Just three months after forming a joint venture to develop the cough medication theobromine, Pernix Therapeutics and Seek have announced they will be auctioning off the rights to the cocoa-derived product. Manfred Scheske, the joint venture’s chief executive, says the speed with which the tie-up decided to hoist the for-sale sign reflects potential buyers’ desire to have greater control over late-stage development.
Mr Scheske tell EP Vantagethere has already been a high level of interest and a deal for the anti-tussive could be struck by mid-year, with specialists in the primary-care and over-the-counter market for cough and cold medications likely acquirers. The first-in-class candidate presents a unique opportunity – a non-opioid, non-codeine medication that has successfully completed trials and regulatory review in South Korea – and as such the partners hope bidding will be furious.
The news was taken positively by Pernix investors, who pushed shares up 16% yesterday to $11.55, close to record highs since listing on the AMEX exchange a year ago.
Whilst the partners have been readying a European phase III trial to begin later this year, potential buyers have been eager to have some say over trial design. Thus Seek and Pernix have decided to test the waters with an auction before the trial can begin.
Trial design will be key for marketing as the product for persistent cough tries to break into a competitive space. As such, suitors will want to make sure the trial is designed to demonstrate theobromine’s unique properties in a tough over-the-counter market.
The potential lies at the primary care level and in the ability to switch patients from those higher-risk opioid and codeine products to theobromine, which suppresses persistent cough by blocking inappropriate firing of the vagus nerve. And it is well-timed, Mr Scheske says: The FDA earlier this month ordered the withdrawal of dozens of unapproved prescription cough, cold and allergy medications.
“OTC is not a market that calls for innovation,” Mr Scheske says. “Innovation at the OTC level is a switch. This might be an OTC switch opportunity of a global scale that this industry hasn’t seen in a long time.”
Theobromine is already marketed as AnyCough by Ahngook in South Korea. Texas-based Pernix and London-based Seek had separately purchased rights covering the rest of the world, with the former in the US and the latter covering all other regions outside Korea. The one-off decision to pair up was intended to consolidate the global value of the product, Mr Sheske says.
As an already marketed product, he believes that theobromine is inherently less risky as a business - it has phase III trials supporting it already and the Korean company is collecting post-marketing data to validate the trial findings.
Mr Sheske would not identify likely bidders, but says global players who are “consolidators” of products and brands in the OTC space will be involved in the process. The joint venture can refuse to sell if offers are insufficient, and will consider licensing offers as well as outright sales.
The auction comes as Mr Scheske sees likely shifts in the over-the-counter market, with consolidators taking a greater and greater share of a fragmented market. The deal yesterday between Teva and Procter & Gamble was a sign of such consolidation; the Israeli company will tap P&G's strengths in supermarkets, while providing P&G with greater access to pharmacies.
Thus the landscape will likely be changing for companies without a big market share, he says. “This market will consolidate over the next decade. Every company will have to decide if they want to be a donor or they want to be a taker and if they don’t decide the market will decide for them.”
As such, as an OTC product theobromine has its best chance to shine in the hands of a global specialist.