Schering/Merck Ready For Vytorin; Lipid Market Growth Returns

Schering-Plough and Merck are likely to price the Zocor/Zetia combination Vytorin on par with Pfizer's Lipitor , Merck indicated during an April 22 conference call.

Merck was asked to discuss its pricing strategy for Vytorin (simvastatin/ezetimibe) in foreign markets where the drug has been introduced. While stressing that the "U.S. market is entirely different" from others, Merck Senior Director-Investor Relations Mark Stejbach highlighted the approach taken in Mexico.

"For Vytorin in Mexico, the strategy was to price it comparable to the leading competitor by dose in order to essentially remove price as a hurdle, but to deliver superior efficacy on that relative comparison," Stejbach said.

The 10 mg Zetia/10 mg Zocor and 10/20 combinations "are priced similarly to Lipitor 10 [mg], which is the most common dose used there," Stejbach said. "The 10/40 is similar to Lipitor 20 and 40, which is the same price," Stejbach said. "The 10/80 is priced similar to Zocor 80 because there is no Lipitor 80 in Mexico."

Vytorin is pending at FDA with a user fee date of July 23. Schering and Merck will market the product via a joint venture (¹ (Also see "Schering/Merck Zetia Clears FDA; Price Favors Combo With Low-Dose Zocor" - Pink Sheet, 4 Nov, 2002.), p. 5).

The companies maintain that Vytorin offers efficacy superior to Lipitor (atorvastatin) at equivalent statin doses.

During Schering's first quarter conference call April 22, Global Pharmaceuticals President Carrie Cox cited a study presented at the American College of Cardiology meeting showing that the 10/20 dose of Vytorin "lowered LDL levels by 50% compared to the most common dose of Lipitor, which provided only a 37% reduction in LDL."

"The efficacy in Vytorin in lowering LDL appears to be as good or better than any other agent on the market, and we believe Vytorin has excellent opportunities to be a very strong player in the high-efficacy market."

The prospects of Vytorin are pivotal to both companies.

Merck reported overall sales growth of just 1% for the quarter, although the company is on track to meet its earnings forecasts for the year. Schering's sales fell 6%, and the company's earnings came in just below expectations.

However, the early performance of the joint venture was a bright spot for both firms.

The joint venture's first product, single-agent Zetia (ezetimibe), posted $189 mil. in worldwide sales during the quarter, a four-fold increase over the first quarter of 2003.

Assuming Zetia continues to grow throughout the year, the brand is likely to reach the $1 bil. mark. Assuming a timely Vytorin launch, the joint venture should easily exceed the $1 bil. milestone for the year.

The profit contribution from the joint venture is expected to build during the year for both partners.

Schering recorded $78 mil. in income as its share during the first quarter. Merck recorded $195 mil. in "equity income" from all of its joint venture affiliates, and is now predicting a full year contribution of $800 mil. to $900 mil.

Zetia ranks as the most-prescribed non-statin in the cholesterol market, but still holds a relatively small overall share: 5.4% of new scripts. Merck noted during its earnings call that Zetia's share is higher among cardiology specialists at 7.9%.

By comparison, Pfizer's Lipitorholds a 43.4% share and posted first quarter sales in the U.S. of $1.6 bil. (up 14%). Zocor is a distant second in the class, with U.S. sales of $900 mil. during the quarter (up 41%, aided by favorable inventory comparisons).

Schering expects Vytorin to build on Zetia rather than cannibalize it. "It is a franchise," CEO Fred Hassan said. "There will be a little back-and-forth among the two brands, but overall we should do well."

Cox noted that about half of Zetia use is as monotherapy, and that the combination therapy use is spread among all the statins in rough accordance with market shares.

"It shows that physicians have a very good understanding of the benefit that can be gained from adding Zetia to existing statin therapy," Cox said. "I think this also gives us a great opportunity to continue to develop both Zetia and Vytorin as we go forward."

In addition to the base provided by Zetia, the Vytorin launch should be helped by a strong recovery in the overall lipid-lowering market.

Merck reported that the dyslipidemia market grew at a 16% clip during the quarter. The growth rate is a hefty increase from the levels seen in early 2003 (² (Also see "Lipitor Sales Slowdown Reflects Overall Rx Market Trend, Pfizer Says" - Pink Sheet, 28 Apr, 2003.), p. 24).

Pfizer is not standing pat. The company is rolling out a combination of its own with Caduet (atorvastatin/ amlodipine) for dual therapy of hypertension and dyslipidemia.

Merck was asked whether it is considering any similar combinations, such as perhaps Zocor plus the angiotensin II inhibitor Cozaar .

Stejbach responded that Merck will develop combinations only "where we see a real meaningful clinical benefit."

"We see relative benefit in combining Zocor and ezetimibe into Vytorin. You've seen the efficacy profile," Stejbach said.

"When it comes to combinations which we see more as a matter of convenience - combining two medications that patients may be taking into one - we don't really see a strong clinical benefit to doing that."

Merck has "looked at this in the past across our product line," but "our research suggests that most physicians would see those kinds of products...as conveniences that they may consider for people who are already on both those medications."

Merck's combination product development efforts are "driven by clinical benefit and practices of medicine, as opposed to convenience," Stejbach declared.