The "New Jersey pharma corridor" has become a mecca for companies

involved in the pharmaceutical industry, and King Pharmaceuticals is

one of the latest to make the pilgrimage. Although the company’s

headquarters and largest manufacturing facility are in Bristol,

Tennesee, the 10-year-old company moved all of its sales and marketing

to 7 Roszel Road, next to the Tyco building, last June. For a company

like King, with its major thrust the acquisition and revitalization of

drugs with as yet unrealized market potential, the presence of both

pharma talent and potential partners close by was a big draw.

"Where King has been able to put itself on the map is with products

that could have been launched by someone else and have been around a

few years, but still have value," says Richard W. Pascoe, senior vice

president of the Neuroscience Marketing Group. "Our strategy is to

promote these products and drive additional growth out of them." Since

its founding in 1994, "King has acquired and integrated more than 60

branded prescription lines and introduced product-line extensions,"

according to the company website. The combined net sales of products

acquired by King between 1997 and 2001 grew from $342 million in

annual sales at the time of acquisition to $662 million in 2001.

The decision to relocate to Princeton is part of a buildup of King’s

entire commercial operation, says Pascoe. Growth locally has been

rapid, from the four employees who moved up from Bristol to

approximately 60 employees today; with all new positions filled from

central New Jersey. Target employment is about 65 positions.

The senior commercial leadership based at King’s New Jersey site

covers all sales and marketing functions: making decisions about how

products are marketed; providing support, guidance, and continuing

education for King’s 1,000-person field sales force; and managing the

operational needs behind sales, including cars, storage, shipment of

samples, marketing materials, and human resource functions.

King maintains marketing teams in three product areas: neuroscience,

cardiovascular medicine, and critical care hospital products.

Neuroscience, which is Pascoe’s domain, promotes drugs like Sonata, a

sleep medication, and Skelaxin, a drug for treating acute, painful

musculoskeletal conditions. Cardiovascular medicine markets products

like Altace, "King’s largest product," an "ACE inhibitor" that helps

to reduce blood pressure by decreasing production of a protein that

can cause the blood vessels to constrict. According to the Altace

website, "Altace is the only ACE inhibitor proven to reduce the risk

of heart attack, stroke, or cardiovascular death in high-risk patients

aged 55 plus." Examples of critical care hospital products are

Thrombin-JMI, a topical hemostatic used to control blood loss and

clean wounds in the surgical suite and for burn patients, and

Synercid, a powerful antibiotic for treating resistant strains of

infections.

Currently King Pharmaceuticals is facing some uncertainty about its

future, as it awaits a decision from Pittsburgh-based Mylan

Laboratories on its possible acquisition of King. The market value of

the proposed transaction was estimated to be about $4 billion, but a

recent announcement by Mylan suggests that the deal may not go through

on the original schedule.

The kink in the works is King’s December report that it would be

restating its previously reported financial results for 2002, 2003,

and the first six months of 2004. The reason for the restatement,

according to a December 8 King press release, "is primarily to give

earlier recognition to expenses, thereby correcting methodological

flaws concerning the timing of expense recognition for product

returns."

As a result of the impending restatements, Mylan may be changing the

deal. Mylan’s vice chairman and CEO Robert J. Coury was quoted in a

January 12 Mylan press release: "While we are monitoring and reviewing

these accounting issues and a number of other matters concerning King,

in light of timing issues, we believe that it is highly unlikely that

the parties would be able to consummate the merger contemplated by our

merger agreement with King by February 28. Also, in light of our

ongoing review, we believe that it is unlikely that Mylan will

consummate the acquisition of King on the terms, including the

economic terms, set forth in the existing merger agreement."

King was founded in 1994 as a contract manufacturing organization,

making prescription pharmaceutical products for such prominent

companies as SmithKline Beecham Corporation, predecessor to

GlaxoSmithKline, and Novartis. The company acquired the former North

American headquarters for Beecham Labs from a third party in 1994.

This facility was available following the merger of Smith Kline and

Beecham Labs in the late 1980s.

Although King’s startup strategy was to simply manufacture drug

products, the company quickly began to acquire and promote branded

pharmaceutical products from other companies, including big

pharmaceuticals. King’s website reports that, more recently, the

company is also "focusing more intently on the acquisition and

in-licensing of promising products in development."

One example is King’s partnership with the Cranbury biotech Palatin

Technologies to codevelop and comarket a drug for treating erectile

dysfunction. Designated PT141, with no brand name as yet, this product

works through the central nervous system to produce erection in men;

by contrast, Viagra and Levitra, the PDE5 inhibitors, work through the

vasculature. "Because it acts on the central nervous system," says

Pascoe, "it can be taken safely by patients who have cardio risks."

PT141 is a nasal spray, not a tablet, and gets into the system

quickly.

For each new product, "our model is to assess the needs of the

marketplace, reposition the product if necessary, and provide

appropriate sales and marketing," says Pascoe. "We believe strongly

that we really have to do the homework – do the market research; talk

to patients, physicians, and care givers; and understand what their

needs are." King then develops tailored marketing messages for the

niche served by a particular drug. "We are able to communicate in

their words what these products can do for them."

One drug that exemplifies King’s approach and is now being actively

marketed by the company is the sleeping medication Sonata. Acquired by

King in mid-2003 in a declining revenue state, Sonata quickly

experienced an increase in net sales from $93 million in 2002 to $121

million in 2003, says Pascoe, "after only seven months of our effort."

"Sonata represents a tremendous opportunity for us and for people who

suffer from a sleep disorder," he continues, and King has targeted a

very specific population for the medication – people who occasionally

have trouble falling asleep but need flexibility as to when they can

take the drug. When a businessperson hops a "red eye" to Europe, for

example, or a shift worker falls asleep, and then awakens after four

hours, or a hospital patient is awakened throughout the night, each

needs a medicine that is short acting.

According to Pascoe, Sonata will allow these people to fall asleep

quickly, without next-day residual effects. "What is unique about

Sonata – because it has a half life of about an hour, which is

relatively short – is that you can wake up and feel refreshed," he

says. "You don’t have to worry about a groggy feeling." With certain

other medications, he adds, this is not true. Sonata also gives people

the flexibility to take it after they try to go to sleep on their own,

"which is good sleep hygiene."

Sonata and its closest competitor, Ambien, are the newest entries in

the sleep medication market and both are thought to have fewer side

effects than older drugs. Ambien, manufactured by New York-based

Sanofi-Synthelabo, was first launched in the mid-’90s and has a large

presence. "It is important that people understand the difference

between the two medications," says Pascoe, "because Sonata fits a

unique profile." Sonata has a shorter half-life than Ambien, which is

recommended for people who can commit seven to eight hours to sleep

before taking it.

"The drugs are similar in terms of sleep onset, 20 to 30 minutes, so

if it’s midnight or 1 and a person has to get up at 5:30 or 6, Sonata

would be more appropriate." There are patients who take both, he

continues, depending on their situation. "If it’s 10 p.m. and they

need a night’s sleep, they take Ambien. If they are up late,

traveling, and forgot to take Ambien and are watching the clock," then

Sonata would be a better choice.

An Internet source, Drug Digest, summarized studies that compare

Sonata and Ambien; they agreed with Pascoe’s observation, also adding

additional insight: "Thus far, Sonata and Ambien appear to be similar

in effectiveness in reducing time until sleep; however, some evidence

shows that Ambien may be more effective in increasing total sleep time

and decreasing the number of nighttime awakenings. In one study,

Ambien caused an increase in hangover effect and rebound insomnia once

the drug was discontinued compared to Sonata."

According to Pascoe, the research says that about 40 percent of people

who have difficulties falling asleep on their own. But, he adds, "we

don’t advocate that Sonata is right for every patient."

"Looking at a sleep disorder, doctors are best equipped to identify

whether a person needs medications or a lifestyle modification," says

Pascoe. "We don’t want patients having other problems masked by having

a sleep medication. If you are depressed, we want you to get treated

for that first."

"Once we understand the market and the needs of patients and how our

product can fit, we promote its benefits," says Pascoe. King has put

appropriate sales representation behind Sonata, informed doctors about

its unique attributes, and provided information for patients in

physicians’ offices and at www.sonata.com.

Currently Pascoe estimates that the entire insomnia-related

marketplace is about $2 billion, with prescription and OTC combined.

"If we look at what the future holds, estimates predict that the

market could grow twofold over the next three or four years. As more

patients are diagnosed, other products enter the market." He explains

that with any disease state, you see a rise in utilization as people

understand it and seek treatment.

Sonata also has potential beyond the current formulation, says Pascoe,

and King is partnering with Elan Pharmaceuticals to look at additional

formulations. "Sonata is currently available in 5 and 10 mg. doses as

a sleep induction medication, but, as with any drug, there is the

opportunity to change its structure or put it in different delivery

systems," explains Pascoe.

New versions might behave differently for patients with different

conditions or permit longer-term use of the product. "The current

patent for Sonata is through June, 2008, he says, but if you modify

the product and change how it is used, you can get about three years

of additional patent life. Although drugs are typically patented for

17 years, once a drug is patented, it has to be developed, leaving

about 10-12 years of useful patent life.

Pascoe, 41, not only works for a southern company but he has deep

personal roots in the south, having grown up in Spartanburg, South

Carolina. In 1986 he graduated from the United States Military Academy

at West Point. As a commissioned artillery officer, he was posted both

stateside and elsewhere and served in the "Desert Storm" Gulf War. But

after five years, Pascoe was ready for something different. "I made a

conscious choice to resign my commission and embark upon a career in

the civilian world," he remembers.

No civilian job seemed daunting. "Nothing compares with being a

22-year-old lieutenant, responsible for people’s lives. It’s great to

have that perspective at 27." Because he is independent and enjoys

competition – he played football in high school and varsity rugby at

West Point – he thought sales would be a good fit.

Pascoe joined a company in Raleigh, North Carolina, that sold products

in the semiconductor manufacturing space. He was quickly approached by

B. Braun Medical, a privately held German company, to be a sales

representative in the hospital environment. Although Braun was a large

organization, it did not have a presence in the U.S. hospital market

for its interventional devices, like catheters and angioplasty

balloons. "It was a great opportunity to join a company that, though a

conglomerate, had a startup potential," says Pascoe.

"Because all of us employed at that time were new employees in a brand

new operation," he says, it set the stage for him to develop the

"architectural" approach that he has used throughout his career: "I

take something that didn’t exist and grow and build it into something

successful," he says. After a year and a half he went from being a

sales rep to managing half of Braun’s sales reps in the United States.

He had a similar position with another start-up, Cor Therapeutics, a

biotech company out of California that was eventually acquired by

Millennium Pharmaceuticals.

Then the chief financial officer of a small startup biotech in North

Carolina, Medco Research Inc., invited Pascoe to help build a sales

and marketing group to launch products into the cardiovascular and

surgical markets. "Medco started as an R & D boutique" that developed

products and licensed them to pharmaceutical companies, says Pascoe,

but they also "had designs to commercialize a series of products they

had in development." That was five years ago when King acquired Medco

and converted the company, the people, and the location into what is

now King Research and Development. "Overnight King was able to pick up

"a talented group of researchers," he adds.

In contrast to Pascoe’s own experience in a number of different

companies, his father, a research engineer for a textile company,

stayed with the same company for 40-odd years. His mother worked in a

field vaguely related to her son’s current work – as a pharmacy

technician in a hospital. Pascoe and his wife went to high school

together; got married after college; and now have two school-age

daughters. "We try to do things as a family whenever we can," he says,

for example, kayaking down the canal or playing tennis. He and his

wife enjoy traveling and do so frequently. Pascoe himself loves to

read, particularly history and biographies. He adds that "running is a

passion," and he runs every day and works out. His sleep pattern? Not

a problem. Five to six hours is enough.

But probably what Pascoe spends the most time doing right now is

marketing drugs that he hopes will improve people’s lives. Among

King’s many products, he says, "what I’m really excited about is

Sonata. It represents to King a manifestation of what we’re all about

as a company: taking products through acquisition, applying

appropriate resources, and driving the success of those products in

the marketplace." Taking Sonata through its paces is something he

takes almost personally: "For me, as a marketing person, it has

potential, fills a need, and can be differentiated because it’s

different. We’re proud of where we’ve come so far and where we

anticipate going."

King Pharmaceuticals (KG), 7 Roszel Road,, Princeton

08540. Steve

Andrzejewski, CEO. Rich Pascoe, senior vice president. 609-580-8000;

fax, 423-274-2516. www.kingpharm.com

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