second half of 2009, with peak sales of $500 million per year.

That should coincide nicely with its KADIAN NT abuse-deterrent opioid, which it hopes to launch in 2009. Having a large sales force already in place should help it compete against Pain Therapeutics' (Nasdaq: PTIE  ) and King Pharmaceuticals' (NYSE: KG  ) abuse-resistant drug Remoxy, which is in phase 3 clinical trials.

Alpharma also acquired the marketing rights to Tirosint, a thyroid replacement therapy. I'm not sure whether Institut Biochimique was having a 2-for-1 sale or what, but Alpharma shouldn't be touching Tirosint with a 10-foot pole. It doesn't appear to have the experience or sales force to deal with launching the drug. With any luck, it will find a partner to which it can outlicense Tirosint relatively quickly -- perhaps Forest Laboratories (NYSE: FRX  ) or Genzyme (Nasdaq: GENZ  ) , who both have drugs in that field, would be interested.

Overall, I think the deal is a good one for Alpharma. Low-risk licensing deals for FDA-approved drugs are hard to come by, and this one will allow it to leverage its current sales force almost immediately. The launch will cut into its near-term earnings, but should help it in 2009 and beyond.

Want to know the latest drug stock we've picked for the Fool's market-beatingRule Breakers newsletter? Click here to take a look at all our recommendations with a free 30-day trial.

Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. The Fool's disclosure policy doesn't hurt a bit.

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 534593, ~/Articles/ArticleHandler.aspx, 10/25/2016 6:46:01 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 9 hours ago Sponsored by:
DOW 18,223.03 77.32 0.43%
S&P 500 2,151.33 10.17 0.47%
NASD 5,309.83 52.43 1.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

3/18/2011 12:43 PM
ALO.DL2 $11.69 Down +0.00 +0.00%
Alpharma, Inc. CAPS Rating: **
FRX.DL $0.00 Down +0.00 +0.00%
Forest Laboratorie… CAPS Rating: ****
GENZ.DL $76.25 Down +0.00 +0.00%
Genzyme Corp CAPS Rating: ****
KG.DL2 $0.00 Down +0.00 +0.00%
King Pharmaceutica… CAPS Rating: **
NVS $75.45 Down -0.09 -0.12%
Novartis CAPS Rating: ****
PTIE $0.69 Down -0.06 -7.42%
Pain Therapeutics CAPS Rating: ***
WYE.DL $0.00 Down +0.00 +0.00%
Wyeth CAPS Rating: ***