Tuesday, shares of specialty biopharmaceutical company Santarus Inc. (SNTS) rose 35% to $5.80 in after-hours trading, following FDA approval of over-the-counter version of the company's prescription heartburn drug Zegerid. The stock was around $3.81 when an article alerting readers to the stock about the company's revised outlook and impending FDA decision was featured on our site on November 8.
Zegerid is the first and only immediate-release oral PPI (Proton Pump Inhibitor), providing immediate release and continued acid control. All other oral PPIs are delayed release, requiring enteric coatings to protect against acid degradation, thereby delaying absorption and initial acid suppression. PPIs are used widely owing to their potent acid suppression, demonstrated safety and ease of once-a-day dosing.
The OTC heartburn market in the U.S. is estimated at $1.7 billion. Zegerid OTC is expected to be available in the U.S. in the first half of 2010.
Santarus received FDA approval for Zegerid with Magnesium Hydroxide Chewable Tablets in March 2006, Zegerid Capsules in February of 2006, Zegerid Powder for Oral Suspension 40 mg in December of 2004, and Zegerid Powder for Oral Suspension 20 mg in June of 2004. The company is also seeking FDA approval for a new tablet formulation of Zegerid and the regulatory agency is expected to make a decision on December 4.
In October 2006, Santarus entered into an agreement with Schering-Plough HealthCare Products, Inc., a subsidiary of Schering-Plough Corp., granting certain exclusive rights to Schering-Plough to commercialize Zegerid branded immediate-release omeprazole products for the over-the-counter market in the U.S. and Canada. Schering-Plough and Merck & Co., Inc. (MRK) merged on November 3, 2009.
Under the terms of the OTC license agreement, Santarus received upfront license fee of $15 million from Schering-Plough in November 2006 and $5 million milestone payment in August 2007.
Now that Zegerid OTC has been approved, Santarus earned a $20 million milestone and may be entitled to receive up to an additional $37.5 million in sales milestones. Santarus will also be entitled to a low double-digit royalty, subject to adjustment in certain circumstances, on net sales of any Zegerid OTC products sold by Schering-Plough HealthCare Products under the license agreement. In turn, Santarus will be obligated to pay royalties to the University of Missouri on net sales of any such OTC products.
Santarus also has a licensing agreement with Norgine B.V., a European specialty pharmaceutical company for the development and commercialization of prescription immediate-release Zegerid products in specified markets in Western, Central and Eastern Europe.
Last month, Santarus raised its revenue outlook for the year to $150 million from its previous guidance of $145 million, citing the revenue growth of Zegerid and diabetes medication Glumetza. The company had also revised its product-related revenue for the year to $141 million, up from its prior estimate of $138 million.
Analysts are bullish on Santarus' earnings prospects for this year and they have revised their projections within the past thirty days, pushing the consensus earnings estimate up by 12 cents to $0.26 per share.
Since the company has already hinted that its financial outlook will be positively impacted this year if Zegerid OTC is approved, will there be another upward revision in estimates? Stay tuned...
For comments and feedback: editorial@rttnews.com