ANALYSIS <b>Corporate Case Study</b>: Healthy dose of PR helps Icos and Eli Lilly push Cialis

In touting the advantages of Cialis, the Icos-Eli Lilly joint venture launched an integrated campaign that first sought and got doctors' blessing for its new erectile dysfunction drug. Icos jumped onto the healthcare scene during the Super Bowl with a 60-second commercial hyping its new and improved solution to erectile dysfunction (ED), challenging the two dominant players on their own turf. Backed by Eli Lilly & Company, the newcomer's opening salvo - which cost an unconfirmed $3 million to $4 million - carried a low-key message for its pill, Cialis. It was the first time a TV ad for the drug was directed to consumers with information about its purpose and its specific attributes.

In touting the advantages of Cialis, the Icos-Eli Lilly joint venture launched an integrated campaign that first sought and got doctors' blessing for its new erectile dysfunction drug. Icos jumped onto the healthcare scene during the Super Bowl with a 60-second commercial hyping its new and improved solution to erectile dysfunction (ED), challenging the two dominant players on their own turf. Backed by Eli Lilly & Company, the newcomer's opening salvo - which cost an unconfirmed $3 million to $4 million - carried a low-key message for its pill, Cialis. It was the first time a TV ad for the drug was directed to consumers with information about its purpose and its specific attributes.

The ads were produced and paid for by the joint venture set up with Eli Lilly to develop and market Cialis, which began airing 15-second awareness spots during the NFL's conference championship games in January. But the impact of Icos' pitches apparently has a shorter lifespan than the vaunted impact of the pill they are promoting. Icos' somewhat generic advertising for its ED pill contrasted sharply with the macho ads for Viagra and Levitra. The Wall Street Journal, for one, says their soft sell fell flat. And Lehman Brothers analyst Tony Butler, quoted in Newsweek, says the commercial showing a couple in side-by-side bathtubs "could have been selling soap." Analyst Paul Latta, with McAdams Wright Ragen, says he is encouraged that Icos will "carpet-bomb" its Cialis commercials to make it a household name, although he is disappointed with Icos' diminishing R&D. However, Icos sales and marketing VP Leonard Blum has other plans. Although the company continues to use advertising - together with Eli Lilly, it's spending an estimated $100 million on an ad blitz - its fortunes cannot continue to rise on advertising alone, particularly when the response has been lukewarm at best. "Clearly, the challenge also calls for a major PR drive," Blum says. "We're a small company, [but] we intend to be competitive." The 14-year-old company has 650 research and administrative staff members on its campus in Bothell, WA, a Seattle suburb, but no PR department. "Our biggest challenge is competing with two of the largest pharmaceutical companies in the industry," says Blum, 42, a veteran of 13 years with Merck. "That's never happened before - a biotech company going toe-to-toe with such pharmaceutical giants. Fortunately, we're benefiting from our partnership with Eli Lilly. Their marketing prowess is going to be influential. As we grow, we will, of course, create a PR department of our own. Meanwhile, we both work with MS&L's New York office, which also handles media relations and organizes our press briefings." Icos' IR director Lacy Fitzpatrick, who doubles as the company's PR spokeswoman, also issues a continual stream of financial data, including SEC filings, and also works with analysts. Getting the message out Because Icos does not yet have a PR department and has no other product on the market besides Cialis, news and information about the new drug come from Eli Lilly, whose news releases report clinical data presented at medical meetings. Eli Lilly declined to provide details on its PR strategy. Eli Lilly, which helped run large clinical trials and win FDA approval, is the sole manufacturer of Cialis. The two companies' deal gives each an equal share of sales and profit in North America and Europe, where both companies market the drug. They collaborate on media relations concerning Cialis, with Lilly handling the lion's share of PR. Lilly also has rights to market it in all other territories. Icos tries to focus on key differentiators that will easily catch the media's attention, such as Cialis having fewer side effects than its rivals. It has what Newsweek calls a 36-hour "nookie window," compared with the five-hour effectiveness of the other pills. In Europe, where Cialis was first introduced in February 2003, it has become known as "Le Weekender." Icos has introduced Cialis in 50 countries, including Australia, Brazil, and Canada. "In the year that Cialis has been available in Europe, we have seen that men and their partners appreciate it because it gives them a broad window of activity so they can choose the moment of intimacy that is right for them," says Mark Barbato, executive director and product team leader of the primary care products group at Eli Lilly. "They have more time." And that completely changes the paradigm of how these drugs are used, adds Blum. Marketing is geared toward getting people to think in a whole new way of using these drugs. And getting that message out is imperative, says Icos CEO Paul Clark, Product labeling worldwide reinforces how Cialis is different, he explains, which clearly has captured the attention of some men, as market share in some countries exceeds 25 percent. But Icos and Lilly take the message not to men needing a little help, but to the doctors who can prescribe it for them. One reason for focusing on physicians, Blum says, is that they evidently weren't quite comfortable with Pfizer, Bayer and GlaxoSmithKline pitching Viagra and Levitra directly to consumers. "There's a long-running debate within the industry about how important it is to get the doctors on your side before talking to consumers," Blum notes. "Studies showed some doctors resented it because the two giant companies began running ads the week after approval, before they had time to learn about the product themselves. "Our principal target is doctors, and our strategy was to make sure they were comfortable with our clinical data and getting their enthusiasm before we turned on all of the consumer promotion," Blum adds. "We need to get them to prescribe Cialis for men who haven't yet tried it." And that requires personal contact by medical detailers. Clark recently told investors at the JP Morgan Healthcare Conference, the biotech industry's biggest annual investor event, that Icos and Lilly sales reps were calling doctors to pitch Cialis the day after its approval by the Food and Drug Administration in November, and the drug was shipped to 80% of US pharmacies within two weeks. Icos has also been reaching doctors via satellite news conferences, with panels of urologists and other experts answering their questions. Blum points out that physicians cite peer-to-peer programs and medical journals as having the most influence on them. "So we took a different approach," Blum says. "And once we got the doctors on our side, we started the consumer activity. Our partnership with the PGA in sponsoring the Cialis Western Open Golf Tournament through 2006, for example, is to emphasize the image of golfers as relaxed and confident. We chose the leisurely approach in contrast to Levitra's, which is associated with football, and to Viagra's, which has linked its promotional efforts to race-car driving." Cialis is also an official partner of both the PGA Tour and Champions Tour through 2007. Working toward profitability The company has been working on a number of other products, including IC485, which recently started a mid-stage clinical trial in emphysema and bronchitis. It's also developing treatments for serious, unmet medical conditions, such as chronic obstructive pulmonary disease and cancer. On the down side, it dropped RTX, an experimental treatment for frequent and painful urination, after clinical results showed no statistical significance. Together, Icos and Lilly lost more than $125 million last year, slightly less than the year before, when it lost more than $161 million. The Seattle Times reporter Luke Timmerman points out that the venture is likely to spend $600 million this year peddling Cialis. On a recent conference call with analysts, Icos did not confirm or deny the spending figure, Timmerman adds. But Icos did say it expects the partnership to lose $235 million to $275 million this year. Nevertheless, the company expects Cialis to be a profit engine by next year, the joint venture to be profitable in 18 months, and Icos to be profitable in mid-2006, says Blum. Latta does not own the stock, but he rates it a "buy." "Three years from now," he says, "Seattle is going to be known for coming up with good coffee and good sex." PR contacts Icos VP, sales & marketing Leonard Blum Icos IR director Lacy Fitzpatrick Eli Lilly US team leader for Cialis Matthew Beebe Eli Lilly executive director, product team leader of the primary-care products group Mark Barbato

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