On June 18, 2012, Mallinckrodt, the Pharmaceuticals business of
) revealed that it had inked a definitive co-promotion agreement
Horizon Pharma, Inc.
), a biopharmaceutical company. As per the agreement, Mallinckrodt
will promote DUEXIS (ibuprofen and famotidine) in the U.S. through
December 14, 2014. The agreement includes the possibility of
renewal for additional periods.
As per the understanding between the companies, Mallinckrodt
will receive compensation for every prescription generated
according to the physician promotion targets agreed upon. The
promotion of DUEXIS to physicians is expected to begin from August
2012. However, Horizon will continue to be the exclusive
manufacturer and supplier of DUEXIS and record its revenue.
DUEXIS is a single tablet combination, indicated for the relief
of signs and symptoms of rheumatoid arthritis and osteoarthritis.
It also reduces the risk of developing ulcers in the upper
gastrointestinal tract. It has been available to U.S. physicians
since December 2011 and was fully launched in January 2012.
Though the sales force at Horizon since the launch of DUEXIS
performed satisfactorily, the significant promotional efforts by
Mallinckrodt are expected to yield improved results. Management at
Horizon is optimistic about the co-promotion agreement expanding
its market reach amongst primary care physicians in the U.S.
The agreement will take some weight off the sales and marketing
expenses of Horizon, which had increased almost ten-fold to $11.0
million in the first quarter, primarily due to increased marketing,
advertising and promotional efforts for DEUXIS. The
commercialization strategy also includes employment of an
additional 80 sales representatives to build up its sales force, to
drive the DUEXIS revenue.
Horizon is rigorously bolstering the sales of its proprietary
DUEXIS. The company generated 41% net sales from the tablet.
Considering the company's therapeutic focus on pain management,
osteoarthritis, rheumatoid arthritis and gastro-intestinal
side-effects, DUEXIS has the potential to become its flagship
The agreement provides Mallinckrodt's sales forces the right to
sell DUEXIS in the U.S. market. Management at Covidien believes
that the co-promotion agreement represents a key opportunity for
its pharmaceuticals business as Mallinckrodt prepares to spin off
the next year, as announced in December 2011.
The addition of DUEXIS to its portfolio will boost Covidien's
efforts to improve standards of care. DUEXIS is thus expected to be
an excellent accompaniment to Covidien's existing portfolio of pain
Covidien is a leading developer, manufacturer and distributor of
medical devices and services on a global scale. Its business
segments overlap with the business of its competitors such as
Becton, Dickinson and Company
Johnson and Johnson
CR Bard Inc
) among others. While acquisitions remain the most important part
of the company's growth strategy, the agreement reflects its
aggressive strategy of portfolio extension.
The stock currently retains a Zacks #3 Rank, which translates
into a short-term Hold rating. This is in agreement with our
long-term Neutral recommendation.
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