Pfizer Must Meet Viagra Expectations To Repeat First Quarter Stock Gain

Pfizer will need to deliver strong initial sales of its impotence drug Viagra to keep pace with analyst expectations for the compound.

Pfizer continued its remarkable run on Wall Street during the first quarter, posting a 33.7% (25-1/8 point) increase. The run-up came as Pfizer successfully achieved a six-month priority approval for Viagra (sildenafil), which Wall Street is eagerly awaiting as the company's next blockbuster ("The Pink Sheet" March 30, p. 3).

The challenge for the company for the rest of the year will be to deliver on expectations for the product.

Lilly discovered the downside to a long-anticipated launch with its osteoporosis drug Evista. Wall Street, which now tracks new prescription data as carefully as manufacturers, determined that the Lilly product had not taken off as swiftly as Merck's osteoporosis drug Fosamax ("The Pink Sheet" Feb. 23, p. 27).

Lilly was the only major pharmaceutical manufacturer to post a loss in stock value in the first quarter. The company was off 14.4%, or 10 points.

Lilly has emphasized the positive in the initial script data for Evista, and maintains that the product was never expected to match the performance of Fosamax. However, there are indications that the company is disappointed with the product roll-out.

Executive Director of the Women's Health Brand Team Mary Ann Caballero has left Lilly. While the transition from development to market marks a natural time for staff turnover during a product's life-cycle, Lilly has espoused a "heavyweight team" approach to product launches, stressing the continuity between Phase III product optimization and market launch.

Wall Street's concerns with the initial script data reflect the altered landscape for pharmaceutical marketing. Lilly's top-seller, Prozac, was a relatively slow-building product. That history apparently carries little weight on Wall Street, in part because recent launches like Lilly's antipsychotic Zyprexa have demonstrated the potential for new products to establish themselves very quickly as market leaders.

Pfizer is facing tremendous sales expectations for Viagra. Gruntal & Co. analyst David Saks, for example, is projecting peak annual Viagra sales of $4.5 bil., half in the U.S. Gruntal's estimate is based on a 5% share of three markets: men with erectile dysfunction (25 mil. total), women with sexual dysfunction (10 mil.) and recreational users (100 mil.). Gruntal anticipates use of 48 pills per person annually at $7 wholesale acquisition cost per dose.

In Pfizer's clinical trials, men with erectile dysfunction took two pills weekly. Assuming that rate of usage, and assuming that the drug is used on-label only (not for women or recreationally), a 5% market share would yield sales of $946.4 mil.

Merck's baldness therapy Propecia (finasteride) could offer one of the closest parallels to Viagra as a prescription product aimed at a quality of life condition affecting men.

Propecia carries considerably lower sales expectations than Viagra does, after Wall Street overestimated the impact of the first baldness therapy (Upjohn's Rogaine) and the first incarnation of finasteride (Proscar for BPH).

CIBC Oppenheimer analyst Steven Gerber, for example, projects $500 mil. in peak annual sales for Propecia. Propecia sales reached $7 mil. through February, its first two months on the market, IMS Health data show.

The Propecia sales figures do not reflect the impact of direct to consumer advertising, which will begin soon. Young & Rubicam is handling DTC promotions of Propecia. Merck said that it waited to embark on the DTC campaign until it had developed an awareness of the drug in the medical community through professional promotions.

The first stage of Merck's consumer campaign began with an unbranded ad in the March 30 issue of Time magazine.

The two-page ad opens with a page that states only "one day science will create a pill for hair loss." The next page has the words "that day is today" in the center. Below, the ad reads, "available only from your doctor, or call 1-888-465-4247 for a doctor near you" and features the Merck name and logo.

The branded Propecia consumer campaign will feature print and television ads in publications and on programs and networks that have high male viewership, Merck said.

Wall Street was apparently satisfied by Propecia's performance during the first quarter. Merck closed the quarter up 20.9% (22-3/16 points).

While Viagra and Propecia are in one sense similar products, Pfizer's marketing challenge may be easier in two senses: Viagra, unlike Propecia, offers an immediately perceptible benefit to consumers, and there appears to be a more compelling case for third-party reimbursement of the drug.

Viagra "enables" an erection in up to 70% of patients within one hour of use. Propecia's hair retention effects are not necessarily apparent to users, and the drug can take months to begin to show benefit.

Pfizer conducted clinical studies of Viagra in several erectile dysfunction subpopulations, including spinal cord injury patients and diabetics. To the extent that Pfizer can position the drug as treating a complication of a serious, well-recognized medical disease, reimbursement may be easier.

Pfizer pointed out that the cost of Viagra is lower than that of competing injectable impotence therapies. Pfizer has a national health care organization group that targets major national insurer accounts as well as representatives who will focus on local and regional accounts.

Pfizer's handling of the publicity surrounding the approval of Viagra will also help the company. Viagra received extensive pre-approval coverage in The Wall Street Journal, which may have encouraged other national media outlets to devote more attention to the news of the approval. The coverage accorded the drug should simultaneously encourage consumers to try the product and increase pressure on managed care groups to reimburse the drug.

While the consumer-focused nature of pharmaceutical promotion continues to grow, the bulk of advertising dollars still targets the physician.

Manufacturer spending on physician-directed Rx brand promotion reached $4 bil. in 1997, an increase of 10% over the previous year, IMS Health reported at a briefing in New York City March 31. The $4 bil. represents 81% of promotional spending for the year. Consumer promotion grew at a much faster rate (46%), but remains a much smaller expense ($917 mil.).

DTC ads are having an impact. Eighty-five percent of physicians in an IMS/Physicians On-line survey reported receiving at least one request for a brand-name product in the prior month.

Physician promotional spending included $2.8 bil. on office promotion, $614 mil. on hospital promotion and $564 mil. on journal ads, IMS Health reported.

Even brands that are particularly amenable to consumer promotions, like the antihistamine Claritin, had larger physician promotion budgets than DTC budgets, IMS indicated. Schering-Plough spent $57 mil. on professional promotion and $36 mil. on national TV advertising, IMS said, a 60/40 split.

IMS Health also pointed to Astra Merck's proton pump inhibitor Prilosec, which was backed by $31 mil. in promotional spending: $26 mil. on professional promotions and $5 mil. on TV advertisements.

Madison Avenue continues to expect a dramatic increase in DTC spending. Datamonitor projects that by the end of 1998, DTC drug ad spending will increase 80% to $1.8 bil. By 2005, top tier U.S. pharmaceutical companies will allocate 45% of their total marketing budgets to DTC ads, the firm said.

Pharmaceutical marketing specialty firms are preparing for that growth. For example, the Bethesda, Md.-based contract sales and marketing firm Snyder Communications bought the consumer agency Arnold Communications to expand its DTC capabilities. Boston-based Arnold's clients include Volkswagon and McDonald's.

The pharmaceutical industry, however, is continuing to increase its investment in professional promotions. Pfizer, for example, added its second new primary care sales force in a year when the Alta sales force began operations in March.

Pfizer's investment in sales reps is paying off in attracting high-profile co-promotion deals. The company, which co-promotes the Alzheimer's therapy Aricept with Eisai and Warner-Lambert's highly successful cholesterol reducer Lipitor, recently signed a deal to co-promote Searle's upcoming COX-2 inhibitor Celebra. Searle's parent Monsanto celebrated with a 23.8% gain for the quarter.

As companies analyze the results of early DTC campaigns, the landscape of products heavily promoted to consumers could change.

Pfizer itself has pulled back on DTC ads for its benign prostatic hyperplasia drug Cardura. The company is using the names generated by the campaign to conduct targeted promotions ("The Pink Sheet" Feb. 23, p. 20).

The promotion of Cardura gives Pfizer experience in the urology field which could help in the Viagra launch. The company also has a presence in urology, and specifically in impotence, through its device subsidiary American Medical Systems. AMS manufactures a range of inflatable and malleable penile implant devices.

"The near-term expansion of nonsurgical treatment options...is expected in due course to greatly increase the diagnosis and treatment of erectile dysfunction, with surgical implants remaining a preferred option for some patients," Pfizer says in its recently-released 1997 annual report.

Pfizer, however, is considering selling off its device operations. In February, the Pfizer board "approved a plan to explore strategic options for the businesses in our Medical Technology Group," the annual report notes. Pfizer sold its Valleylab surgical products business to U.S. Surgical in late 1997.

Should Pfizer divest the device businesses, it would be continuing a trend among drug manufacturers. Bristol-Myers Squibb and American Home Products sold device subsidiaries in late 1997. Both Bristol (up 10.2%) and AHP (up 24.7%) performed well during the quarter.

As pharmaceutical companies are paring down their non-drug presence, they are expanding the range of therapeutic categories in which they market drugs.

Pfizer, which sells products in the categories of urogenital disorders, cardiovascular diseases, infectious diseases, central nervous system disorders, diabetes, allergies and arthritis, has late-stage research projects that would expand its portfolio to include osteoporosis (droloxifene) and oncology (the anti-emetic CJ-11,974).

Within established categories, the company also is looking at new disease states. Eletriptan would provide an entry to the migraine market and Tikosyn (dofetilide) would bring a cardiac arrhythmia treatment. The Tikosyn NDA was filed March 9.

Merck notes in its annual report that it will expand into nine new therapeutic classes by 2002, giving it products in 24 classes. Merck received approval for its asthma product Singulair during the quarter and has a migraine treatment (Maxalt) nearing approval at FDA.

The "F-D-C" Index of big board stocks continued its torrid pace during the first quarter. The 28-company pharmaceutical component closed up 18.2%.

The disclosure of merger negotiations between SmithKline Beecham (up 21.9%) and AHP, and then SmithKline and Glaxo (up 13.1%), helped the sector sustain its momentum during the quarter, although no merger agreements materialized.

Wall Street is enthusiastically awaiting the next round of consolidation in the industry: April 1 testimony by Glaxo Chairman Richard Sykes on the failed SB deal before the House of Commons Science & Technology Select Committee provoked another spike in Glaxo's value when Sykes did not rule out the possibility of Glaxo merging with another firm.

The British Extel Examiner reported that, when asked if Glaxo could attempt another merger, Sykes replied: "We have a clear strategy as to where we want to go" and "if there is a way to get there quicker, then we will look at it." Sykes also predicted that "consolidation will take place across the world."

The perception that AHP could still be in play as a merger candidate has been aided by Redux data presented to the American College of Cardiology annual meeting in Atlanta on March 31, which could allay concerns over AHP's liability in lawsuits filed following the withdrawal of AHP's obesity therapies Redux and Pondimin.

The data came from a 1,072-patient trial of a sustained-release formulation of Redux comparing the SR formulation, Redux and placebo. The study was halted when Redux and Pondimin were withdrawn from the market in September.

Wyeth performed echocardiographic evaluation of participants, who had been treated for an average of 77 days. No statistically significant differences in aortic or mitral regurgitation rates were seen between the drug and placebo arms, although the Redux rates were numerically higher than placebo.

While the data did not address the potential risks of longer-term therapy, Wyeth stated that, when it was marketed, 76% of Redux patients used the drug for 60 days or less and 86% used it for 90 days or less.