BMS: Unlocking value from late stage compounds

The IN VIVO Blog has praised Bristol's moves regarding unlocking value from its phase III compounds by licensing them to other companies. The latest such move by BMS was in licensing anticoagulant apixaban for as much as $1B in upfront and licensing payments from Pfizer.

Looks like a good move by BMS under most possible outcomes. If the product turns out to be a an "Exubera", then BMS comes out ahead. If it turns out to be a medium size product, then for BMS, the value of getting $1B early (helps with dividend payments and other investments which hopefully earn a good return) probably makes it worthwhile. The only scenario where this may not be such a good deal (and even then only from an opportunity cost point of view) is if the product turns out to be another Plavix and BMS is forced to split $6B (or something in that range) with Pfizer. However given that J&J+Bayer have a similar product (rivaroxaban ) further along in development, makes it all the more unlikely that this product will be a Plavix.

One other interesting point that occurs to Pharmalyst is that BMS seems to be rotating its licensing deals among other big-pharma partners. Besides Pfizer, there was that deal with AZ a few months back and that ill-fated collaboration with Merck over Pargluva. Having so many partners is likely to keep BMS independent and these JV deals give BMS the cash to pay a high dividend and therefore a high stock price making an acquisition harder (even Sanofi is rumored to have balked at the price). These appear to be the real reason behind these deals rather than Bristol's stated intent (see this) to focus on specialty and move away from a primary care model..Pharmalyst believes that BMS - the company that sells Plavix (& previously sold Pravachol) already had a strong primary care presence. Also if you look at their financial statements (see here), their SG&A expenses have stayed not really declined - so at least their spending doesn't give any dramatic indication that they are cutting back on a lot of their primary care activities like reps etc.

Expect BMS to stay an independent company for a long time - temporary or permanent CEO not withstanding?

Rebuffing a Mack Attack

Pharmalyst hopes it was just an oversight . However for the record, things must be set right. Pharmalyst generally enjoys reading John Mack's Pharma Marketing Blog, but does not have much use for John's PharmaBlogosphere (a blog about pharma blogging). This is because Pharmalyst started this blog so that he could learn about the pharma industry thru comments from readers and from researching (ok web surfing) various topics to blog on. So Pharmalyst rarely visits the PharmaBlogosphere. The dynamics of the blogging "industry" itself are not of much interest to Pharmalyst.

PharmaGiles' last post made some references to the PharmaBlogosphere and Pharmalyst had a read today. So naturally he was shocked to find the following in one of Mr. Mack's posts:

Good idea! I remember getting "bitch slapped" by Rost for asking Pharmalyst not to use my copyright logos and images to illustrate posts (see "John Mack attacks, new blog apologizes."). Pharmalyst had no problem with my request, which was designed to protect my business's reputation. Misuse of logos and registered trademarks is even a stronger no no than using an image I may have created to illustrate a post.

For the record: I have never used any of John's logos or images or posts for any of my posts and judging by the language above I probably never will!! If I am not mistaken the blogger in question was "John S" a Pfizer rep who started his Bill of Rights blog. Based on this post from John S, it looks like he was just starting out and did not really know the blogging etiquette...so perhaps John Mack was being a bit unduly harsh.

Mr. Mack: I know that it is hard to get all the facts right all the time, but please do try (especially when you yourself are involved).

Doggie Prozac featured on NPR's Morning Edition

Read more & listen here. Pharmalyst nearly spilled his morning coffee when he heard that the pertinent Pfizer division is called the "Companion Animal Health" group.

Giles

Pharmalyst is really sad to read that PharmaGiles has decided to hang up his blogging boots. There is some hope because Giles titled his last post "That's all for now, folks". Pharmalyst holds out some hope that Giles will be back. Besides being funny, PharmaGiles really provided one with the true sense of how things work at Phoni and other big pharma companies. By using the fictitious Phoni universe, Giles could unravel the real truth, the conscious and sub-conscious motives behind many of the moves that Phoni and other companies like it undertake....a George Orwell of the pharma industry if you will.

Pricing of Pfizer's Maraviroc - Part Two

Pharmalyst wishes to thank anonymous for his/her insightful comments regarding the previous post on this topic. Anonymous highlights some interesting issues around the testing for Maraviroc:

"Speaking of tests each patient will be required to have a trofile assay from Monogram to see if they can safely take miraviroc. The cost of this test not including clinic visits will be about 1000.00 and has a 3 week turn around time. In trials about half of those who needed miraviroc were unable to take it safely due to having the x4 which shows up in advanced HIV patients. It is unclear how Pfizer intends to market this product given its close ties to Monogram and the cost of testing...who will pay for the test? will it be bundled as one product? Since the trofile test is not FDA approved or regulated it seems it should be a seperate test much like other testing that happens regularly for HIV patients. It is also unclear how often you must have the trofile test and it only works when a patient stops reponding to therapy. There is also an issue surrounding what will happen if during therapy they develop the x4 which is contraindicated for the start of therapy. "

Pharmalyst is also a bit confused regarding an apparent catch-22 situation with the product. Given that the safety issues etc haven't been fully studied, the product is only being recommended for those who have failed other treatment options etc. Yet the CCR5 pathway is used more often during the early stages and during the early stages patients have other treatment options....so unless the safety picture with this drug is clearer, it may not be used earlier and using it later may render the product less effective...no?

Pricing of Pfizer's Maraviroc

The FDA advisory committee approval of Pfizer's CCR5 pathway-based HIV drug Maraviroc was widely covered in the media. While analysts and doctors seem to agree that this is a novel class of therapy, there is a wide range of estimates in terms of the product's commercial potential. According to CNN, analyst Les Funtleyder of Miller Tabak estimates 2011 sales at $200 million while analyst Barbara Ryan of Deutsche Bank estimates the same at $500 million.

Pharmalyst was curious regarding the huge variability in estimates and decided to take explore the numbers in this post. The wide range is not surprising given that Pfizer has not released any pricing information about the product. Further, as Pharmalyst read more about the product, the number of patients too could change as further trials and safety information emerge.

According to WSJ (subscription):

"Pfizer has proposed using maraviroc in patients with advanced HIV infection or AIDS who have failed treatment with other drugs, which is estimated at about 40,000 patients in the U.S."

This use of the product as a drug of last resort would suggest to Pharmalyst that Pfizer would probably look at pricing this like some of the oncology drugs (Avastin $47,000 per year, Nexavar & Sutent at $45,000 per year according to WSJ (subscription)). However this kind of pricing would definitely prevent this product from being considered for the first-line cocktail of HIV drugs. It appears to Pharmalyst that Pfizer probably would like to maximize total revenue by expanding Maraviroc's patient population. According to a background article in NYT (registration):

"About 85 percent of newly infected patients have a virus that uses CCR5 while only about half of highly drug-resistant viruses use that portal. "

To get the product adopted in early-stage patients , Pfizer will perhaps opt for much lower pricing (given that there are several alternatives for early-stage patients). From the recent Abbott v Thailand saga, we know that a years supply of Kaletra in the US costs around $7000. So Pharmalyst would like to speculate that Pfizer's initial pricing for this drug would be somewhere between $7,000 and $40,000. Despite the potential PR hit, Roche priced its HIV drug Fuzeon at $20,000.

Given that there are still safety concerns over Maraviroc and it has not been reported to be a product with manufacturing difficulties (unlike Fuzeon), Pharmalyst guesses that Pfizer will price this somewhere around $13,000 to 15,000 initially. This price is higher than the price of current therapies but will gladly represent value to patients for whom existing therapies are not working. Over time, if there are no liver/other safety issues with this drug, it could be a standard part of the early-stage cocktails for patients with the CCR5 strain. In that case, Pfizer would probably drop the price further in line with the price of existing therapies.

Pharmalyst welcomes readers opinions regarding the pricing of this drug.

This part of the game is brought to you by...the OIG!

No, we're not talking the recent saga at AZ. This refers to the fascinating study done by PharmedOut's Dr. Adriane Fugh-Berman in collaboration with Shahram Ahari, a former rep. They provide great insights into how reps categorize physicians into specific types and the strategies the reps employ to manipulate/influence them. Nothing to be surprised about but a real fascinating read nevertheless. The study has received wide coverage in the blogosphere and you can view the full publication here. One interesting aspect that caught Pharmalyst's eye was the funding source for the study:

So this study was indirectly sponsored by Pfizer (from the fines Warner Lambert paid to the state AGs for off-label promotion of Neurontin)! Unlike the way many states spent their tobacco litigation settlements (earmarked for tobacco education efforts but actually used to pay interest on bonds issued by profligate state governments), it seems that these funds are being used as originally intended!

Amgen's financial engineering backfires

Pharmalyst read an interesting article in yesterday's WSJ (subscription) regarding some savvy financial engineering that Amgen undertook last year. Unfortunately it looks like Amgen's Corporate Finance department was not talking to the crew that was undertaking additional clinical trials featuring Aranesp. The Aranesp-driven decline in Amgen's share price caused additional heartburn as these financial maneuvers backfired.

As most readers of pharma blogs know, results from these trials have cast a cloud over the entire Aranesp family of products which according to the WSJ article represents about half of Amgen's sales. What readers may not know is that in Feb 2006 Amgen issued about $5 billion of convertible bonds. From Amgen's press release on this topic, they used some of the proceeds for

"entering into separate warrant transactions with one or more of the initial purchasers and/or their affiliates. These transactions will generally have the effect of increasing the conversion price of the notes to $107.90 per share, representing a 50 percent premium based on the last reported bid price of $71.93 per share on Feb. 14, 2006."

Basically looks like they used the part of the money ($750m per WSJ) to buy the warrant call options associated with the convertible bond issue to drive up their price (and therefore the conversion price at which the bonds could be converted to stock). The net result according to WSJ was that their cost of borrowing this kind of money was only around 3%.

Amgen used about $3 billion from the bond issue to buy back Amgen stock in the $70 price range. Given that the stock has fallen about 12% thanks to the Aranesp trials, looks like their financial engineering moves cost them dearly!

Going to the Dogs - Part Two

The wonderful Clin Psych blog recently blogged about Pharmalyst's previous post re Lilly's Prozac for dogs. Clin Psych considered my estimates of $270m for annual US sales to be a bit over the top. I agree with Clin Psych that $270m does seem to be a bit high...but as I have found out from the Clin Psych blog itself - never underestimate the power of industry to push anti-psychotics, SSRIs etc (at least in humans and may be in dogs too!).

For the record I would like to clarify that $270m wasn't my guesstimate of likely US revenues. I was merely estimating that IF 10% of the target market (of 10m dogs who are afflicted with separation anxiety - per Lilly's press release numbers) takes doggie Prozac, then Lilly stands to make about $270m. I do not know if Lilly will be able to persuade 10% of the potential market to consider Reconcile. I tried to guesstimate how many pet owners would consider such a move by looking at the income distribution of pet owners. However I was was unable to find a free source of such data..some vet association was selling such statistics for an arm and a leg...well out of Pharmalyst's reach.

Pharma industry going to the dogs?

Recently we read about Lilly's reconcile, a beef flavored version of prozac for separation anxiety. Lilly's press release estimates that there are 10 million dogs in the US with this disorder. Lilly's move follows other similar moves by other Pharma majors. Pfizer launched Slentrol for canine obesity and Cerenia for motion sickness.

Lilly's price for reconcile is not yet known but Slentrol is estimated to cost $1 to $2 per day at the retail level. Assuming reconcile costs the same and Lilly gets about 75 cents of that, it could be a good market depending on how many pet owners buy into this. Pharmalyst tried to guesstimate that number based on the number of pet owners and their household income ranges but free data are hard to come by. If 1 million pet owners (1/10th of Lilly's estimate of potential market) were to try this and pay Lilly 75c a day, it works out to approximately 270 million...not too bad. Pet ownership & expenditures on care are similar in percentage terms in other countries like Australia. Could be a lucrative global market.

What's next in this segment? GSK to launch something for "Restless Tail Syndrome"? We start seeing more combination molecules to reduce pill burden? Clinical trials to justify that combo pills improve patient adherence? These will be a sure indicator that "the industry is going to the dogs" as it were!

Virginia Tech

Pharmalyst & his fellow students would like to record their condolences & prayers for the victims of the senseless tragedy at Virginia Tech. Donations to Hokie Spirit Memorial Fund here.

Pharmalyst merits a mention on ...PharmaGossip!!

Pharmalyst is really honored that my analysis of Casodex prices in relative terms (following up from a related post on PharmaGossip and eDrugsearch) merited a mention on the incomparable PharmaGossip. To Pharmalyst it is like being mentioned on the front pages of the NYT and Gawker at the same time!! Thank you Mr. Friday. You continue to amaze everyone with your great blog!!

Casodex International Pricing

Pharmagossip and eDrugsearch have done it again. Shine a light into the murky corners of international pharma pricing that is. They have published the per tablet pricing of AZ's Casodex in a few rich nations. As perhaps expected, the US price appears to be the highest at $17.33 per tablet. However if the per capita (PPP) GDP figures quoted in Wikipedia are any good, then it appears to Pharmalyst that the citizens of AZ's home country (the UK) may be getting screwed even more in relative terms! In both absolute and relative terms, the Canadians appear to drive the best bargain. Calculations below:

Chantix: The making of a quiet blockbuster?

A recent post on BrandwekNrx gave us a preview of some of Pfizer's newer products. One product that seems to be generating some buzz is Chantix, Pfizer's new smoking cessation product. Given the past performance of Zyban and other Nicotine Replacement Theapies (NRT), most analysts had modest sales estimates. Analyst Les Funtleyder of Miller Tabak estimated peak annual sales of $900M.

Now that the product is generating some buzz and given that smoking statistics are easy to come by, Pharmalyst decided to take a look at building a peak sales model. In this post, Pharmalyst presents some US numbers. However global sales will be a big determinant of peak annual sales and will be the subject of a future posting. One interesting aspect of international sales is the pricing of the product. Typically prices are higher in the US than other developed nations such as the UK, Canada, France, Germany etc thanks to the bargaining power of single payer systems. In this instance however, Pharamlyst believes that the price of Chantix (regardless of the reimbursement status) in developed nations will be comparable to the US. The reason being that the pricing is done in reference to the cost of cigarettes and most developed nations tax cigarettes heavily. Regardless of the reimbursement status, most rich nation consumers will be willing to pay high prices given the value relative to the cost of their smoking habit.

Looking at the US, a 2005 CDC survey indicates that there are 45.1 million active smokers in the US (aged over 18). The same CDC survey reports of the 45.1 million smokers, 42.5% (i.e. 19.1 million) had reported giving up smoking for at least 1 day (i.e 19.1 million would like to quit).

How many of these 19.1 million wannabe quitters might be willing to try some sort of a therapy in a given year? This is hard to estimate since many of these smokers will try to quit cold turkey. Some will opt for alternatives like NRT and Zyban (though Pharmalyst believes that most willing to try Zyban will actually switch to trying Chantix first). Given that NRTs haven't been too successful, it is reasonable to assume that the biggest "threat" to Chantix is the cold turkey method. One good set of cold turkey statistics can be found in a CDC survey in 1991. This survey reports that in 1991, there were 40.5 million smokers. Of these 42.1% (17 million) attempted to quit (by reporting that they did not smoke for at least one day). In the same survey, 2.3 million (13.8%) reported not smoking for one full month (assumed to have quit). In 1991, presumably all the cessation attempts were probably done cold turkey. The success rate of this method then appears to be 2.3million/17 million or 13.5% (i.e. 86.5% failed). Applying the same percentages as the 1991 survey to the 2005 data, Pharmalyst believes 86.5% of the 19.1 million wanna be quitters are *potential* candidates for Chantix (most quitters make multiple attempts before succeeding). This works out to 16.5 million smokers. The remaining 2.6 million would have succeeded quitting cold turkey. In coming years too, it appears that there will be 10+ millions of potential candidates for Chantix given that the US has seen very marginal reduction in smoking rates (comparing data for 1991 and 2005 in terms of % of US population).

How many of these *potential* 16.5 million therapy seeking wannabe quitters will be persuaded to try Chantix in a given year? Again, hard to say and will depend on the success of Pfizer's promotional & DTC efforts. As a bold guess, Pharmalyst takes it to be the same as the number of people as those who succeeded using the cold turkey method (2.6 million). The rationale for this assumption is rather thin. It supposes that the 2.6 million who succeeded cold turkey comprised of the most determined bunch. Presumably a bucket of similar size exists for a group that is a notch less motivated than the former and this bucket is most likely to be persuaded to try Chantix (at least it beats pulling a number out of thin air!). Please e-mail me any other suggestions you may have (Pharmalyst@gmail.com).

How much moolah does 2.6 million Chantix customers translate to? The cheapest online prices for the full 3 month course of Chantix appear to be around $330. This being the sole product in its class, the margins claimed by wholesalers and retailers on this product will be the bare minimum. The overall profit margins for wholesalers like Cardinal, McKesson etc range from 3.5% to 11% (gleaned from their quarterly reports). Assuming that there is a markup of 20% total (~10% wholesale & ~10% retail), Pfizer makes about $265 per completed course. However the prescribing information document of Chantix reports that in its pre-approval trials, only 65% of patients enrolled completed the full trial(presumably the rest dropped out due to side effects, cravings etc). Pharmalyst assumes a similar completion percentage in the general population and assumes that customers unable to continue due to side effects etc are entitled to & do claim a full refund (not sure if this is the case).

Based on these (big) assumptions, the US revenues alone work out to (0.65*2.6million*265) or about $447 million on an annual basis! The actual figure could easily be double that (or even more, given the total potential market size) if Pfizer's DTC advertising succeeds in a big way. These figures coupled with the international sales figures (subject of a future post) make it seem to Pharmalyst that Chantix is a blockbuster in the making for Pfizer.

PS: See this to get some thoughts on why Chantix may not have such a rosy outlook.

Pharma Giles: Fresh fruit from rotting vegetables

Readers of this blog already know the blog Pharma Giles. In the unlikely event that there is someone who doesn't, please check it out. For someone like Pharmalyst it is an amazing source to really learn about the industry. Giles debunks the industry doublespeak in a manner that George Orwell would approve. And he does it in really funny way - a "pharma industry Dilbert in words" sort of way.

So it was quite an honor (honour) for Pharmalyst to merit a mention in one of Mr. Giles' recent posts. In it he offers some good career advice to yours truly. Using a rather ingenious empirical technique, Mr Giles mines the depths of Cafepharma to get some useful nuggets. How does he do it? Well he gives you his assumptions & techniques in his post. Based on Mr. Giles' analysis, the two best pharma employers are Wyeth & GSK. The two worst? Abbott & Pfizer (Pharmalyst must say that a casual reading of Cafepharma does leave one with the gut feel that ABT & PFE are not great places to work currently). Mr Giles confirms this with a more "robust" model. PharmaGiles is quite funny at many levels. It lampoons company memos using "phoni" company memos..in a similar vein it may be poking fun at some of the empirical techniques that Pharmalyst has recently used. Either way the entire blog is really funny!

Out of curiosity Pharmalyst also checked Fortune magazine's top 100 employers . The pharma names that figure in this list?
2. Genentech
40. Amgen
43. Genzyme
71. Astra Zeneca

Given recent news regarding Amgen & AZ, Pharmalyst suspects that Mr Giles' list is much more current and accurate!

International Pharma Pricing: All smoke & mirrors

Inspired by a recent post on the very fine Pharmagossip regarding the high price of medicines, Pharmalyst set out to to compile some prices for various brand name medicines in the US and Thailand (Thailand being in the news re compulsory licensing of Abbott's Kaletra etc due to high prices). In a previous post Pharmalyst had noted that Kaletra in Thailand was priced at 30% of their per capita GDP compared to the US price of 18% (of US per capita GDP) .

Well, Pharmalyst is sorry to report that finding international prices of pharmaceuticals outside the US & Western Europe has been really hard. Pharmalyst knows that some of the readers of this blog are in Asia. Pharmalyst appeals to you to e-mail prices from your markets. Pharmalyst's research indicates that drug companies like to keep drug prices opaque; they then seem to exploit this information asymmetry to overcharge those countries that do not drive a hard bargain. Towards this point, Pharmalyst refers readers to Health Action International. Together with the WHO, they have a project to compile world medicine prices so that consumers and govts can negotiate the best prices from pharma companies. To quote from their brochure on medicine prices:

"if you have a peptic ulcer and require a month’s treatment, the originator brand version of ranitidine will cost you the equivalent of 50 days wages in Cameroon, almost 19 days of pay in Armenia and 13 days in the Philippines…That is almost two month’s pay for one month of treatment. If a partner and children get sick, then the medicine bill will rapidly devastate a household income. Of course, the medicine may be available at lower prices. Generic equivalents from public sector sources can be half of the price of the originator brand. But in some countries – e.g. Cameroon and Philippines – generic ranitidine was not found. People either pay the
full price of the originator brand of ranitidine or go without. Medicine prices vary to an extraordinary degree. The same medicine may have a different price tag in its originator or generic form, from a public clinic, a charitable agency or from a private pharmacy, in an urban or rural area. This makes it impossible for people to know what is the ‘best buy’ and where to find it."

Another interesting find for Pharmalyst was how the drug companies use free trade agreements to prevent countries (including some not very wealthy ones like Morocco) from supporting medicine reimportation. A good summary of this can be found here at the American University's website for the Project on Information Justice and Intellectual Property. It appears that these free trade agreements are anything but free trade. They probably should be called special interest agreements.

Exubera: More ammo to pull the plug?

Pharmalyst recently read another post on Pharmalot informing us that analyst David Risinger of Merrill now thinks that Exubera will generate sales of $250 million in 2012 (revised downward from $630 million). Pharmalyst's own estimates under the skeptical scenario were about $284 million. Looks like most of wall street is now gravitating towards a strongly negative outlook on this product given the reported NRx numbers (even after Pfizer had pushed the product to endocrinologists).

Numbers like $250 million in 2012 would indeed make this product a spectacular bust. Pfizer brass has to make a decision on pulling the plug. Pharmalyst believes that Pfizer's current thinking is revealed by two comments (made by SMC and Superman..who look like PR people or employees of Pfizer) in response to a WSJ health blog article regarding Exubera. Their main defense of the product (and Pharmalysts comments in italics are as follows):

• Needle phobia is a big deal. May be so. However even with Exubera people need to use needles to measure sugar levels. Various types of pens etc have made injecting insulin easier. Users still need to inject long acting insulin on occasion.

• Presence of competitors will drive market growth (capturing 50% of insulin market). More likely that Exubera's performance will deter competitor entry. If anyone does, it will be with a better inhaler device and will capture share from Exubera.

• Only insulin is effective at A1C control. May be so. However, not an inhaled one with potential for lung damage and lawsuits. Also some of those "oral agents" seem to have other benefits like weight loss.

Pfizer made a good effort in enhancing the science of inhaled medicines & Pharmalyst commends its scientists for trying. Perhaps Pfizer can benefit from its learnings for future products. However it is time for Pfizer brass to seriously think about whether they need to throw in more good money after bad or whether it is time to cut their losses. Surely Pfizer must have other projects with better odds of success, that are in need for capital and resources.

About me

I wanted to thank Jim at BrandweekNRx for his kind comments on my humble (and I am sure sometimes stupid) blog. Only reason I wish to be anonymous is that I hope to graduate sometime next year and at that point I hope to apply for jobs at:

a. Many pharma companies: Specifically looking for jobs in the market research/finance area
b. Any financial type company covering the pharma sector

I am sure that if they knew my status as a blogger, my resume will go straight to the trash can. For a lot of reasons (family/friends etc), I like the pharma industry and I really respect the science & innovation that comes out of this industry..and I am also aware that there are a lot of shady practices in the industry (thanks to all you bloggers). I have been reading many of the pharma blogs for months and hopefully have absorbed some of the jargon/lingo via osmosis. I hope this will give me an advantage re the job search. I also wish to learn more about the industry by chiming in with my own 2 cents and get feedback from the 35 readers I seem to be averaging :-)

If I do get a job with one of these companies, I probably will stop blogging though I will continue reading all the great blogs out there :-)

PS: I'm reachable at pharmalyst@gmail.com

Zelnorm: Statistically insignificant to significant

Someone sent me the this link from NYT (registration). This answers the question posed in my previous post as to why Zelnorm was initially approved just in women. According to the article: "Men were dropped from the initial studies because the drug did not appear to work in them at all.". This leads me to wonder if the reason that the CV events were at a statistically insignificant level in the original label was because it was not studied enough in men? (given that for people below 65, men are more prone to CV events than women)? Once the drug was approved in men and more data in male patients became available, the CV events perhaps went up from insignificant to significant level.....just wondering.

Meanwhile ads from lawyers have started showing up!

Male HPV Market Size

A few weeks back, Pharmalyst had blogged on Gardasil's potential revenues among the 6th grade female students in the US (given various statewide HPV vaccination mandate efforts). So naturally Pharmalyst was intrigued when Pharmalot had this very interesting post regarding Merck's marketing efforts focusing on male college students.

Pharmalyst wondered what the potential market size for US males in the age range 18 to 24 might be. Based on the analysis below, Pharmalyst estimates that Merck stands to make approximately 148 million each year from 18-24 males in the US.

We know from the US census figures, that the number of males in the 18-24 age range is projected to be 14.543 million (2005 projections). Of these 14.543 million men, what percentage are likely to sign up for an HPV vaccine absent any mandates? Pharmalyst thinks that the percentage will be relatively low (given that they are taking this vaccine not for their own benefit but for the benefit of their current future spouse/girlfriends).

Given that Pharmalyst doesn't have access to fancy market research data like Merck does, I wondered if a proxy metric could be found. One thought that occurs to Pharmalyst is that perhaps the percentage of US males who undertake something like say vasectomy may be a reasonable proxy metric to estimate the % of males likely to sign up for HPV. The actual figure will probably be somewhat lower given that these are mostly young men not in a committed relationship(though with DTC, Merck will make it cool for males to sign up).

If the above assumptions re proxy metrics are somewhat reasonable, where might one get them? The UN and WHO have some excellent 2005 world contraceptive use stats here (data in excel format can be downloaded at the bottom). Based on this fascinating data, there are 37.550 million women aged 15-49 who are in some sort of a union in the US. Out of this, 70.5% use modern contraceptive methods (26.47 million). 13.2% involve male sterlization (4.96 milion). So 4.96/26.47 can be estimated as the % of men who will sign up for the HPV vaccine. This works out to 18.7% or 2.61 million males in age group 18-24 based on census figures. At $400 per course that works out to a cool 1.044 billion dollars. Note that this is not an annual revenue figure; once the 18-24 set is vaccinated, then one can only expect 18.7% of men who just turned 18 to get vaccinated every year. If the 2.61 million is evenly distributed among 18-24, then this works out to .37 million new males per year or $148 million each year in anualized revenues to Merck from this customer segment (US males aged 18 to 24).

Pharmalyst really really welcomes your comment and critique of this analysis. Please let me know if you can identify a better proxy metric to estimate % of 18-24 men likely to sign up for an HPV vaccine.

More evidence of shaky pharma stock research

BrandweekNRx has an interesting post on how thin some of Wall Street's research really is. In the same light, Pharmalyst would like you to read this great forecast from WR Hambrecht. You can see other gems on the same topic from them here. Some of their earlier predictions are really funny!

Earnings Season & Pfizer's Prospects

Earnings season is almost upon us. I think most of big pharma will continue to meet estimates. Some like Merck will probably beat the street thanks to new launches like Januvia & Gardasil. Lilly may be another name that beats the street due to strong sales of Byetta & Cialis capturing more marketshare from Viagra & Levitra. In the case of Lilly, the Zyprexa numbers will be interesting to watch given the recent issues around its metabolic effects.

One big name that will be struggling is Pfizer. I don't have access to fancy data tools like IMS but I hear from friends who do that Lipitor has lost a lot of marketshare to Simvastatin & Vytorin (perhaps the BrandweekNRx guys will be kind enough to post some NRx numbers for both Lipitor & Zyprexa). Based on all the chatter on CafePharma, it looks like Pfizer's sales force is a bit too disoriented/demoralized at this point - given all the changes that new CEO Jeff Kindler has unleashed. Expect numbers for other Pfizer brands like Celebrex, Lyrica & Geodon to miss promises. There was also the earlier than expected patent loss for Norvasc. Pfizer's Chantix seems to be the one drug that seems to have decent growth prospects based on some recent media articles I've read....but Chantix alone is not enough for a company the size of Pfizer.

Pfizer's Lipitor prospects seem to be the principal driver of its poor stock performance these days. I heard the Lipitor pitch made by Ian Read (President of Pharma Ops) during their January analyst meeting and have to say that it was quite a weak defense. His basic argument seems to be that Lipitor has proven outcomes data where as Vytorin (esp the Zetia component) & Crestor do not. This may be true but most people know that products like Vytorin are newer products and while the outcomes data will take time to emerge, they have every reason to expect them to be as good or better than Lipitor given Vytorin's LDL lowering claims. He did not go after Crestor's safety record. As to the Simvastatin threat he alluded to some contracting strategy mumbo jumbo...though CafePharma has many reps complaining about Lipitor's managed care status.

It is time for Pfizer brass to acknowledge the reality that Lipitor can not be defended as is. One good thing they have done is to launch Caduet (Lipitor Norvasc combo). How about doing a deal with Novartis and developing a Lipitor Diovan combo? What about a Lipitor Niacin combo with Abbott (Abbott is already building a Crestor Tricor combo). These combo molecules may be the way to stop the bleeding a bit till some of Pfizer's new pipeline drugs kick in.

What is Abbott's profit maximization price in Thailand?

Thanks to Pharmalot, I have been following the recent spat between Abbott and the Thai govt regarding Abbott's pricing of AIDS drugs in Thailand. The Thai govt claims that Abbott charges a lot and has therefore decided to break Abbott's patent. Much of the dispute centers around Abbott's Kaletra & Sanofi's Plavix. Some online sources claim that Abbott has offerred to lower its price from approx $4000 per year to $2000 per year. Other sources say that Abbott already charges $2200 per year and point out that this is well below the US price of $7000 per year.

I have been wondering as to why Abbott chose to price this drug at the $2000 level. In our microeconomics classes, we learn that pricing in these situations is determined by the utility of the drug. For life saving drugs, the utility tends to be infinite and therefore the only limiting factors may be the availability of substitutes and the ability to pay. To gauge the Thai's ability to pay, consider the fact that their per capita GDP is about $7400 . This compares to $37,800 for the United States. Therefore at $7000 per year, Abbott is pricing Kaletra at 18.5% of the US per capita income. For the Thai people at $2200 per year, this works out to approx 30% of their per capita income.

Any ideas you have on why Abbott chose to price the drug this high relative to GDP would be greatly appreciated. I would imagine that at a lower price, more Thais would take Kaletra & Abbott would make more revenue in volume. One reason I can think of, is that they want to avoid arbitrage (if the prices fall lower in Asia, someone will find it attractive to buy in Asia & ship to the US)...Perhaps if Abbott tightens their supply chain like Pfizer & Novartis in the UK, then they may be more willing to drop prices. Please let me know if you have any other thoughts on this. Thanks

Zelnorm: The financial hit and lingering doubts

Novartis recent announcement regarding the voluntary withdrawal of Zelnorm was widely covered in the media and the blogosphere. According to BrandweekNRx Zelnorm had annual sales of 541 million. The immediate financial hit to a company of the size of Novartis doesn't appear to be significant. However BrandweekNRx also reports that sales for this drug were growing at 30%. At that rate of growth, this brand could have achieved blockbuster status in slightly under 3 years. Could Zelnorn have continued to show that kind of growth? Pharmalyst thinks so. Given the range of symptoms associated with IBS & the heavy DTC spend, it is likely that in a few years the average Joe who really needs two Tums would actually end up "talking to his doctor about Zelnorm" (though to be sure for a smaller subset of the overall target market, Zelnorm will probably be greatly missed). The stock market too seems to be acknowledging the potential long-term financial hit. NVS ADRs were down $2.26 in NYSE trading, erasing over $4B in overall market cap.

Part of the market's fears surely concern litigation. Novartis press release indicated that while the risk was statistically significant, the actual numbers were small. They also noted that all impacted patients had existing CV risk factors...hinting that despite the statistical significance, Zelnorm may not be to blame (a type II (?) error). However some doubts linger. The press release also states that "A small (but not statistically significant) imbalance in cases of angina pectoris was recorded and included in the US label when Zelnorm was approved in 2002."...so the trend does appear to be somewhat consistent.

The press release also states that "Zelnorm received FDA approval for the short-term treatment of women with IBS in the US on July 24, 2002. Zelnorm also received FDA approval for the treatment of men and women less than 65 years of age with chronic idiopathic constipation in the US on August 20, 2004.".. Could anyone shed some light on why the initial approval was just for women? Were more women involved in the pre-approval trials or was there something different such that the initial approval was only for women? If so, could this have something to do with the statistically insignificant imbalance in cases of angina pectoris?
Any insights around this will be greatly appreciated.