Is Pfizer's Viagra Suffering with the Economy?

On the Pfizer (PFE) earnings conference call yesterday morning, Chairman and CEO Jeff Kindler kicked things off by calling this a "time of great uncertainty in the world economy and capital markets and significant challenges in our industry."

As a Pfizer PR person pointed out in an email following my earnings story on "Squawk on the Street" yesterday morning, worldwide Viagra sales in the second quarter were up 21 percent versus the same period last year, U.S. Viagra revenue was up a whopping 41 percent and international sales of the little blue pill rose nine percent. But I like to look behind the numbers, oftentimes much to the consternation of the above-mentioned PR person and his/her colleagues at PFE and at other drug companies.

I think I found an interesting trend, if you can call it that. I went back through Pfizer's quarterly earnings reports over the past year. In the second quarter of 2007 U.S. Viagra sales were $142 million. They jumped to $208 million in Q3-'07, remained flat in Q4, and then shot up again in the first quarter of this year to $220 million. But in the second quarter--and I'm trying so hard to avoid obvious puns and plays on words--U.S. Viagra revenue fell to $199 million. Which brings me back to Kindler's opening statement about the economy.

I wonder if the weak American economy is causing men to cut out Viagra from their budgets. Or maybe more of them are cutting their pills in half. I know that urologists and the companies that make the erectile dysfunction drugs -- Pfizer, Eli Lilly (LLY), GlaxoSmithKline (GSK), Schering-Plough (SGP), and Bayer (BAY) -- are quick to say that impotence can be a sign of much more serious health problems and that the drugs shouldn't be viewed as lifestyle or recreational products, but that's how most people I know think of them. At drugstore.com 30 25mg pills cost nearly 400 bucks and that's supposedly with a 20 percent discount!

We'll find out if I'm onto something, perhaps, when LLY reports its earnings tomorrow morning and whether sales of Cialis are also down or maybe it's simply stealing market share from Viagra.

Comments

[Hoppie]

I think the "shrinking" trend has to do with the "softness" in the economy causing men to focus their attention on "increasing" the size of their other assets rather than thinking about "stretching" their physical assets. I think they are just prioritizing their concept of what they should made "big"!!! Who knows???

[John65]

I think you are looking too hard for negatives to justify your job. Specific to your comment, generally YoY results are more meaningful than comparing random quarters. There may be some seasonality to Viagra results, or a random quarter may have been news driven (i.e., blindness news scare) which is relatively short lived.

[Atlex]

John65 is correct about seasonanality. It is not due to increases or descreases in prescribing, but it is due to seasonality of purchasing patterns by wholesalers--typically... purchasing more in the 1st quarter than the 2nd. A better indicator would be TRx and NRx. I'm sure Mr. Huckman could place a call to IMS, but this might destroy his hypothesis.