San Diego Business Journal Biotech: Partner to Embark on Major Ad Campaign

San Diego-based Avanir Pharmaceuticals said the recent Food and Drug Administration approval for the first over-the-counter herpes drug marks a major milestone for the firm.

Biotechnology experts, however, contend much of the drug's success on the market depends on Avanir's partner, British-based SmithKline Beecham Plc's ability to attract consumers.

Bud Leedom, editor of the San Diego Stock Report, remains cautiously optimistic.

"There are no guarantees," Leedom said. "It's not a big market product."

Gerald J. Yakatan, Avanir's president and CEO, agreed most of the estimated 50 million Americans suffering from recurring cold sores every year simply wait out the seven- to 10-day period it takes for the outbreaks to disappear.

He said Avanir's drug, known as docosanol, can cut the healing time to four days or less.

SmithKline, which sells docosanol in the United States and Canada, will embark on a major advertising campaign to raise awareness for the drug, he said.

Yakatan declined to say how much money SmithKline will spend on advertising, citing confidentiality issues. He also wouldn't comment on expected sales.

He did point out that pharmaceutical firms typically spend between $25 million and $50 million to establish a brand name.

Yakatan hopes to see docosanol, which is designed to speed the healing and reduce painful symptoms, in major U.S. food and drug stores by the end of the year.

Avanir could receive as much as $25 million in licensing fees in addition to royalty payments ranging between 4 percent and 10 percent, from its agreement with SmithKline Beecham, he said.

Pricing for the drug and an easily identifiable brand name have not been made public.

Yakatan revealed, however, the drug will be sold at a higher price than cold-sore treatments already on the market. That means higher than $9.

He doesn't expect the premium will put a damper on sales.

"I would suggest that people are willing to pay a significant premium over what's out there," he said during a conference call. "This is a drug you are going to sell to consumers."

While consumer confidence in Avanir's drug has yet to be established, investors' interest in the biotechnology firm also seems to be on hold.

Yakatan said he was disappointed, but not surprised to see Avanir's stock go nowhere on July 26, the day the firm announced the drug's FDA approval.

Shares in Avanir closed unchanged at 3 3/16 in American Stock Exchange trading that day.

"It wasn't unexpected, because people that can make the stock move don't look at stocks trading under $5," Yakatan said.

Yakatan hopes to lift Avanir's stock price and its profile by visiting with institutional investors and biotechnology analysts covering the industry within the coming weeks.

It's been a rough road for Yakatan and Avanir.

The FDA turned down Avanir's approval for the drug a year-and-a-half ago, because it needed more proof the drug worked.

After Avanir submitted more data, it was granted a request to sell the treatment without a prescription, a process that can take two years or more, according to Yakatan.

On June 1, Avanir received an approvable letter from the FDA, a precursor that the drug will be approved soon.

The approval moved the firm into financial stability and will allow it to pursue future products in development.

Yakatan said he licensed a drug, which is being tested in Phase II trials.

He hopes SmithKline or another company will partner with Avanir to test docosanol in a late-stage patient trial for genital herpes.

If approved, this drug and others still in development would be sold as prescription drugs by Avanir's own sales force, he said.

Avanir stock traded at 2 15/16 on July 27.