MONSANTO: Squaring up for drug wars
Financial Times
February 5, 1999
Only in the drugs industry can the fate of a huge company be determined by the structure of a tiny molecule. Nowhere is this better illustrated than in the soon to start battle over the potential $5bn market for Cox-2 inhibitors, a new class of molecule, or drug, that appears to have ended the 60-year search for a safe aspirin.
Not since the mid-1980s, when Glaxo launched Zantac, an anti-ulcer drug, to challenge SmithKline's Tagamet, has a marketing war been so eagerly awaited.
Last month Monsanto, the US life science company, won approval from the Food and Drug Administration to market Celebrex, a Cox-2 inhibitor that combats arthritic pain and inflammation without causing the stomach ulcers often associated with aspirin and ibuprofen. In its second week on the market, 45,000 prescriptions for Celebrex were written, making it the most successful drug launch after Viagra, Pfizer's anti-impotence pill.
But Monsanto, which is co-marketing with Pfizer, will not have the lucrative market to itself for very long for Merck, the world's biggest drugs company, will launch Vioxx, a Cox-2 of its own within months. Each drug, which will be priced higher than the non-steroidal anti-inflammatory drugs (NSAIDs) such as ibuprofen, is expected to notch up sales of $2bn within four years.
The scrap over Cox-2's is expected to be mean. "This is going to be the most promoted product ever in the history of the US pharmaceuticals industry," says Dick De Schutter, chief executive of Searle, the Monsanto drugs unit that developed Celebrex.
For Monsanto, whose merger talks with American Home Products ended bitterly last year, Celebrex's success is vital. Celebrex is the fuel that could guarantee the growth of Monsanto as an independent company," says Sergio Traversa, pharmaceuticals analyst at Mehta Partners in New York.
Searle admits a lot is riding on Celebrex, which could practically double the drug unit's sales of $2.8bn.
For Merck too, the stakes are high. Although its pharmaceuticals sales of $15bn dwarf those of Searle, Merck faces an earnings squeeze over the next few years as several of its leading products lose protection from generic competition. Analysts estimate that could mean lost revenue of up to $3.5bn in 2002.
"We've got big drugs going off patent, so we need big drugs to replace them," says Raymond Gilmartin, Merck's chief executive.
Moreover, Merck recently announced a setback in its "Substance P" programme to develop a potentially blockbuster anti-depressant. That makes the performance of Vioxx even more crucial.
In clinical terms, there appears little to separate Celebrex from Vioxx. Both work by blocking cyclo-oxygenase-2, an enzyme responsible for pain, without inhibiting the virtually identical cyclo-oxygenase-1, which protects the stomach lining. NSAIDs block both enzymes, sometimes leading to serious stomach lesions, and the deaths of an estimated 16,000 people in the US each year.
Celebrex starts with one advantage: it has beaten Merck to market. "It's critically important to be first," says Al Heller, Searle's chief operating officer. Searle hopes that, if it can convince patients of the benefits of its Cox-2's first, Merck will find it hard to persuade them to switch.
Both companies are expected to employ huge salesforces, to give away free samples and to take out television and magazine advertising slots.
When Vioxx is launched, probably by mid-1999, analysts expect the Merck machine to crank into action. "The basis of competition will be the clinical data that we have, and how much [product] differentiation we can establish," says Mr Gilmartin.
The initial clash is just the start. Both companies hope to win regulatory approval for Cox-2's as a treatment for other inflammatory conditions, such as colon cancer and Alzheimer's. And both are working on second-generation drugs, safer and more potent than the first.
They hope to get those on the market in 2001, before Johnson & Johnson, a US rival, launches a second-generation Cox-2 of its own, licensed in from Japan Tobacco. Roche and Novartis of Switzerland, as well as Glaxo Wellcome are just some of the companies believed to be working on Cox-2 programmes.
Mr Gilmartin is not worried by competition: "This is a whole new class of drug and you've got two guys out there within months of each other. That sets up a very interesting competitive rivalry. And that can only be good for the patient."
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