Lackluster sales of NitroMed's ( NTMD) congestive heart failure drug for African-Americans -- a result of high copayments charged by managed care organizations and low salesforce productivity -- contributed to a fourth-quarter loss that tripled from a year earlier. The Lexington, Mass.-based company said Thursday that efforts to improve sales of the drug BiDil include stepping up negotiations with insurers and converting the contract salesforce to an in-house salesforce.
BiDil has been available since mid-July. A combination of two generic drugs, BiDil is the first drug approved by the Food and Drug Administration on the basis of race . "Prescription growth, while steady, has remained below expectations, leaving many patients without access to BiDil," said Michael D. Loberg, NitroMed's chief executive. "It is a primary objective of the company to ensure that patient copayments are affordable for the 750,000 blacks with symptomatic heart failure in the United States. ... It is important that we continue to make progress in moving BiDil to Tier II on managed care plans." Many managed care plans have three tiers of coverage. The lowest patient copayments are assigned to Tier I generic drugs, higher copayments are for Tier II preferred brand-name drugs, and the highest copayments accompany Tier III brand-name drugs. Insurers place the highest copayments on Tier III to encourage patients to use generics or brand-name drugs on their preferred lists. NitroMed executives told analysts Thursday that the difference between Tier II and Tier III copayments can mean the difference between filling and not filling a prescription. Some Tier III copayments can be as high as $100 and "raise the question of affordability," Loberg said during a telephone conference call. NitroMed has encountered "more affordability issues than we anticipated." Dr. Lawrence E. Bloch, the chief financial officer, said NitroMed's research shows that a filled BiDil prescription has an average copayment of $39, while an unfilled prescription has an average copayment of $73.
The prescription and sales disappointments contributed to fourth-quarter results that fell below analysts' expectations. For the quarter ended Dec. 31, NitroMed lost $31.6 million, or $1.04 a share, on revenue of $3.7 million. Analysts polled by Thomson First Call had expected an EPS loss of 94 cents. For the same period in 2004, NitroMed lost $9.7 million, or 36 cents a share, on revenue of $9.5 million. Expenses rose in 2005 due to the start-up costs of marketing BiDil. Revenue declined because Merck ( MRK)canceled an agreement in which NitroMed had been collaborating on a new versions of Cox-2 arthritis drugs.
Merck pulled its Cox-2 drug Vioxx from the market in September 2004 because of concerns about cardiovascular risk. In midday trading Thursday, shares of NitroMed fell $1.16, or 10.2%, to $10.23. The stock has been cut in half since July, when NitroMed began marketing BiDil. In late January, NitroMed raised about $58.6 million by selling 6.1 million shares at $10.25 to selected institutional shareholders. The money will be used for general corporate purposes and for marketing BiDil. NitroMed executives said the performance of its sales representatives has been inconsistent, adding that the company has taken steps to improve productivity. NitroMed cut its sales territories to 144 from 195 after a sales audit that revealed 90% of BiDil's sales came from 141 territories. "We also expect additional cost efficiencies once the BiDil sales staff is integrated into NitroMed," the company said. NitroMed had signed a contract with an outside firm, Publicis Selling Solutions, to handle the sales force. Now, NitroMed said it will hire 140 to 155 of the contract sales representatives as NitroMed employees by the third quarter.