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OraPharma: Reformulation of an Existing Product

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biotechnology management case

Payam Benyamini1, Mark J. Ahn2, and Danielle Hathaway2
1University of California, Los Angeles; 2Atkinson Graduate School of Management, Willamette University

Summary and key issue/decision: In 2002 OraPharma Inc. was a six-year old Warminster, Pennsylvania-based company commercializing products that maintained and restored oral health, received an acquisition offer from Johnson & Johnson for $85 million. OraPharma’s initial product Arestin®, a therapeutic for the adjunct treatment of periodontal disease, was approved for marketing by the FDA in February 2001 and launched on April 2, 2001. OraPharma’s new product programs also included OC-1012, a compound for the prevention of mucositis, as well as OC-1016, a bone regeneration compound, both of which Orapharma began Phase 1 trials in 2001. The decision-based case assesses the strategic options of Michael D. Kishbauch, founder, president and chief executive officer to either stay independent or sell OraPharma to Johnson & Johnson.

Companies/institutions: OraPharma, Johnson & Johnson

Technology: Locally Applied Antibiotics (LAA). Arestin® is a microsphere encapsulated antibiotic (minocycline hydrochloride, 1 mg) in the tetracycline family, administered locally into the infected areas around teeth, that comes in powder form. This powder is bio-adhesive when placed inside infected periodontal pockets and releases the antibiotic for up to 14 days. A dentist or dental hygienist can place Arestin® after scaling and root planning, a common procedure used to treat beginning and moderate periodontal disease.

Stage of development at time of issue/decision: Johnson & Johnson acquires OraPharma one year after its lead product, Arestin®, was approved for marketing by the FDA. During that same year, OraPharma was also developing compounds for bone regeneration and prevention of mucositis, for which the Company began Phase 1 trials.

Indication/therapeutic area: Periodontal disease is a complex infection that involves plaque-associated bacteria, host genetic factors, and environmental features. Symptoms can be observed in an estimated 47% of Americans over the age of 35 (10% of adults worldwide) and range from simple inflammation (gingivitis) to extensive destruction of the tissue and bone that surround and support the teeth (chronic periodontitis). While symptoms are primarily confined to the oral cavity, recent studies suggest that the effects of periodontal disease are more widespread, possibly contributing to heart disease, stroke, systemic infections and premature births.

Geography: US

Keywords: Arestin®, Locally Applied Antibiotics, periodontal disease

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