Sales exceeding $150 million in two weeks on retail shelves for OTC weight-loss drug alli figure prominently in GlaxoSmithKline's commitment to its consumer health care products division, senior executives say.

In its July 25 fiscal 2007 second quarter earnings statement, GSK says sales of alli (orlistat 60 mg) reached 76 million U.K. pounds, which converts to $155.7 million using July 26 exchange rates.

The London-based firm says alli's launch on June 15 helped push its U.S. OTC sales up 51 percent to $569.7 million as total sales by its Consumer Healthcare division grew a record 18 percent to $1.77 billion. GSK also cites its Aquafresh and Sensodyne oral care brands and Lucozade nutritional brand as key consumer product sales drivers.

During a July 25 earnings call, Glaxo CEO J.P. Garnier and Consumer Healthcare President John Clarke said the firm's commitment to its consumer business is justified not only by the second-quarter performance, but also by its strong history and by its synergy with the firm's pharmaceutical operation.

Market analysts have suggested the firm's profit margins would grow from divesting its consumer business (¹ Also see "Sales & Earnings In Brief" - Pink Sheet, 12 February, 2007., p. 5).

"The discovery of innovative, new OTCs has a lot to do with our expertise in formulation, in clinical development to build new claims for our drugs, in our ability to work with regulatory agencies, as we have seen we have done for alli on behalf of Roche," Garnier said.

GSK acquired from Roche the U.S. nonprescription marketing rights to Xenical , a 120 mg orlistat product, in 2004 and this year acquired the exclusive rights to alli in markets outside the U.S. excluding Japan (² 'The Tan Sheet' Feb. 26, 2007, In Brief).

"We've introduced a range of new products recently and plan to continue to do so into the future. Our top-line is also being driven by a significant increase in marketing expenditure, and a determined focus on producing competitively superior communications and advertising, and we're achieving that," Clarke said.

He identified cooperative efforts between the research and development and marketing branches as well as an aggressive cost cutting program as key drivers for the firm's consumer business strategy.

Garnier emphasized the OTC growth potential outside Europe and the U.S. For example, he estimated OTCs represent up to 10 percent of drug sales in Europe and the U.S., but account for 40 percent in China.

"Not being in [the OTC] market, in my view, is a strategic disadvantage. So we are very happy about being in over the counter, and we're going to stay there for the foreseeable future," he said.

GSK launched alli in June as the first, and so far only, FDA-approved OTC weight-loss drug product (³ Also see "Alli Approved OTC For Weight Loss With “Goal Oriented” Indication" - Pink Sheet, 12 February, 2007., p. 8).

The firm's alli marketing strategy focuses on helping consumers decide whether they will follow the usage protocol (⁴ Also see "Alli Marketing Stresses Education, With Emphasis On Minority Groups – GSK" - Pink Sheet, 28 May, 2007., p. 4).

Clarke said GSK's "challenge in this category, where we see the consumer need for an effective product continuing to grow ... is to create a long-term sustainable business." To address the challenge, GSK built its "marketing strategy around a concept we call a program, not a pill," he added.

Within GSK's consumer business, OTC medicine sales were up 29 percent to $955.7 million, with Panadol acetaminophen sales up12 percent to $116.9 million.

Sales of Breathe Right nasal strips and FiberChoice dietary supplements, both of which GSK took over along with other brands in October 2006 when it acquired CSN, were at $37 million for the quarter (⁵ Also see "GSK Looks To Expand OTC Reach With CNS Brands" - Pink Sheet, 16 October, 2006.. p. 10).

Nutritional beverage sales were up 9 percent to $383 million, led by Lucozade sales growing 17 percent to $192.6 million. Horlicks sales grew 14% to $86.1 million and Ribena sales were up 9 percent to $84 million, according to the firm.

Oral care product sales grew 9 percent to $545 million, including a 20 percent increase to $164 million for the Aquafreshline and a 13 percent increase for Sensodyne sales to $151.7 million. GSK launched the Aquafresh White Trays teeth-whitening productand Aquafresh White & Shine toothpaste in the quarter.

Total sales for the quarter were up 3 percent to $11.7 billion.

- Malcolm Spicer (m.spicer@elsevier.com)

GSK Touts Alli As Tip Of OTC Strength, Reaffirms Consumer Commitment

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