Santarus shares jump after FDA approves OTC heartburn drug

BANGALORE (Reuters) - Shares of Santarus Inc (SNTS.O) jumped 36 percent on Wednesday, a day after the company said an over-the-counter (OTC) version of its heartburn drug, which is licensed to Schering-Plough Corp, received regulatory approval.

Upon approval of the drug Zegerid, the company received a milestone payment of $20 million and is eligible to an additional $37.5 million in sales milestones.

"It is a clear positive. It lowers the risk and gives Santarus another income stream," Roth Capital analyst Scott Henry said.

The company, which currently markets Zegerid capsules and Zegerid powder, will also be entitled to a low double-digit sales royalty from a unit of Schering-Plough -- acquired by Merck & Co (MRK.N).

The unit, Schering-Plough HealthCare Products, holds the rights to the drug in the United States and Canada.

Analysts estimate peak sales for the OTC drug to be about $100 million to $150 million.

In January, the U.S. Food and Drug Administration had declined to approve the marketing application of the OTC version of Zegerid.

"(The FDA approval) puts the drug on the radar screen. Big pharma companies want to do better in the over-the-counter consumer business. This is a pretty good consumer product," Cowen & Co analyst Ian Sanderson said.

Analysts said the over-the-counter version of Zegerid could work faster than other heartburn drugs.

"Consumers generally want things to work faster," Roth Capital's Henry said.

"With enough money behind it that is a pretty compelling argument to take to the consumers," he added.

The company expects to see the product on retail store shelves across the United States in the first half of 2010.

Shares of Santarus jumped 36 percent to a new two-year high of $5.82, before paring some gains to trade up 94 cents at $5.22 Wednesday on Nasdaq.

(Reporting by Anuradha Ramanathan in Bangalore; Editing by Aradhana Aravindan)