West Coast Editor

NitroMed Inc. lost about a third of its stock value after reporting sharply slower sales of BiDil, the heart failure drug for African-Americans, as the company told Wall Street full-year revenues from the compound would be lower than expected, too.

Shares (NASDAQ:NTMD) closed Tuesday at $5.96, down $2.65, or 30.8 percent.

NitroMed reported a loss of $25.9 million, or 75 cents per share, on sales totaling $2.3 million, compared to $19.6 million, or 65 cents per share, for the same quarter a year ago.

"The consensus was $4 million or $5 million, and missing by a couple million in early launch shouldn't be such a big deal, but the outlook is murky," said Liana Moussatos, analyst with Pacific Growth Equities in San Francisco, who downgraded the stock to "neutral" from "buy."

NitroMed predicted 2006 sales would reach only about $20 million, less than half of the $44.4 million consensus forecast, she noted, adding that the company was caught off-guard by supplies of the drug that had expired.

"The end-user demand was less because right now the FDA has only approved a one-year shelf life on the product, and they're getting returns," she said.

Included in Lexington, Mass.-based NitroMed's financials are a $6.5 million expense for the launch of BiDil, and a $2 million restructuring charge. About a month ago, the company said it would get rid of about 30 positions in research and development and boost efforts to out-license or partner its preclinical nitric-oxide enhancing program. (See BioWorld Today, April 3, 2006.)

But the biggest factor in the low earnings turned out to be sales of the two generics that comprise BiDil, isosorbide dinitrate and hydralazine hydrochloride, Moussatos said. Skeptics of BiDil had worried that physicians would prescribe the two components separately, to keep the out-of-pocket cost for patients lower, although others said the convenience of the branded product would overcome pricing. (See BioWorld Today, Aug. 9, 2004.)

"BiDil sales would have been fantastic, had the separate components not been available," Moussatos told BioWorld Today. The damage was particularly steep because NitroMed had no data that would convince physicians the ratio of the two generics provided by BiDil was the optimum for clinical response.

Patients using the generics separately are willing to take two pills three times per day rather than one pill three times per day. "It's really more like two and a half [to get the exact ratio]," Moussatos said. "But some docs are telling me two is close enough."

Convenience would matter more if NitroMed could knock the co-pay lower. In a conference call with investors, the company said progress is being made with Medicaid to gain preferred status in California, Florida and Michigan, which means physicians do not have to phone for authorization before prescribing the drug. There's also a new initiative using a BiDil co-payment savings card for non-Medicaid insured patients, which reduces their monthly co-payment by up to $60.

Moussatos called those efforts a "good start," but "more progress is needed for significant results." Also, a co-promotion agreement was said to be in the works to target acute in-hospital patients receptive to adding new medications.

"We believe this is a good move and look forward to seeing traction from these efforts," Moussatos wrote in a research report.

Meanwhile, an update on extended-release BiDil, which would be dosed once or twice per day, is expected by the end of the year. "If they're successful at getting co-payments down closer to the level of the separate components' co-payments, [BiDil XR] would be competitive, because you reduce the number of pills," she said.

NitroMed's play with BiDil makes sense, despite the fact that its ingredients already are available at a lower price, Moussatos said. Doctors tend to prescribe generics first, but "sometimes it doesn't work out that way, and the branded [product] wins," especially if the product is extended release, she said.

A case in point is Wellbutrin XL, London-based GlaxoSmithKline plc's formulation of the antidepressant bupropion.

"Wellbutrin XL really sold because it's once a day, and Glaxo did a big direct-to-consumer marketing campaign," Moussatos said. The product sold £647 million (US$1.2 billion) in 2005, up 38 percent over the previous year.