THE NEW ERA OF LIFESTYLE DRUGS
Viagra and other blockbusters are transforming the $300 billion industry
Viagra, Viagra, Viagra. TV shows are interviewing ecstatic customers. Newspapers and magazines are analyzing its cultural implications. Internet chat sites are spreading info on how to get it. Bars and cocktail parties are buzzing with jokes about it. But Viagra is more than just a blockbuster drug that treats a widespread sexual ailment. It represents a whole new class of drugs which will alter the lifestyle of millions, transform the pharmaceutical industry, and add vigor to the economy.
Pfizer Co.'s new impotence drug is barely a month into its debut, but already Wall Street analysts estimate that the medicine could easily hit sales of $5 billion a year--even $11 billion according to some optimistic projections. Demand is off the charts. NDC Health Information Services, a Phoenix-based market-research firm, says 206,246 prescriptions for Viagra were filled in the week ended Apr. 24, up nearly 70% from the prior week's number. "It's kind of a cultural phenomenon," crows Pfizer chief William C. Steere Jr.VAST APPEAL. Sure, Viagra is a godsend for men with clinically diagnosed impotence, just as weight-loss drugs already available or coming to market can be a major health boon for the seriously obese. But what gives such drugs vast appeal is their ability to enhance the lives of people with less severe symptoms. Other drugs in the pipeline control everything from minor irritations like baldness and wrinkles to debilitating diseases such as arthritis, memory loss, and incontinence. "We may find targets for hair loss, aging skin, all the lifestyle issues of the baby boomers," says Pfizer's Steere. Soon they'll be joined by drugs that could actually prevent the diseases of aging, such as osteoporosis, heart disease, and some forms of cancer (table, page 94). The demand will be fueled by demographics. "The aging baby boomer population wants to remain young and is very willing to use drugs that counteract some of the ravages of aging," says independent pharmaceutical analyst Jack Lamberton.
Ultimately, the new lifestyle drugs could turn the pharmaceutical industry into an engine of growth for the entire economy. Right now, worldwide spending on pharmaceuticals is running at about $300 billion a year, with the U.S. accounting for some one-third of the total. At that level, it's a lot smaller than the high-tech sector. But strong demand combined with new technology is a formula for a pharmaceutical economic boom in the next decade that could rival the high-tech explosion of the last 10 years. At a time when many people lay out $20 to $30 a month on cable television, it seems likely they'll pay as much for a lifestyle drug. Such enormous spending could double the size of the drug industry over the next five years, sending ripple effects through the entire economy.
Investors are already placing their bets. Pfizer is now trading at 54 times the consensus for expected 1998 earnings, above both Microsoft Corp.'s multiple of 52 times earnings and the Pacific Stock Exchange technology index multiple of 49. Suddenly, drug stocks are performing like those Wall Street darlings, the high-tech stocks. "The drug industry is hitting on all cylinders," says Cowen & Co. analyst Stephen M. Scala.
The whole focus of the industry is undergoing dramatic change. Until recently, most research was aimed at curing life-threatening or severely debilitating illnesses. But the new megadrugs target medical conditions that are somewhere between painful and uncomfortable. Treatment could even be considered optional for some. Impotence is only the most sensational of these so-called lifestyle conditions. Hundreds of millions of dollars are also being poured into efforts to discover safe and effective treatments for obesity, anxiety, memory loss, depression, incontinence, and arthritis. Cures seem remote. But drug companies are working up medicines that may hold these ailments in check if taken regularly for a lifetime--the surefire ingredient for a huge-selling drug.OPEN DOOR. The industry hasn't given up on research into more serious diseases. But for these diseases, an emphasis on prevention could generate mega- bucks as well. It's not a very hard sell to get someone to take a pill every day for decades if it could prevent, say, cancer, stroke, or Alzheimer's. Eli Lilly's Evista is the preventive model every drug company would like to emulate. The drug, which blocks cancer-causing estrogen in the breast while increasing bone mass, won approval last December for the treatment of osteoporosis, a weakening of the bones that affects 18 million women in the U.S. Now, recent clinical data indicate the drug may also prevent breast cancer in high-risk women--an additional 29 million potential customers. Evista's annual sales, if approved for both purposes, could easily triple the $1.2 billion it's estimated to reach by 2001 for osteoporosis alone. "This has really opened the door to the pharmaceutical industry to exploit preventive maintenance therapies for a whole range of diseases," says V. Craig Jordan, director of breast cancer research at Northwestern University.
This new class of drugs raises a lot of questions. Who will pay, for example. It's not a hard call for an insurer to pony up for a drug that may prevent osteoporosis, but not so clear when an ailment's biggest impact is on one's lifestyle. Many insurance companies are already balking. And, although the side effects produced by medicine are worth the risk when the diseases are life threatening, the calculus is different when the outcome is merely lifestyle-enhancing.
Even if insurers refuse to reimburse for Viagra in some cases, it may not matter to fans of the little blue pill. They're likely to pay for it themselves. "Viagra is special," says Salomon Smith Barney analyst Christina Heuer. "It's the epitome of a brand- new market.""AMAZING." How big is the market? Who knows? It's not clear how many men may prove to be regular customers--or women, for that matter, who may also decide to try the drug. Heuer expects Viagra to soar to $2 billion in annual worldwide sales by 1999, rivaling the year-old cholesterol-reducer Lipitor, jointly marketed by Pfizer and Warner-Lambert Co., as the most explosive drug launch ever. Cowen's Scala, who conservatively estimates that Viagra sales will hit $2.5 billion by 2001, has laid out scenarios in which the drug could produce as much as $11 billion in annual sales by that year. In fact, if just 16 million people use it once a week, annual sales could hit $5.8 billion. But doctors say the average use rate would likely be closer to a dozen times a month.
Medical experts say that a big part of that market is normally potent men who are looking for enhanced sexual performance. "This is clearly being prescribed to a very large number of people whose primary problem is that they don't get along with their partner," says Dr. Sidney Wolfe, director of Public Citizen's Health Research Group.
For millions of men--perhaps as many as 30 million Americans, urologists estimate--who have suffered silently from an ailment that few would even talk about just a couple of years ago, the drug is a miracle. The $10 pill restores potency that may have been lost through such ailments as diabetes, hypertension, anxiety, or even simple aging. "It restores feelings I had forgotten were there," says a 63-year Texan who has been using it. "This is absolutely amazing, and I hate to say that."
Pfizer's competitors are already looking to improve on Viagra. The drug got its start as a potential angina treatment that, because it suppressed a key enzyme, facilitated blood flow into the penis. Industry executives say Pfizer rivals Merck & Co. and Bristol-Myers Squibb Co. are hard at work on similar compounds. Their challenge: to come up with medicines that don't produce such unwanted side effects of Viagra as the occasional headache, and less frequently, blue haze in the patient's vision. Many of the impotence treatments, including Viagra, are also being studied to see what, if anything, they might do for women.
Viagra is sure to be sharing the impotence market soon. Schering-Plough is expected to enter the market in 1999 with Vasomax, a pill developed by Zonagen Inc. that blocks receptors in the penis that prevent blood vessels from dilating. In 2000, a joint venture of Abbott Laboratories sand Takeda Chemical Industries Ltd. is expected to debut its so-far unnamed pill, based on a drug called apomorphine. Vivus Inc., a smaller contender, generated about $129 million in sales last year with a less convenient--though arguably more effective--pellet inserted in the urethra. Marketing of the pellet started in January, 1997. And Pharmacia & Upjohn Inc. sells an injectable form of the compound used by Vivus.
The fast entrance of competing drugs highlights a dramatic change in the pharmaceutical industry. Where once it took some 15 years to develop a new drug, advances in technology and the understanding of how cells work has allowed drugmakers to shave years off that incubation period. At warp speed, new technology allows chemists to test thousands of drug candidates in one day. And that's just the beginning: Drugmakers are now able to identify the specific receptors on many cells that attract disease-causing agents. By pinpointing those pieces, they hope to target their attacks on everything from cancer to viruses with amazing accuracy and few side effects.
All of these techniques are being marshalled to look for what could be the biggest lifestyle blockbuster--the next Prozac. The pioneering antidepressant Prozac, introduced in the late 1980s, and its younger cousins Zoloft and Paxil, target the brain chemical serotonin. They are widely used for a whole host of ailments, from eating disorders to obsessive-compulsive behavior. The result: Annual sales for the three this year should top $6 billion. Drug companies are searching for a new psychotropic drug with even more uses and fewer side effects.SIZE COUNTS. There are lots of candidates. Merck is investigating a new class of drugs that block the action of a brain chemical called Substance P and could be used to treat depression and schizophrenia. Pfizer, in partnership with Neurogen Corp., is in early clinical trials with a drug that is aimed at GABA, a brain chemical involved in anxiety. If successful, the compound should have all the benefits of Valium, with none of the addictive qualities or other dangerous side effects. Given that medical experts estimate that 10% of the U.S. population suffers from chronic or acute anxiety, a safe and effective treatment could easily rival Prozac in sales.
The huge sums that must be spent to find these blockbusters will spawn dramatic changes in the industry. Drugmakers have long felt they needed size--especially massive research budgets--to produce the gigantic sellers. With billion-dollar drugs have come billion-dollar research-and-development budgets and, paradoxically, the need to chase still more megasellers to keep growth rates up. Look for a raft of mergers, affecting largely those companies that aren't able to deliver their own blockbusters, and a reordering of the type of ailments drugmakers focus on. Over time, old deals that collapsed amid ego clashes--such as the aborted joining of SmithKline Beecham PLC and American Home Products Corp. early this year and then of SmithKline and Glaxo Wellcome PLC--could get a second wind. Even huge players such as Merck--whose executives pondered a deal with Pfizer in the early 1990s--might be less resistant to approaching the altar.
A wave of patent expirations will further accelerate consolidation. While Pfizer's bumper crop of new drugs has kept it above the merger fray, Eli Lilly & Co. and Merck, among others, are more vulnerable because star drugs such as the antihypertensive Vasotec and Prozac will face cheap generic rivals within six years. Moreover, thanks to the technology-driven speedup in new drug discoveries, competitors can quickly follow innovative drugs to market with knockoffs aimed at the same disease. That's why Merck's Zocor, for instance, is losing share in the cholesterol-reducer market less than a year after the introduction of the wildly successful Lipitor. Lipitor's edge: greater efficacy.
Ironically, the drug now at the forefront of all this ferment was discovered more by serendipity than fancy chemistry. Pfizer researchers were investigating the compound, technically known as sildenafil citrate, for angina in men when they heard that study participants reported an unexpected side effect: The drug was improving their sex lives. "The guys in those early [impotence] trials didn't want to give it back," says Pfizer executive vice president John F. Niblack.
Mindful that occasional impotence--a natural effect of the slowdown that comes with aging--is a growing worry for baby boomers, the Pfizer researchers quickly launched full-scale clinical trials. Eventually, they tested it in over 4,500 men, aged 19 to 87, who suffered from "erectile dysfunction" as a result of causes ranging from anxiety to diabetes. After some five years of research, Pfizer found that the drug works in about 70% of sufferers. Taken about an hour before amorous pursuits, the drug becomes a powerful aid to natural stimulation. As nitric oxide builds up, Viagra enhances its erection-producing power by inhibiting another biochemical, PDE5, that works against arousal.
Viagra has entranced even veterans of the sexual-treatment field. "Nothing's perfect, but this is as close as you can get," says Dr. Uri P. Peles, director of the Beverly Hills Center for Sexual Medicine in Los Angeles. Peles, 57, has tried the drug as well as prescribed it for patients and says Viagra produces a long-lasting "rejuvenation" that couples find exhilarating. Peles' 56-year-old lover agrees, saying that the drug made Peles "a little more mellow, not as anxious."
Men who have been impotent for years are ecstatic over the drug. Barry Fribush, a marketing consultant in Bethesda (Md.), was rendered impotent by surgery for colon cancer a few years ago. He tried everything from a tree bark known as yohimbine to the injectable Caverject, but nothing was satisfactory. His urologist enrolled him in the trials for Viagra and he hasn't been disappointed since. "I have the kind of erections I had when I was 20 years old," he says.
Doctors say the drug could deliver some important side benefits. Men who shy away from discussing impotence could have more dire ailments that will turn up in medical assessments. Studies have shown that as many as 40% of men over age 40 have some degree of erectile dysfunction but most ignore the problem. "This drug will bring a lot of men into the office," says Dr. Kenneth A. Goldberg of the Male Health Institute at Baylor Health Center in Irving-Copell, Tex. "We can pick up other medical problems."
If they do, drug companies hope to be there with a cure. "We are very interested in drugs for the aging population," says Pfizer's Niblack. "That is where you should watch us--osteoporosis, strength, and fragility in the elderly, mental illness in the elderly, prevention of second heart attacks."
Industry executives figure baby boomers would gladly pay to pop a pill rather than diet, exercise, watch their cholesterol--or do without sex. Viagra costs little more than the price of a movie ticket--a small price to pay for many men whose joie de vivre can now get a chemical kick-start. "I don't smoke. I don't drink much. I could spend my money that way," says a 58-year-old Los Angeles resident who is a happy Viagra consumer. For drugmakers and their investors, finding new ways to encourage consumers to spend their money is the most powerful elixir of all.By Joseph Weber in Toronto and Amy Barrett in Philadelphia, with Michael Mandel and Jeff Laderman in New YorkReturn to top