The Cholesterol Sweepstakes
The pharmaceutical industry is in dire straits these days. Devastating patent expirations are hitting, product pipelines are virtually empty, and complaints about high drug prices keep escalating. Consequently, Big Pharma has a lot riding on the continued demand for statins, the cholesterol-lowering drugs that are the lifeblood of millions in this overweight land. These heart-protecting medicines are money machines, bringing in $19 billion in revenues a year.
No surprise, then, that the battle over such riches is about to intensify. Merck & Co. (MRK ) and Schering-Plough Corp. (SGP ) have joined forces behind Zetia, a new type of cholesterol-lowering drug, meant to work with statins, that could win approval this month. The two companies will market Zetia together and are also readying a pill that would combine Zetia with Merck's Zocor, a statin currently pulling in $7.5 billion a year in sales, to create a superpotent cholesterol-fighting agent. This combination therapy, which is still undergoing clinical testing, is expected to hit the market in 2004. To fight off this challenge, Pfizer Inc. (PFE ) is gearing up a vigorous defense of Lipitor, its all-time best-selling product and the statin leader with yearly sales of $7.9 billion.
The potential spoiler? AstraZeneca (AZN ), which has a potent new statin called Crestor that's now under review by the Food & Drug Administration. An approval has been delayed over concerns about possible side effects, but Crestor could yet become a contender in 2003. "This is the biggest market for many major pharmaceutical companies," says Richard T. Evans, an analyst at Sanford C. Bernstein. "There will be a fight for survival."
None of the players in this contest can afford to lose. For Pfizer, the continued growth of Lipitor is critical to meeting Wall Street's double-digit earnings growth expectations. Schering-Plough desperately needs Zetia to be a hit, to partially offset the expected blow to earnings next year when the company's blockbuster allergy medicine, Claritin, comes off patent. As for Merck, the success of Zetia-Zocor may soften the blow when Zocor's patent expires in 2006. "This Zetia franchise is everything for Merck," says Dr. John R. Borzilleri, portfolio manager at State Street Research & Management.
The contenders also are hoping that the new drugs will put an end to a worrisome trend in statin demand. Market research firm IMS Health (RX ) says that growth in U.S. statin prescriptions slowed to 8% this year, from 20% just two years ago. This comes despite a recent revision in guidelines from the National Institutes of Health that nearly tripled the number of Americans suitable for cholesterol-lowering therapy, to 36 million. Analysts attribute the slowdown, in part, to higher co-payments for prescriptions.
Merck and Schering are counting on an exciting new way to fight cholesterol to reignite demand. Statins work by blocking the action of an enzyme that plays a critical role in producing cholesterol in the liver, while Zetia prevents the absorption of cholesterol in the intestine. But Zetia on its own is not as powerful as the statins, which can lower blood levels of LDL cholesterol--the "bad cholesterol"--by 40% or more. Zetia lowers LDL by just 18%.
Many observers believe the real medical--and financial--payoff for Zetia is likely to come from combining it with statins. Doubling the dose of a statin only lowers bad cholesterol by an additional 6% or so, according to doctors. High statin doses can also cause a rare but potentially life-threatening side effect called rhabdomyolysis, in which muscle cells break down, causing pain and, in rare cases, organ failure. Adding Zetia to a low statin dose can turbocharge its efficacy, bringing cholesterol down an additional 25% or more.
Merck and Schering-Plough hope to market the Zetia-Zocor combination as a superstatin, offering maximum cholesterol reduction with minimal risk. "The timing for Zetia couldn't be better," says Dr. Michael H. Davidson, director of preventive cardiology at Rush Presbyterian St. Luke's Medical Center in Chicago, who has conducted some Zetia trials.
The two companies still face a marketing challenge, however. They believe a therapy of Zetia plus a low-dose statin poses less risk of muscle side effects than a high-dose statin. But Cecil B. Pickett, head of Schering's research and development operation, acknowledges that no study has been done yet proving this claim. Because deadly muscle side effects are so rare, it would be difficult and costly to construct such a trial, requiring 20,000 or more patients. Pickett believes the safety benefit will become evident over time.
Many on Wall Street are skeptical. Sanford C. Bernstein's Evans warns that without a study proving that point, the FDA may still require a warning about muscle-related side effects when Zetia is used with a statin. And that, he contends, could threaten Zetia's success. Stephen M. Scala, an analyst at SG Cowen Securities Corp., expects total Zetia and Zetia-Zocor sales to hit just $1.3 billion in 2006. "Zetia won't have the same impact on this field that the statins did," says Dr. Irving M. Herling, associate professor at the University of Pennsylvania School of Medicine.
The wild card in the statin equation is AstraZeneca's Crestor. The drug has been delayed at the FDA, analysts figure, because of worries about the risk of rhabdomyolysis. Still, many on Wall Street are betting that Crestor hits the market in the second half of 2003. But if side-effect concerns lead the FDA to approve only low doses, "competitors will try to make mincemeat of the product," warns Norman M. Fidel, health-care portfolio manager at Alliance Capital Management LP.
First in line with such an assault would likely be Pfizer, which is determined to protect Lipitor's lead position. The company spent nearly $60 million advertising Lipitor to consumers in the first half of 2002, vs. $26 million in the same period last year. More than 200 studies of Lipitor are also under way, examining everything from whether the compound can reverse the effects of heart disease to whether it can fight osteoporosis. On Oct. 10, data from a 20,000-patient study were released showing that Lipitor reduced heart attacks and strokes in people with only slightly elevated or normal cholesterol but with high blood pressure.
And Pfizer may have another weapon in its arsenal. The company is developing a compound that raises levels of HDL, the good cholesterol, in patients. Analysts expect a pill combining that drug with Lipitor could be launched by 2006, creating what Alliance's Fidel calls "the ultimate drug for this class." That's sure to trigger yet another round in this high-stakes battle over patients' hearts.
By Amy Barrett in Philadelphia