While J&J's Tylenol recovers from a recall, sales of century-old Bayer are soaring
When Bayer executives talk about the products that will shape the future of their pharmaceutical unit, the drug names they cite sound like comic book villains: Xarelto, VEGF-Trap Eye, and Nexavar. Yet so far this year, Bayer's top performer is a surprising wonder drug from a bygone era: aspirin.
The medicine patented under the last Kaiser has become the lagging pharmaceutical unit's bright spot, thanks to an aggressive marketing campaign that capitalized on production-related recalls by competitor Tylenol, made by Johnson & Johnson (JNJ). Aspirin was Bayer's fastest-growing major drug in the first quarter as over-the-counter sales spiked 24 percent, five times last year's gain. "Consumers are running scared," says Donald Riker, a consultant on over-the-counter drugs and editor of OTC Product News. "There's been a shift in the trust in the products and the brands."
Aspirin, first developed by Bayer chemist Felix Hoffmann in 1897, has staged a comeback in the past five years after Leverkusen (Germany)-based Bayer funded studies showing the vintage painkiller's anti-blood-clotting ability could also play a role in preventing heart disease, says Erik Gordon, a professor at the University of Michigan's Ross School of Business in Ann Arbor. Annual sales climbed to $1.1 billion in 2007, entering true blockbuster drug territory.
Then Bayer caught a break. Rival J&J, beset with manufacturing problems, pulled more than 200 million packages of Tylenol, Motrin, and other over-the-counter drugs from the market in a wave of recalls that began more than a year ago and cost it more than $900 million in sales. The production problems, which resulted in some caplets having a musty smell, led the U.S. Food and Drug Administration to advise consumers to switch from Tylenol to private labels of acetaminophen, the active ingredient in Tylenol. That news followed FDA warnings of liver damage risks for users of the ingredient. "It's a disaster for the [Tylenol] brand, but good for others, including good old-fashioned aspirin," as some customers seek an alternative painkiller, Gordon says.
J&J declined comment for this article. The company expects the full range of recalled products to be back on store shelves by next year, with some undisclosed changes to win back customers, Chief Financial Officer Dominic Caruso told analysts on May 3.
Sales of Tylenol tablets have dropped 14 percent in the U.S. to $75.6 million in the 12 weeks ending Apr. 17, according to market researcher SymphonyIRI Group. Meanwhile, sales of Bayer aspirin sold for pain relief (rather than low-dose varieties targeted at heart health) rose 21 percent to $40.2 million in the same period, according to IRI data, which doesn't include sales at Wal-Mart Stores (WMT).
Still, some customers may be so spooked by the Tylenol recalls that they permanently embrace aspirin or other painkillers with a different active ingredient, says Riker. Sales of one such rival, Novartis's (NVS) headache pill Excedrin, rose 19 percent in the first quarter, suggesting it might also have profited from J&J's misfortune. Eric Althoff, a spokesman for Novartis, says many factors contributed to the increase, including more online ads and a reworked marketing strategy to focus the brand's consumer message around pain relief.
Bayer used aggressive marketing campaigns promoting both its aspirin and Aleve brands to capitalize on the absence of J&J's pain relievers, says spokeswoman Anne Coiley. In the U.S., for example, it ran an ad campaign called "surprising aspirin" to argue that the drug is good for back pain, not just heart health. In Germany the pitch was tweaked to promote the venerable drug's efficacy relieving headaches. And until mid-June, Bayer's consumer websites also reminded potential users in capital letters, white on red, that its painkiller was free of the acetaminophen found in Tylenol.
Jay Kolpon, Bayer's global head of aspirin marketing, says aspirin sales were also helped by a nasty cold season and the payoff of a decade of efforts to dream up new versions of the aging drug. Bayer now sells aspirin with vitamin C as fizzy tablets, aspirin in dry granules like pain-relieving Pixy Stix, and low-dose versions for heart-conscious users. This month it also began marketing so-called Advanced Aspirin devised to dissolve more quickly in the bloodstream. Says Kolpon: "The wonder drug from over 100 years ago is still the wonder drug in 2011."
The bottom line: In the wake of recalls that have cost rival J&J $900 million in sales, Bayer is enjoying a revival in demand for its century-old aspirin brand.