West Coast Editor
Setting its sights on profitability in 2006, ICOS Corp. acknowledged deeper losses in its second-quarter earnings report but reiterated plans to keep getting out the word on the erectile dysfunction drug Cialis.
The company's stock (NASDAQ:ICOS) closed Thursday at $23.68, up 51 cents.
Cialis sold $137.2 million worldwide in the second quarter, compared to $108.3 million in the same period last year. Lilly ICOS LLC, the joint venture between Bothell, Wash.-based ICOS and Eli Lilly and Co., of Indianapolis, reported those numbers last month.
"Reported earnings I don't pay too much attention to at this point," said Andrew Heyward, senior vice president of research for Ragen MacKenzie in Seattle, a division of Wells Fargo Investments LLC. "I want to see an improving trend." Heyward has seen enough to put a "buy" rating on the stock.
ICOS' net loss totaled $51.9 million, or 82 cents per share for the quarter, compared to a net loss of $11.5 million, or 19 cents per share, for the same period last year. The hike mainly was due to sales and marketing costs for Cialis (tadalafil), approved by the FDA in November.
"Cialis is making very good progress, I think," Heyward said, noting that sales have beaten most estimates.
Sales of the phosphodiesterase Type 5 (PDE5) inhibitor are expected to be between $500 million and $600 million this year, ICOS said, adding that the PDE5 prescription rate grew 13.2 percent over the same period last year in the U.S., and Cialis' share of prescriptions in June grew to 14 percent, up 3.8 points from the March level, according to tracking firm IMS National Prescription Audit Plus.
In a conference call, ICOS executives "went through the criticisms people had, one by one" and refuted them. Skeptics, for example, suggested the higher sales might be due to distributor stocking related to a price increase.
"They said they have no evidence that's the case, and ordering patterns haven't changed," Heyward said, although "in the short term, that's what people would think about, because sales came in higher than expected."
Sales in territories outside of North America and Europe are reported by Lilly and totaled $32.2 million during the period, a slight drop. In those nine territories, Lilly sells the product and pays royalties.
"Sales in the five biggest of those countries grew very well in the second quarter, so people didn't have that to point to anymore," he said.
The main edge claimed by Cialis over competitors in the PDE5-inhibitor space consists of an up to 36-hour window of opportunity for intercourse after taking the pill, thus earning it the moniker as "the weekend drug." Others in the race are leader Viagra (sildenafil citrate) from New York-based Pfizer Inc. and Levitra (vardenafil) offered by Bayer AG, of Leverkusen, Germany, and London-based GlaxoSmithKline plc.
A study published in the Aug. 5, 2004, issue of the International Journal of Impotence Research found that since Viagra's launch in 1998 its use has soared 312 percent in men ages 18 to 45, while rising 216 percent among men 46 to 55 years old, which is the population deemed more likely to have ED.
"I don't know how scientifically that was done, but I can tell you I was at a meeting at [GSK] earlier this year, and they said they believe the average age of users of PDE5 inhibitors was decreasing, and that, in their view, new users were looking for new technology, which means Levitra or Cialis," Heyward told BioWorld Today.
Levitra is a newer product, "so people think it's a newer technology," he said. "It's very similar to Viagra, though for some people it may have fewer side effects and a little quicker onset."
Some observers expressed surprise at the apparent recreational use of the PDE5 inhibitors as noted in the journal article, though the FDA seems to have seen it coming (as might anyone else who gave the matter much thought). As part of the Cialis approvable letter in the spring of 2002, the agency asked for more pharmacology studies - an indicator, analysts said, of concerns about recreational use. (See BioWorld Today, May 1, 2002.)
"The companies never did really say [what the FDA was worried about]," Heyward said. "The Lilly people hinted that part of the FDA's concern was some sort of recreational abuse, but they never said specifically what that was."
In its second-quarter report, Pfizer reduced its guidance for full-year earnings slightly, blaming factors that include "new product competition, notably in the erectile-dysfunction market," but said Viagra still holds 77 percent of the U.S. prescription rate for ED. Viagra sales dropped 7 percent to $389 million from $419 million worldwide during the same period last year.
Levitra has had problems standing out since it was introduced in the summer of 2003, and has had to make do with whatever's left after Viagra and Cialis take their shares. The drug lacks the long half-life and lack of food interaction boasted by Cialis, and resembles first entrant Viagra. Ads for Levitra, which once featured football coach "Iron" Mike Ditka, now are taking a different approach; a woman is pitching the drug. That might be a reaction to ICOS' bid with Cialis, which analysts have noted seems to have been named with an eye to what might be perceived as a softer female sensibility.
"They went more the way of Cialis, including women in the commercial, and it was at about that point that Cialis [prescriptions] seemed to flatten out, though in the last three weeks they have ticked up," Heyward said.
ICOS also is studying Cialis for benign prostatic hyperplasia, estimated to afflict more than 6 million men in the U.S. and Europe. The company plans to start a clinical trial in that indication later this year.
In the pipeline, too, is IC485, an oral small-molecule PDE4 inhibitor in Phase II trials to determine whether the drug can block inflammatory processes in the lungs of patients with chronic obstructive pulmonary disease. Data are expected in the first half of next year.
Many eyes, though, are on Cialis and the continuing ED contest.
"The big bolus of sampling was done earlier this year by all three companies," Heyward said. "That's beginning to settle out, but it will take a long time to settle out completely."