Act Two From The Purple Pill

Linda Palczuk /Doug Levine /Suzanne Delaney

Blockbuster, the sequel: With new Nexium and Prilosec, AstraZeneca created a model for next-generation drugs.

One might say, in theater terms, that drug companies are masters of the first act. As the Millennium approached, pharmaceutical juggernauts paraded their medications in TV ads in front of not-so-healthy consumers-and voil! The industry had a string of runaway successes that it spun into household names: Prozac, Claritin, Lipitor, Paxil, Procrit, Viagra, Zyrtec, Zoloft.

The problem, of course, came when it was time for an encore. Drug patents expired, generics cut into profits and ongoing switches from prescription to over-the-counter meds left the pharmaceutical giants desperate to produce a compelling second act.

Now, all eyes are on the repeat performers known as next-generation drugs. Schering-Plough attempted that feat with Clarinex as a follow-up to its prescription allergy pill, Claritin, now OTC. But its effort has been a severe disappointment. Enter AstraZeneca with Nexium, the next-generation version of its "purple pill" stomach remedy, Prilosec. Nexium easily weathered last fall's OTC switch of Prilosec and remains neck and neck with TAP Pharmaceuticals' Prevacid atop the prescription stomach relief category, with sales of $2.1 billion through July '04, per IMS Health. Nexium's 2003 sales of $3.3 billion, per Med Ad News, already ranked it as the world's seventh-largest prescription drug. (Pfizer's Lipitor was No. 1, with $9.2 billion.) Prilosec OTC, meanwhile, is expected to ring up more than $400 million in sales this year.

By contrast, prior to the OTC launch of Claritin in 2002, fewer patients than expected switched to Clarinex, which generated relatively meager sales of $694 million in 2003. To be sure, Claritin's $600 million in retail sales have hardly compensated for what was once a $3 billion gold mine.

Having succeeded on many levels where Schering-Plough did not, AstraZeneca was the first drug company to establish a workable next-generation model. It moved quickly to ward off competition from Prevacid (whose patent expires next year) by launching Nexium back in 2001, whereas S-P milked Claritin as long as it could before developing a successor.

"AstraZeneca did a number of things right," said Gil Bashe, head of the healthcare unit at pr firm Makovsky, New York, who has consulted for Pharmacia and Schering-Plough. "One of the biggest was having Nexium and Prilosec share the same space: It wasn't afraid to market . . . two [similar] branded products."

And while consumers were given little reason to choose Clarinex over Claritin, AstraZeneca positioned Nexium's eso-phageal healing properties as a