With two back-to-back U.S. Food and Drug Administration (FDA) approvals in its kitty, Santarus Inc. (SNTS) is on a roll. The company recently received approval for its over-the-counter (OTC) as well as tablet versions of flagship product, Zegerid.

Zegerid is Santarus’ lead product which accounted for approximately 80% of total revenues in the third quarter of 2009. Santarus markets the Zegerid family of products, which are proprietary immediate-release formulations that combine omeprazole (Prilosec), a PPI, and one or more antacids. Zegerid is approved by the FDA for the treatment or reduction of the risk of a variety of upper gastrointestinal diseases and disorders. Zegerid is currently marketed as capsule and powder for oral suspension dosage forms.

The FDA approved the tablet version for all the indications that the company had applied for Incorporatedluding for the treatment of heartburn and other symptoms associated with gastroesophageal reflux disease (GERD).

The approval of the tablet version of Zegerid is a major positive for Santarus. The new formulation could help protect the product against generic threats and give the company’s sales force another talking point when promoting the drug to physicians. The tablet’s dual buffering system and convenient dosage form could help it gain share once launched.

Santarus shares have gained more than 24% since the company received approval for OTC Zegerid on Dec 1. Both the OTC and the tablet versions will be launched in 2010.

We have an Outperform recommendation on Santarus. Flagship product Zegerid has captured a significant share of the GERD market, and the company has good upside potential with the product through its partnerships with GlaxoSmithKline (GSK), Merck (MRK) and Norgine. We are also impressed with management’s ability to in-license new products and expand its pipeline.

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