SmithKline to counter rivals in MMD deal

SMITHKLINE Beecham, the Anglo-American drugs company, is putting its US over-the-counter medicine business into a joint venture with Marion Merrell Dow, its US rival, in a deal that could give it acccess to the hay fever treatment, Seldane.

SmithKline will initially take 90 per cent of the new company, which will market its brands such as Tums, for indigestion, Contac, the cold remedy, and Aquafresh toothpaste, while MMD will contribute products such as Gaviscon for heartburn and Cepacol, a throat lozenge and mouthwash.

The ownership reflects the fact that SmithKline's business is the fifth-largest in the US, with sales last year of dollars 550m ( pounds 99m), while Dow's OTC sales were dollars 110m. Combined, they would have made profits of dollars 120m. But the ownership split could change, depending on products contributed by the partners, and could eventually become a 50-50 split. The partnership could also be extended to cover other territories.

A key product for the merged company will be Seldane, only available on prescription but which MMD is hoping to launch into the OTC market. But the drug ran into controversy recently after some users suffered irregular heartbeats when taking the drug in conjunction with an anti-fungal treatment and some antibiotics. Some people who suffer from liver disease also complained of reactions.

The Food and Drug Administration is examining these cases, but MMD said there were only 64 from 200 million users worldwide.

Last year, Seldane - already available without prescription in Britain - had US sales of more than dollars 500m and the group expects these would increase substantially if it was available over the counter.

The two companies may also transfer other products from prescription to OTC, including Tagamet, SmithKline's ulcer drug which comes off patent in the US in 1994, and Nicoderm, an aid to stopping smoking, from MMD. It will also consider acquisitions and developing other products.

Bob Bauman, SmithKline's chief executive, said the partnership was 'another step in achieving (the) goal' of becoming the market leader in the US over-the- counter market. He added that it would help the group take advantage of the growing trend towards self-medication.

MMD said it was attracted by SmithKline's larger sales and marketing force, which would help it maximise the returns available from products like Seldane.

The deal also reflects the growing trend towards joint ventures and partnerships in the pharmaceutical industry. Jacquelyne Cantle, pharmaceuticals analyst with Smith New Court, said: 'We are increasingly seeing joint ventures as the overall cost of an outright purchase is prohibitive.'