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Vytorin sales rise during debut year.
Analysts bullish on cholesterol combo drug, but future uncertain with Zocor's impending patent loss.
June 20, 2005: 3:50 PM EDT
By Aaron Smith, CNN/Money staff writer

NEW YORK (CNN/Money) - Sales for Vytorin, a cholesterol-treating combination produced by Merck and Schering-Plough, have grown since its market debut last summer, but the drug's real test lies ahead, analysts say.

"Vytorin has been plowing ahead," said Michael Krensavage, analyst for Raymond James & Associates. "Vytorin has been on a very steady march and it seems to be seizing more share."

Vytorin contains Zetia, a drug produced by Schering-Plough that inhibits absorption of cholesterol into the liver and intestine, and Zocor, the Merck blockbuster that cuts cholesterol. Zocor, Merck's biggest drug with $5.1 billion in 2004 sales, is scheduled to lose patent protection in mid-2006. The loss of Zocor's exclusivity could help clear the way for Vytorin to achieve blockbuster status, or it could dampen sales as new patients gravitate towards generic Zocor, analysts say.

New Jersey-based drug makers Merck (down $0.02 to $32.20, Research) and Schering-Plough (up $0.75 to $20.13, Research) are partners, splitting sales of Vytorin, which totaled $132 million in 2004 and $179 million in the first quarter of 2005, and Zetia, which totaled $332 million in the first quarter of 2005. Schering-Plough launched Zetia in the United States in November, 2002 and Vytorin entered the market in July, 2004. The partners have split sales on both these drugs since the debut of Vytorin.

According to Robert Hazlett, analyst for Suntrust Robinson Humphrey, Vytorin has an 5.5 percent share of the cholesterol market, up from 3.5 percent in December 2004. Zetia remained constant with a 6.5 percent share since last summer. Zocor had a 17 percent share before Vytorin's launch, and has recently dropped to about 14 percent.

As sales of the new drugs climbed higher, Krensavage ramped up 2005 projections, to $1.4 billion for Zetia and $958 million for Vytorin, from his original projections of $1 billion and $600 million, respectively.

"Zetia has held more share than we expected," said Krensavage. "We expected cannibalization of Zetia because of Vytorin, but that hasn't been happening."

As sales of Zetia and Vytorin have increased, Zocor sales have dropped off slightly, partly because Merck is not aggressively promoting it in its last full year of patent exclusivity, analysts say. Meanwhile, Vytorin has enjoyed the status of a two-for-one drug, while Zetia sales and market share have increased, according to analysts.

"Vytorin looks like it's actually cannibalizing Zocor and Pravachol," said Al Rauch, analyst for A.G. Edwards.

Rauch said that patients taking Lipitor, Pfizer's (down $0.04 to $28.74, Research) cholesterol-reducing drug and the world's leading blockbuster with $10.8 billion in 2004 sales, will sometimes add Zetia to their medication to get the drug's cholesterol-blocking effects. Meanwhile, Zocor patients are leaving that drug behind in favor of Vytorin. Bristol-Myers Squibb's (down $0.07 to $27.84, Research) cholesterol-class blockbuster, Pravachol, is also feeling the pressure, Rauch said.

"Instead of adding Zocor to Zetia, [Zocor] patients just take Vytorin," Rauch said. "Pravachol has been used less and less and Vytorin has been benefiting from that."

So what happens when Zocor goes generic? Analysts believe that all name-brand cholesterol drugs will feel the bite as patients switch to lower-cost generics. Scott Henry, analyst for Oppenheimer & Co., believes that Zetia sales will also slow down, because Zocor's patent loss will dampen new patients' enthusiasm for any name-brand drug in the cholesterol class.

Zetia's sales growth has been riding on its favorable price model, which is "almost like when you're buying Zetia you're getting Zocor for free," said Henry. But the appeal of "free" Zocor as a means of selling Zetia will lose potency when Merck's blockbuster goes generic, said Henry.

"My guess is that patients on Vytorin will stay on it, but the new patient market will stay competitive, because a lot of [medical] plans will say, 'try generic Zocor'" instead of Vytorin, said Henry.

Adam Schechter of Merck, vice president and general manager of the Merck/Schering-Plough pharmaceuticals venture, said Vytorin will successfully compete against generics because it meets the aggressive physician guidelines in reducing low-density lipoprotein cholesterol, also known as "bad" cholesterol.

"I believe that Vytorin will continue to be successful in the marketplace even after generics are made available," said Schechter. "Doctors are looking for powerful LDL cholesterol reduction right from the start."

None of the analysts own stock in the companies mentioned here and the companies do not have business relationships with them.  Top of page


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