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Viagra's lure
Pfizer to offer free impotence treatment pills to loyal customers in effort to fend off competitors.
April 14, 2004: 2:27 PM EDT
By Andrew Stein, CNN/Money staff writer

NEW YORK (CNN/Money) - In an effort to hold its market share in the increasingly competitive erectile dysfunction (ED) market, Pfizer is now offering a free Viagra prescription after users buy the first six.

Pfizer (PFE: Research, Estimates) said Wednesday that the Viagra Value Card program is available to men who pay for their entire prescription, or the part of it not covered by insurance, out of their own pocket, but not to those using co-payments or Medicare.

"We thought this was a good time to reward Viagra users and provide some incentive for them to stay on," said Pfizer spokesman Daniel Watts.

Although it was the first commercially available ED drug to hit the market six years ago, Viagra's dominance is being challenged by Levitra from GlaxoSmithKline (GSK: Research, Estimates) and Bayer, and Cialis from Eli Lilly (LLY: Research, Estimates) and ICOS (ICOS: Research, Estimates).

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Of the newcomers, Cialis is making the biggest splash and has become the main threat to Viagra, according to Robert Hazlett, analyst with SunTrust Robinson Humphrey.

"Cialis is the better mousetrap," he said. "People like its 36 hour impact and the fact that it's not affected by food intake. These drugs are pretty expensive at about $10 a pill and offering a discount for Viagra could counter that. But in the end, Cialis and Viagra are different."

Pfizer's Watts countered that Cialis' longer potency doesn't make it better because "Viagra is there when you want it, not when you don't."

As for the impact of food on Viagra, Watts noted that users can take the drug with food and alcohol, but it does have a delayed onset with foods with high fat content.

Whether users prefer Cialis' differences or are just interested in trying a new drug, its been gaining market share at Viagra's expense.

Cialis accounted for about 19 percent of all the new prescriptions in the class as of April 2, according to Hazlett, citing figures from IMS Health. That's up from about 10 percent of all new prescriptions at the beginning of the year.

Meanwhile, Viagra accounted for about 65 percent of all new prescriptions as of April 2, down from 78 percent at the beginning of the year, Hazlett added.

Despite Viagra's drop in market share, it probably won't hurt the company's bottom line, said John Roberts, analyst with Susquehanna Financial Group.

"Of the two new entrants, Cialis is definitely taking the market share," he said. "But it probably won't have an impact on Pfizer's EPS because it's not happening faster than they thought. The discount is a good way to hold on or even recapture some market share."

Viagra is still a huge drug for Pfizer, as it brought in sales of about $1.9 billion in 2003, up 8 percent from a year earlier, according to the company's annual regulatory filing.

That $1.9 billion is good for sixth place on Pfizer's list of best selling drugs, "and there aren't many of that size in any company," Hazlett noted.

Hazlett said he has a "buy" rating on Pfizer, but the erosion of Viagra's market share is one of his main concerns about the company, along with a longer-term concern about generic competition for its top selling drug Lipitor.  Top of page


--SunTrust's Hazlett does not own shares of the companies mentioned, but his firm has done banking for ICOS. Roberts does not own shares of the companies and his firm does not do banking.




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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.