OTC Cialis? Pfizer’s Viagra Will Be Just Fine

Eli Lilly and Sanofi have an ED idea that might spook Pfizer investors, but there's little to worry about

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OTC Cialis? Pfizer’s Viagra Will Be Just Fine

An over-the-counter erectile-dysfunction solution? While it sounds like a setup for several possible punchlines, to Viagra maker Pfizer (PFE), it’s no laughing matter.

Last week, Eli Lilly (LLY) and Sanofi (SNY) floated the possibility of the duo launching an OTC erection aid once the erectile dysfunction drug Cialis — currently owned by Lilly — loses much of its U.S. patent protection in 2017.

viagra OTC Cialis? Pfizer's Viagra Will Be Just FineWhile it’s nowhere near being a done deal at this point, the marketability of an over-the-counter version of Cialis is clear. Not only would the OTC erectile-dysfunction drug presumably cost considerably less than its prescription-based counterpart, but it would sidestep a potentially awkward conversation between a man and his doctor … by replacing it with the awkward silence between a man and a cashier.

For investors, though, it all begs one question: What kind of revenue opportunity would an over-the-counter ED treatment mean for Sanofi and Eli Lilly?

Viagra and Cialis Are Blockbusters, For Now

Erectile-dysfunction is a big business. In 2013, category-leading Cialis generated $2.2 billion in global sales, while Viagra generated approximately $1.9 billion in revenue for Pfizer.

All told, the world bought $4.3 billion worth of ED drugs in 2012.

Problem: Once drugs lose patent protection, annual sales of that drug typically plunge 90% as generics chip away at revenue, and both Cialis as well as Viagra are on the verge of falling off the patent cliff. In fact, Viagra already lost patent protection in Europe last year and will lose most of its U.S. patent protection in 2019. Meanwhile, Cialis will lose the bulk of its U.S. and European patent protection in 2017.

The usual course of action to milk the last shred of value from a drug that’s lost patent protection is to lower its price and/or produce an OTC version of it, as Eli Lilly and Sanofi are considering for Cialis.

It’s too soon to assume the best for Lilly, though, or assume the worst for Pfizer.

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While the introduction of an OTC Cialis seems disruptive on the surface, there’s a unique reality within this particular race that could lead to an unexpected outcome.

If there was any category of drugs that could continue to command a premium, ED drugs may well be it.

Most men wouldn’t admit it. Indeed, most men might not even recognize it about themselves. But, the typical male is brand-loyal and resistant to change. In the same vein, the one place even the cheapest of guys is unwilling to feel like he’s skimping is the erectile arena; only an established brand name like Viagra or Cialis is going to be trusted by most when it comes to a man’s most important asset.

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Article printed from InvestorPlace Media, http://investorplace.com/2014/06/viagra-threatened-prospect-otc-cialis/.

©2014 InvestorPlace Media, LLC

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