ICOS’ prospects bright

BOTHELL – On Nov. 21, 2003, ICOS Corp.’s decade of research and development work to bring Cialis from the laboratory to pharmacy shelves reached a final milestone.

That day, word came that the Food and Drug Administration had approved Cialis for sale in the United States, the world’s largest market for erectile dysfunction drugs.

But as the champagne corks popped in the biotechnology company’s usually more subdued offices in Bothell, Leonard Blum’s job was really just beginning.

His challenge: to make Cialis succeed against Viagra, perhaps the world’s best-known prescription drug brand.

A year later, Cialis is poised to end 2004 with at least $550 million in worldwide sales. The Pharmaceutical Marketing Congress gave ICOS and its partner in the drug, Eli Lilly &Co., its annual best product launch award. The drug’s name is showing up in jokes on “Saturday Night Live.”

Viagra still dominates, but it is losing market share. As of early this month, Cialis was capturing 21 percent of first-time U.S. prescriptions for erectile dysfunction drugs, compared with 66 percent for Viagra, according to IMS Health.

“Patients continue to move every month from Viagra to Cialis,” said Blum, senior vice president for sales and marketing at ICOS. “We’re the only one of the three drugs that’s growing in market share.”

Satisfied with the first year’s sales, Blum is also optimistic about the drug’s future. He still foresees the day when Cialis overtakes Viagra.

“I think that our objective is that Cialis will become the No. 1 ED medication,” he said, though not adding when he thinks that will happen.

At least one prognosticator has predicted Cialis will eclipse Viagra by early 2006. Fritz Krieger, editor of the Journal of Longitudinal Data, made that prediction two months ago based on detailed prescription-tracking surveys.

Daniel Watts, spokesman for Viagra’s maker, Pfizer Inc., points out that his company’s drug still accounts for 70 percent of all prescriptions for erectile dysfunction drugs.

“Obviously, we don’t like losing market share, but it’s a given with the new competition,” Watts said. “(Viagra’s) still the product to beat.”

Levitra, a similar drug introduced last year by Bayer and GlaxoSmithKline, hasn’t fared as well as Cialis in the three-way battle. Its share of the market lags at 11 percent.

While the FDA’s approval a year ago allowed ICOS and Lilly to sell the drug in the United States, the job of selling the brand name really kicked off on Feb. 1, Super Bowl Sunday. In front of a potential American audience of nearly 90 million people, the first full-length television ad for Cialis ran during a third-quarter commercial break.

The commercial featured soft jazz music, the image of a couple watching the sunset in matching bathtubs and other warm visuals.

But the aspect that grabbed the most attention was the unusually direct voiceover.

In a first for erectile dysfunction drug ads, the announcer gives specific details about Cialis’ effect, including the fact that its effectiveness against erectile dysfunction can last up to 36 hours. A warning that men who experienced erections lasting four hours or more need to seek medical attention was singled out by comedians and ad reviewers for days afterward.

But the commercial, which was then played widely during ad breaks, seemed to work. ComScore Media Metrix measured a 1,868 percent increase in traffic to Cialis’ Web site on Super Bowl Sunday.

Additionally, prescription-tracking services showed a noticeable increase in the number of patients getting Cialis in the weeks after the TV commercial blitz debuted.

Since then, ICOS and Lilly have produced several more commercials for Cialis, all featuring couples in the same relaxed atmosphere as the first ad.

“They’re not the most exciting, but they’re very persuasive,” Blum said. “We continue to find our ads more relaxed than the others. They speak to the target audience.”

Meanwhile, Levitra and Viagra have tried several different themes with their competing ads. Levitra, for example, dumped ex-pro football player and coach Mike Ditka in favor of a “flirtatious” spokeswoman who seems much younger than the average man who suffers from erectile dysfunction.

“We’ve tweaked. They’ve done major surgery,” Blum said, pointing out that the rivals have made some of their ads look more similar to those for Cialis. Most now feature images of couples together, which was rare before the Cialis ads debuted.

“We were the first one to say that the purpose of the drug isn’t to make the man feel better about himself, but to re-engage his love life,” Blum said.

Cialis’ marketers also talked to comedy and entertainment writers to inform them about the new drug and clear up misconceptions. It’s unclear how much those meetings were responsible for the frequency with which Cialis’ name is showing up in TV jokes; Blum said greater name recognition overall is the reason.

Over the past year, Cialis also has sponsored PGA golf tournaments, concerts in Europe and other events worldwide. The brand name also emblazons pens, pencil cups and other promotional items given out by sales representatives to doctors.

The brand building has shown results, Blum said. In recent surveys, 78 percent of impotence patients said they knew of Cialis. When the brand name wasn’t mentioned in the question, 40 percent remembered it.

That recognition has come at a price, however. ICOS and Lilly’s joint venture for Cialis reported spending $476 million for general administrative and marketing during the year’s first three quarters.

But with those costs beginning to shrink and sales growing, the joint venture set up by Lilly and ICOS hopes to break even by the middle of next year. ICOS itself could be profitable for the first time by 2006.

Andrew Heyward, an analyst with Seattle-based Ragen MacKenzie who tracks ICOS, said Cialis’ first year of U.S. sales met his expectations.

Before the FDA approval last year, he estimated worldwide sales would reach $550 million. He recently revised that upward, as the drug has posted $400 million in sales through the third quarter. On the down side, Heyward said, marketing expenses have also exceeded his expectations.

Still, he counts the drug’s launch as a success. He’s estimating Cialis will generate about $760 million in sales next year, and he’s bullish on the long-term chances of surpassing Viagra.

“I do see that within the realm of possibility,” said Heyward, who holds a personal stake in ICOS. “That’s simply because it’s the best drug. … Usually the best drug wins out.”

Under a promotional program that gives patients a free chance to try Cialis, Blum pointed out, 93 percent request another voucher for the drug.

And outside the United States, where Cialis has been on the market since early 2003, it’s nudging closer to Viagra. Cialis has 38 percent of the market in France and Australia, compared with just more than 50 percent for Viagra. In Saudi Arabia, Cialis leads Viagra 43 percent to 39 percent.

Blum still seems as confident as he did a year ago. He talks about early-stage tests on the drug’s potential to treat other conditions. Cialis’ effect on ICOS’ bottom line should also allow it to develop more drugs in the year to come, he said.

“The story keeps getting better,” he said.

Reporter Eric Fetters: 425-339-3453 or fetters@heraldnet.com.