Life after Vioxx - $2.5 billion up for grabs?
SummaryLast week, Merck & Co sent shockwaves through the pharmaceutical market with the announcement that it had voluntarily withdrawn its blockbuster arthritis drug Vioxx. Datamonitor's Adele Schulz examines the likely impact of this event, for the remainder of 2004 and beyond, on both Merck and its rivals...
In the days since Merck's action, speculation has been rife as to the implications for the remainder of the COX-2 market. What is certain is that existing pipeline products will be subjected to additional FDA scrutiny, most likely delaying the US launch of Novartis's Prexige (lumiracoxib) and Merck & Co.'s Arcoxia (etoricoxib), particularly as the emergence of Vioxx's (rofecoxib) cardiovascular side effects only occurred after 18 months means lengthy clinical trials are likely to be needed for approval of these products. What is less certain is who will gain from the $2.5 billion gap in the market left by Vioxx's exit.
Limited growth for COX-2 market?
Prior to withdrawal of Vioxx, Datamonitor had forecast strong growth of the COX-2 market, largely driven by launch of second generation products Prexige and Arcoxia, and strong uptake of Pfizer's second generation COX-2, Bextra (valdecoxib). With the higher potency, and lower gastrointestinal side effect profile of Vioxx compared to Celebrex (celecoxib) being speculatively linked to its poor cardiovascular side effect profile, physicians may now be reluctant to prescribe the second generation products.
While a significant proportion of existing Vioxx users are expected to switch to another COX-2 product, particularly those that had been prescribed Vioxx as second line therapy after having failed on traditional NSAID therapy, Celebrex is expected to be the key beneficiary of this, and not the newer drugs.
Pfizer itself has reinforced this view, by immediately responding to Merck's announcement by turning the spotlight on Celebrex, re-affirming the drug's safety profile and guaranteeing its availability for current Vioxx users, while making little mention of Bextra. This action is particularly intriguing considering Pfizer's previous strategy had been to position Bextra, not Celebrex, against Vioxx. Perhaps the company feels that in the current environment of heightened safety fears, Celebrex's key marketing message of long-term experience and safety is more appropriate than Bextra's "powerful medicine" tag.
A key uncertainty that remains is to what extent this event will drive physicians to reconsider their use of COX-2 products, which have come under fire recently as many healthcare payors, such as insurance companies in the US and NICE in the UK, have questioned whether their high cost, compared with traditional NSAIDs, is justified. The key defense of leading players Merck & Co and Pfizer has been that the lower incidence of gastrointestinal complications associated with COX-2 products actually increased the cost effectiveness of these medications. With suggestions that Celebrex is inferior to Vioxx in this respect, the removal of Vioxx from the market may see physicians question this defense, and increasingly opt for traditional NSAIDs plus a proton pump inhibitor (PPI) for patients at risk of gastrointestinal side effects.
Prior to the withdrawal of Vioxx, Datamonitor forecast the COX-2 market (defined as Bextra, Celebrex, Vioxx, Dynastat, Arcoxia, Prexige and Mobic), to grow at a CAGR of 2.8% between 2004 and 2010, reaching sales of $9,099 million. This forecast has now been reduced to $7,056 million in 2010, representing an average annual decline of 0.4% between 2004 and 2010, as a proportion of Vioxx patients leave the COX-2 market, and with lower uptake of premium priced products Bextra and the pipeline COX-2s among new patients now anticipated.
Celebrex and Mobic to see greatest benefit
Although the COX-2 market is now likely to remain static, two key COX-2 products are expected to directly benefit from withdrawal of Vioxx. Forecasts of both Pfizer's Celebrex and Abbott/ Boehringer Ingelheim's Mobic (meloxicam) have been increased following this event.
The key factor driving Mobic's success lies in its differentiation from the remainder of the COX-2 market. While the drug has some selectivity for cyclo-oxygenase II, and therefore may be associated with a lower rate of gastrointestinal adverse events than other NSAIDs, it is not a specific COX-2 inhibitor. Abbott and BI may therefore be able to distance the drug from association with cardiovascular side effects in a way that some of the true COX-2s may struggle to. Although this product is expected to suffer from generic competition in 2005, until that time, sales are expected to be boosted by patient switching from Vioxx. Forecasts for 2005 sales for this product are $996 million, compared to the previously forecast $442 million.
In the case of Celebrex, Pfizer's marketing strength will ensure this product is a key beneficiary among those patients currently taking Vioxx that will be switched to another COX-2. The 2005 forecast for this drug has raised from $2,472 million to $3,677 million, as it benefits not only from direct patient switching from Vioxx, but also from reduced competition from Bextra and other new COX-2s.
Initial data, according to a report in the Wall Street Journal, suggests that of the 2.4% of Vioxx users that switched drugs within 24 hours of the announcement, 58% received either Celebrex or Bextra.
Aside from Pfizer and Mobic, other companies that stand to benefit from the withdrawal of the $2.5 billion drug include generics companies that manufacture a range of older NSAIDs such as ibuprofen and naproxen. An article in Time Magazine published following Merck's announcement, stressed to the US public that there are a range of options available, besides switching to another COX-2 inhibitor.
Merck v Pfizer - diverging fortunes?
With Vioxx off the market, Merck will lose one of its only two blockbuster drugs not to face patent expiry in the short to medium term, with Singulair (montelukast) being the other. Without Vioxx, and with Arcoxia's prospects being significantly reduced, Merck's ethical sales are forecast to fall at a faster CAGR of 1.7% to 2010, recording sales of $20,502 million in 2004, $22,139 million in 2007 and down to $19,969 million in 2010.
Meanwhile, Pfizer's ethical sales forecast has received a boost from this event, and is now forecast a CAGR of 2.7% between 2003 and 2010, taking ethical sales to $47,649 million, up slightly from the previous forecast of 2.6% taking sales to $47,569 million. Pfizer is also expected to suffer from generic competition to several of its major brands over the forecast period, with all of its nine blockbuster products in 2003 facing patent expiry, except for Viagra (sildenafil) and Celebrex. Pfizer will therefore be watching development of the COX-2 market keenly following this event, and will do all it can to protect revenues in its COX-2 franchise.
The competitive positioning of Pfizer and Merck & Co. has diverged over the past few years and the loss of Vioxx will accelerate this process. From being the number one pharmaceutical company in terms of ethical sales in 1999, by 2002, Merck had dropped to third place, $7.9 billion behind GSK and $6.8 billion behind Pfizer.
Then, in 2003, a $17 billion gap opened up between Merck and previous nearest rival Pfizer, following the latter's acquisition of Pharmacia. By 2010, Merck was forecast to fall to 7th position, but following the withdrawal of Vioxx, it is now expected to drop to 9th position, as a combination of loss of Vioxx and generic competition to its other leading brands takes its toll.
Merck & Co. has historically been resistant to a merger, and as recently as November 2003, it was busy denying rumors that it was to acquire partner Schering-Plough. However, M&A may now be the only way for Merck to achieve growth in the increasingly competitive pharmaceutical market. Schering-Plough, with its ethical sales forecast to grow at a CAGR of 5% between 2003 and 2010 (well above the average of 2.9% for the top 10 pharmaceutical companies), would indeed boost Merck's growth prospects. Whether Merck will be in a position to make any major acquisitions in the light of Vioxx's withdrawal and the likely litigation costs associated with this is another matter.