Cialis, the impotence drug that hit the U.S. market in late November, recently grabbed second place for new prescriptions, moving ahead of Levitra, which entered the market several months before it. Neither drug has approached the still-dominant market share of Viagra, which lost its five-year monopoly in August 2003 when Levitra reached U.S. pharmacies. But the people who market Cialis haven't been shy, issuing a batch of announcements about prescriptions and patient preferences at home and abroad. The question now for investors assessing the impotence drug market is whether Cialis' recent performance signals a trend -- or whether it's simply a case of premature self-congratulation. Wall Street analysts are impressed with Cialis' gains, but they'd also like to see several more months of data. Additional time and information would lessen the initial impact of free samples, vouchers and other distractions from pure revenue recognition that have characterized the launches of Cialis and Levitra as well as the defense of Viagra. Doctors welcome the competition because they believe more drugs will encourage more men to seek help for impotence. But doctors are as mystified as analysts on what product will eventually sell best. "The companies have flooded the market with free samples," said Dr. Wayne Hellstrom, professor of urology at the Tulane University School of Medicine in New Orleans, who has participated in clinical trials for all three impotence drugs. "There's so much out there. It will be hard to get a feeling for what patients want for six to eight months."
With so many multinational giants involved, there's an enormous arsenal of marketing firepower for persuading patients and their doctors. Analysts say that if these drugs can encourage more men to seek treatment, it may not matter which company places second or third in the prescriptions sweepstakes because there will be enough profit for everybody. But if the erectile dysfunction, or "ED," pill market grows slowly, they add, companies face the prospect of eroding potential profits with an escalating marketing arms race. "We believe that total
prescriptions may need more robust growth over the long term for all three players in this market to avoid an expensive share battle," said Dr. Steven Harr, a Morgan Stanley analyst, in an April 5 research report. From late August until the week ended March 26, total U.S. prescriptions for all erectile dysfunction drugs moved up 7%, says the medical data research firm IMS Health. Weekly returns have been erratic. In fact, total prescriptions -- new prescriptions plus refills -- for the week ended March 26 were the lowest since the week ended Jan. 30. A more positive interpretation of this data shows that the March 26 weekly figure -- the latest data available -- was 14.3% higher than total prescriptions for the same period last year. (New prescriptions gained 28.2%.) However, that total prescription growth rate is still not good enough for Harr, whose economic model calls for 20% U.S. prescription growth this year. "Unless the market grows meaningfully over the next several years, we do not believe that all three ED drugs can be substantial contributors to the companies' bottom line," he said. "It appears that the overall market is reacting positively to the recent marketing blitz ... that began around the time of the Super Bowl. However, growth needs to accelerate to meet expectations for all three drugs."
Another way to examine these drugs' prospects is dollar market share. Because the average wholesale prices for the drugs are similar -- there's only about a 5% difference among them -- analyzing the dollar market shares can remove some of the distortions caused by free samples and other discounting tactics. Cialis' U.S. dollar market share has advanced for 13 consecutive weeks, taking 10.7% for the week ended March 26, according to the latest available data from NDC Health, a medical data monitoring firm. Levitra had a 9.6% share for the week ended March 26; it has slipped to third place for the last three weeks. Viagra's dollar market share was 79.7% for the week ended March 26 vs. 90.9% in late November before Cialis entered the market. Cialis' performance "remains quite impressive," said Christopher J. Raymond, an analyst at Robert W. Baird, commenting on the NDC Health data. He has an outperform rating on Icos. "We believe Cialis's growth may be supported by both new patients as well as existing Viagra users," Raymond said in an April 5 report to clients. (He doesn't own shares, but his firm is a market maker in Icos' stock and it intends to receive or seek investment banking compensation within the next three months.)
The current insurance coverage experience is basically Viagra's because the other drugs are new and because managed care organizations take time to review so-called lifestyle drugs for inclusion in health care plans. Pfizer says half of its Viagra prescriptions are covered by insurance. "We're actively working with third-party payers to achieve reimbursement like Viagra's," said Icos' Blum. Right now, patients preferring Cialis must pay out of their own pocket.