National Editor

What a difference a year makes. Or not.

At this point in 2002, ICOS Corp. had just received word from the FDA that its erectile dysfunction drug candidate Cialis (taladifil), partnered with Eli Lilly and Co., was approvable if three issues were cleared up. (See BioWorld Financial Watch, May 6, 2002.)

ICOS said one issue was pharmacology, which meant more studies would be needed, but the company would not be more specific about what regulators wanted. The company's stock plunged 34 percent.

A year later, ICOS has confirmed it still hasn't submitted a complete response to the FDA - a situation that has renewed speculation that Cialis could fail to reach the market before a close runner-up, Levitra (vardenafil), filed with the FDA three months behind Cialis by Bayer AG and GlaxoSmithKline plc.

It's a tight race, with the drugs vying for second place behind Pfizer Inc.'s blockbuster Viagra (sildenafil citrate). Cialis seems aimed for approval in the second half of this year, right around the time Levitra also is projected to enter the market.

Cialis could be strong - very strong. Already launched in Europe, the drug (which, like Viagra, is an inhibitor of the enzyme phosphodiesterase 5) recorded first-quarter sales of $16.6 million, doubling estimates such as those by Leerink Swann & Co., which put the number at $8.3 million.

Even if some of the sales could be attributed to stocking by vendors in Europe, the numbers are encouraging. Unlike Viagra, Cialis works more quickly, lasts for 24 hours and isn't affected by food interaction.

For Levitra (also a PDE5 inhibitor), the FDA in July 2002 issued an approvable letter, and the drug was given marketing clearance in Europe in March. At the American Urological Association meeting in Chicago late last month, Bayer and GlaxoSmithKline offered more data on the drug, disclosing a study in which men who used Levitra reported "significantly improved satisfaction with erection hardness, orgasmic function and overall sexual experience." The Phase III double-blind trial enrolled 803 patients.

Claims and counterclaims flew with the European approval. Levitra's boosters insisted that its half-life of four to five hours as compared with Cialis' 24 hours was a benefit and not a drawback, since the drug was circulating no longer than necessary in the body. What's more, they said Levitra was more likely to work the first time it's used.

The FDA's deadline for action on Levitra is in August, and an FDA advisory panel is expected to review the drug on May 29 with regard to a cardiac phenomenon called QT wave prolongation sometimes observed with use of the drug, noted William Tanner, analyst with Leerink Swann & Co.

"We believe a modicum of recent ICOS share performance could be attributable to the review of Levitra at [the panel] and the fact that Cialis would not appear to induce such a response nor have a safety issue in that regard," Tanner wrote in a report, dated May 3. The company's shares jumped more than 40 percent during April.

"Given the timing of the PDUFA date and the advisory panel, it strikes us that, with the information that is currently publicly available, a clean bill of health by the FDA advisory panel could position Levitra as second to market, ahead of Cialis," he added.

While there's been great enthusiasm for Cialis' European sales, and predictions that the drug could dominate that market, the outlook is not optimistic across the board in the U.S., where Viagra could maintain its grip.

There may be room for plenty of players. Bayer and GlaxoSmithKline said ED affects to some degree more than half of all men over age 40, which amounts to 30 million in the U.S. and 152 million worldwide - and nine out of 10 have not sought treatment.

J.P. Morgan Securities has called Cialis the "best in class PDE5 inhibitor" and pegged potential peak sales in 2008 at $1.5 billion. But in March, the research firm Decision Resources Inc. disclosed results from a survey of primary care physicians and managed care pharmacy directors, finding that Viagra will remain the top seller in ED.

"While Cialis and Levitra both have improved attributes that make them attractive to physicians and patients, they will not be able to overtake Viagra's position," according to the survey results gleaned from 75 PCPs and 21 pharmacy directors of health maintenance organizations.

The PCPs said they were ready to begin prescribing Cialis and Levitra within three months of launches, but HMO directors said they would likely not add either of the drugs to formularies for six months, if at all.

Both sectors cited the likely problem as cost. That's the most common reason why patients discontinue or refuse Viagra. Sixty-seven percent of pharmacy directors said they would add one of the drugs if it was priced 50 percent below Viagra, and almost half of the pharmacy directors said they would do it if Cialis or Levitra cost 40 percent less.

"Dream on," some observers might say. But Kat Neumeyer, an analyst with Decision Resources, said a price break is not out of the realm of possibility.

"It's a big debate," she told BioWorld Financial Watch. None of the companies is tipping its hand on the matter, but - because many insurance providers cover ED therapy only partly if at all, the out-of-pocket cost for such pills as Viagra is high - sellers must be mindful of consumer habits, Neumeyer said.

On the other hand, "a lot of the price decisions [at pharmaceutical and biotechnology firms] are made on research and development expenditure and on market conditions to an almost equal degree," she said.

Although pricing procedures are not identical in Europe to those in the U.S., the marketing path of Cialis in the former may hold a clue.

"It has not come in at a discount in Europe," Neumeyer noted. "Down to the penny, Cialis' price was identical in the UK with Viagra's" - even with Cialis' longer action.

She said that's not surprising, since "most Viagra users are not necessarily using it with such frequency that you would see a decrease in the amount of units sold" if they switched to Cialis.

"Most are using on the average maybe four doses a month," Neumeyer said.

Another factor that makes pricing guesswork difficult, if the pricing is based on demand, is the recreational use of Viagra (and, inevitably, of the ED drugs to follow).

In 2001, Viagra was at the top of the list in "black-market sales," Neumeyer noted. Since then, legitimate avenues of sale such as Internet pharmacies have allowed embarrassed customers or those with no erectile impairment to get Viagra the legal way - and those customers are likely to buy the next generation of drugs through the same routes.

A lower or comparable price would let Lilly "even more quickly steal patient share from Viagra and block uptake by Levitra," Neumeyer said.

But, having lost its patent protection for the blockbuster antidepressant Prozac (fluoxetine), Lilly has "been looking for something to make up the difference, and a couple of recent products Lilly has come out with have been extremely premium priced," she added, pointing to the osteoporosis drug Forteo (teriparatide), which goes for $20 per dose.

Aiming high with Cialis, or keeping its cost level with Viagra, has an obvious appeal for Lilly.

"Their drug is the one people are most interested in, so they could probably get away with it," she said.