Editor

"GERD" might sound like the nickname of the nice German lady down the block who bakes Pfeffernusse cookies at Christmas, but physicians, biotech firms and a large number of unhappy patients know GERD as the acronym for gastroesophageal reflux disease, or acid reflux, an estimated $14 billion market.

Reflux takes place when the lower esophageal sphincter fails to close properly and lets acid back up into the esophagus. About one-third of the adult population in the U.S., or 80 million people, experience symptoms related to GERD at least once per month, and about 25 million get them daily or weekly. People with more pronounced GERD can develop erosions and ulcers in the esophagus, or erosive esophagitis. Untreated, GERD can permanently damage the lining of the esophagus in a pre-cancerous condition known as Barrett's Esophagus.

A strong player - one that has been the subject of takeover speculation - in the GERD space is Santarus Inc., which last fall signed a potential $80 million deal with Schering-Plough Corp. for rights to an over-the-counter, lower-dose version of Santarus' Zegerid (omeprazole) for heartburn-related indications. Schering-Plough paid $15 million up front and as much as $65 million in sales and regulatory payments.

Kenilworth, N.J.-based Schering-Plough will develop, make and sell Zegerid at the 20-mg dose, and Santarus will keep marketing the 40-mg and 20-mg dosage strengths of the proton pump inhibitor (PPI) for their prescription indications: GERD, erosive esophagitis and others.

Doctors write more than 95 percent of prescriptions for the 40-mg dose, Santarus said at the time of the Schering-Plough deal, a tendency in line with other PPIs available in more than one strength. Prilosec (another, slower-release formulation of omeprazole), licensed by Procter and Gamble from AstraZeneca plc, is the only OTC PPI available.

But this might not be the case for much longer. An OTC form of Prevacid (lansoprazole) is in the works under an arrangement between TAP Pharmaceutical Products Inc. with Novartis AG. Prevacid treats heartburn and other symptoms of GERD, and the prescription version of Prevacid is losing patent protection soon. The drug then gets six months of pediatric exclusivity, with all protection terminating around the end of 2009. Prevacid and AstraZeneca's Nexium (esomeprazole) are the market leaders in GERD, with 28 percent and 40 percent market share respectively, thanks to heavy direct-to-consumer (DTC) promotion. Johnson & Johnson has AcipHex (rabeprazole) but doesn't do much advertising, which could bode well for Zegerid's chances.

Even better: "Interestingly, despite a significant price advantage and limited data demonstrating superiority of many of the newer PPIs over generic omeprazole, Prilosec OTC and generic omeprazole account for only a small percent of sales," McAllister wrote in a research report, noting that if Santarus can successfully differentiate Zegerid - which combines omeprazole with an antacid - from its competitors, "the growth potential is virtually unlimited."

Antacids work fast, PPIs more slowly, binding to gastric parietal cells to inhibit acid and hike pH levels until the parietal cells regenerate, a process that takes about 24 hours, which means PPIs must be taken daily to keep relief in place. Santarus says the antacid buffer on Zegerid elevates gastric acid pH levels to 7 or higher within one minute and maintains a pH above 6.5 for 30 minutes. By then, peak blood plasma levels of omeprazole have been reached.

Prilosec and its competitors take one hour to 1.5 hours or longer to reach peak blood plasma levels. This positions Zegerid as the only PPI that can be used to treat both acute and chronic acid reflux. Because it lasts longer than Nexium (16.8 hours) and Prevacid (15.8 hours), Zegerid might also prove better for preventing nocturnal acid breakthrough - a GERD attack while sleeping. A new drug application filing for OTC Zegerid is expected late this year, with approval and launch possible by the middle of next.

Meanwhile, despite competition and Santarus' lack of a heavyweight commercialization partner that could launch a well-financed DTC campaign, Zegerid is grabbing market share. Its piece of the pie increased to 0.8 percent in June, from half that in June the previous year - which might not look like much, but translates to a run rate of about $100 million yearly. Analyst Russell McAllister at Merriman Curhan Ford expects Zegerid's share to double again to 1.6 percent by late next year, for fiscal 2008 sales of $182 million.

Others with recent news in the GERD space, albeit early stage, include Dynogen Pharmaceuticals Inc., which in June reported positive results from a Phase Ib trial with DDP733, an oral, partial agonist of the serotonin type 3 receptor. In April, Addex Pharmaceuticals SA said a Phase IIa, 24-patient, proof-of-concept trial of ADX10059, its lead compound, met its primary endpoint in GERD. The Addex drug is a selective mGIuR5 negative allosteric modulator.

A class of drugs representing yet another mechanism of action for GERD, motilin agonists, reaped a deal worth up to $250 million late last year for Kosan Biosciences Inc., which licensed its program to Pfizer Inc. The lead product at the Phase I stage, KOS-2187, appears to improve gastric emptying and may have a benefit in gastrointestinal diseases, such as GERD or diabetic gastroparesis, also known as delayed gastric emptying.

But PPIs, at least for now, are carrying the day - and Santarus could have a winning combination in Zegerid.