Sonki and all, this piece of news concerns both Pharmacia & Upjohn and Merck:
Pharmacia Sends in Karl Malone for Rogaine
Against Merck Pill
Bloomberg News
May 22, 1998, 12:40 p.m. PT
Pharmacia Sends in Karl Malone for Rogaine Against Merck Pill
Bridgewater, New Jersey, May 22 (Bloomberg) -- Utah Jazz
forward Karl Malone battles on two fronts these days. He's
leading his team in its quest for the National Basketball
Association championship. And he's pitching on television for
Rogaine, the underdog hair-growing liquid from Pharmacia & Upjohn
Inc.
Malone and his endorsement are part of an $80 million
advertising campaign to spur sales of Rogaine, at risk of losing
business to the world's first anti-baldness pill, Propecia.
Pharmacia's rival, Merck & Co., introduced the pill five months
ago.
Even before that, Pharmacia was in trouble. Rogaine sales
fell 32 percent last year to $129 million. In the first quarter
alone, Propecia turned in sales of $13 million, compared with
Rogaine's $31 million.
''Pharmacia needs to breathe life into their more mature
products,'' said Doug Herold, a portfolio manager at Invista
Capital, which holds about 7.6 million Pharmacia shares.
Pharmacia is betting that balding men of all sorts -- 35
million in the U.S. alone -- will identify with the 6-foot-9-inch
Malone, who at 34 has the build of a comic-book super hero and an
all-too-human bald spot on the back of his head. Rogaine helped
regrow some hair on the barren patch, the company said.
''It's very important to Karl that he not look, act or feel
that he's aged,'' said Larry Miller, the Utah Jazz owner.
Some of Pharmacia's best-selling products have aged, too,
and Rogaine's story demonstrates part of what's happening at the
company.
No More Patents
In the mid 1990s, a group of important products, including
Rogaine, lost the patent protection that once kept competitors
from selling cheaper generic versions. That depressed Pharmacia's
1997 revenue, which fell 5.7 percent to $6.35 billion.
To make matters worse, Pharmacia has no new drugs with
blockbuster potential. Rival Warner-Lambert Co. has the
cholesterol reducer Lipitor which topped $1 billion in sales in
its first year on the market. Pfizer Inc.'s Viagra, a pill to
treat impotence introduced last month, also is expected to pass
the $1 billion sales benchmark in its first year.
Pharmacia's most promising new drug is an incontinence
medication Detrol, also introduced in April, that could have
sales of $75 million in 1998. In five years, predictions are for
$400 million to $500 million in annual sales.
Restructuring
Pharmacia, based in Bridgewater, New Jersey, began a major
restructuring last year and hired former American Home Product
Corp. executive Fred Hassan as chief executive. The company was
formed in 1995 by the merger of Sweden's Pharmacia AB and Upjohn
Inc., then of Kalamazoo, Michigan.
Since then, Pharmacia has had trouble keeping up with its
rivals. Its shares rose 23 percent in the past year, well behind
the 59 percent return of Standard & Poor's Drugs Index. In the
same period, Pfizer shares more than doubled and Warner-Lambert
Co.'s nearly doubled.
In the decade before its merger, Upjohn, too, trailed rival
drugmakers. Its shares, for example, more than doubled between
Oct. 31, 1985 and Oct. 31, 1995, while the Standard & Poor's
Drugs Index more than tripled.
While the Rogaine ad aims to be entertaining -- it shows
Malone autographing a product box for his barber -- the company
will need more than star power to boost sales for the hair-growth
product.
No Significant Growth
In the past, men have found Rogaine inconvenient to use
daily as required. And in its original over-the-counter
formulation, only 26 percent of users reported significant hair
growth.
Rogaine does works and hair gets thicker and coarser, if
people stick with it for 12 months, said Ken Vargha, head of the
product's marketing.
Many men, however, decided it wasn't worth the bother to
keep rubbing the liquid on their scalps.
And then there was the cost -- more than $360 a year. When
generic products came onto the market, their lower prices caused
many users to switch. The $1 billion-a-year in sales once
predicted for Rogaine never materialized.
In December, Pharmacia introduced a stronger version of the
product, containing 5 percent of the active ingredient minoxidil
compared with 2 percent. Not only did the product get results
faster -- Malone showed more hair in two months, company said --
the reformulation earned Pharmacia a two-year extension on patent
protection.
Ads Help
The ad campaign, started in December, has helped Rogaine
sales -- up 6.6 percent in the first quarter.
Still, the competition is strong. Popping a pill like
Merck's Propecia -- even a prescription one that costs $600
annually -- is easier. Ads for the product emphasize that
advantage by picturing only an orange pill that fills the
television screen.
Sales of the Merck product could reach $300 million a year,
analysts said. With both products, men must stick with the
regimen for several months before hair grows. Both companies
offer discounts for men buying several months' supply at once.
Pharmacia is testing other balding sports figures to see if
Rogaine restores their hair. Like Malone, they too could appear
in Rogaine commercials, Vargha said. Green Bay Packers coach Mike
Holmgren has pitched for Rogaine since January.
Vargha won't identify other athletes in the experiment, but
he hints that some have appeared in Super Bowls and others play
professional tennis.
And, no, Michael Jordan isn't one. The Chicago Bulls
basketball star, who likes the hairless look, turned Rogaine down
flat.
--Kerry Dooley in the Princeton newsroom (609) 279-4016 with |
