Chantix/Champix - Developed country sales

In a previous post Pharmalyst had guesstimated that Pfizer with its field force and DTC efforts would be able to persuade around 4.5 million (out of 45 million) adult smokers in the US to try their smoking cessation drug Chantix. If 65% of these smokers take the full course, this works out to about $775 million in US sales for Pfizer. Pharmalyst estimates that Pfizer is on track to reach this figure by 2009/2010.

Obviously a big determinant of total sales for this product (known as Champix in most markets) will be its overseas sales. In this post Pharmalyst attempts to look at what the numbers in developed country markets might look like.

Pricing: Previously Pharmalyst had argued that the pricing of Chantix will be similar to the US price (though typically in many such markets prices are lower than US prices due to the bargaining power of single payer systems). This hunch is based on the fact that the product will be priced relative to the price of cigarettes. In many developed nations, cigarettes are even more expensive than those US states that tax tobacco heavily. The US average price for a pack of 20 Marlboro cigarettes is $3 to $3.99. The price is similar in most EU nations. In the UK, the price is higher than $5 (source: WHO tobacco atlas). Also Pharmalyst expects that many of the single payer systems in other markets will not initially reimburse this product or require smokers to have tried other methods before reimbursing this product (like many US insurers). Even if some of the systems do decide to reimburse, Pfizer will have some bargaining power as this is the only drug in class currently.

Market Adoption: Pharmalyst believes that in many European markets, where the smoking rates are higher than the US, the adoption rate of this product will be lower (though to be sure in recent years anti-smoking regulations and attitudes in Europe have tended to converge with the US). One very interesting paper that Pharmalyst read regarding country to country comparisons is titled "Why do Europeans smoke more than Americans?". The paper was published by the National Bureau of Economic Research and authored by economists David Cutler & Edward Gleaser of Harvard U. You can download this fascinating paper here.

The fact that smoking rates in Europe are higher than the US is somewhat paradoxical given that in most other health measures (such as obesity rates), Americans tend to have worse numbers. This is even more remarkable since American smoking rates were higher than Europe's in the sixties. According to Professors Cutler & Gleaser, almost half of the disparity is due to the differences in beliefs about the health effects of smoking. In the year 1994, 91% of the US population (and 83% of smokers) believed that smoking is harmful. In Europe by contrast, only 84% of the population ( and 73% of smokers) believed that smoking is harmful. Presumably the numbers for Europe have converged with the US in the ensuing decade but given more recent smoking rate data, differences still remain.

For each developed nation market, Pharmalyst will discount the US adoption rate by a factor proportional to the excess smoking rate in the country (over the US) to arrive at a potential market adoption rate. Further, given that the US allows DTC advertising and most other markets do not (the other exception being New Zealand) , Pharmalyst guesstimates that the general adoption rate will be about a third lower than the US (in the US, Pharmalyst's assumption was that about 1.5million of the 4.5 million customers were acquired via DTC campaigns).

Projected Developed Nation Revenues: Based on these assumptions regarding the market adoption rates and pricing, the calculations for developed nations is provided in the spreadsheet below. For existing smoking rates, Pharmalyst used the tobacco atlas data provided by the WHO. For the US, there are some discrepancies between the WHO numbers and the CDC numbers that Pharmalyst has used before. As this is just a back of the envelope calculation, Pharmalyst stuck to the CDC numbers for the US. These rough calculations reveal that the total sales in the US and other developed markets will be about 2.5 billion dollars!...Perhaps the market adoption rate in countries like France, Germany, Japan & Korea may be lower than Pharmalyst's projections. Even then this product is perhaps on track to generate north of $2 billion in annual revenues...and Pharmalyst guesses that Pfizer could reach these levels by the year 2010 or 2011. The model also doesn't include numbers from large developing nations like China and India (subject of future post).

What could go wrong with this picture: One issue is that the early success with this product in the US could be just a passing fad...perhaps after the initial success, many of the quitters go back to smoking, the reputation of the product suffers and potential new customers stop trying Chantix/Champix.

The second challenge to Chantix will come from the couple of competitors in the pipeline...for example Novartis recently paid big bucks ($500 MM) to acquire exclusive rights to market Cytos biotech's anti-smoking vaccine. If these vaccines are proven safe, they could really be Chantix killers...With Chantix, a wannabe quitter has to stay motivated to take the full course and other factors like counseling are key to success. With a vaccine, once you take the shot, then factors like lack of willpower may not be that pertinent. However the safety hurdle will be higher for a vaccine compared to a pill which can be easily discontinued if the side effects can't be tolerated easily. Pharmalyst will be eagerly watching out for any news regarding safety/side effects of the Novartis vaccine.

PS: Pharmalyst welcomes reader comments/e-mail (incl. anonymous) on this & other posts (especially the couple of readers who according to Google Analytics are from Basel & Lucerne. Pharmalyst guesses that these readers may be somehow connected to Novartis and therefore may have insightful comments...esp on the Cytos deal).