Companies Testing Viagra Rival

Eli Lilly and ICOS are teaming up to create a sexual dysfunction drug similar to the wildly popular Viagra, the companies reported Thursday.

The pharmaceutical companies said their 50-50 joint venture will develop an oral drug to treat both male and female sexual dysfunction. In a statement, Eli Lilly (LLY) and ICOS (ICOS) said a drug used to treat erectile dysfunction has already been through European trials. There was no mention, however, of how the drug would be used to remedy sexual dysfunction in females.

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Eli Lilly (LLY)

Eli Lilly and ICOS said the lead compound for the drug, IC351, is in its Phase 2 stage to test its safety. In Europe, the compound "showed significant improvement relative to placebo-treated patients," the companies said.

ICOS shares jumped 7/8 to 18 5/8, while Eli Lilly stock advanced 11/16 to 79.

The drug seems to mimic Pfizer's Viagra pill, which was released in April and proved itself as the best-selling drug ever. The Food and Drug Administration reported in August that 69 people died after taking the drug, but maintained that Viagra was still safe.

Under terms of the Eli Lilly and ICOS joint venture, the companies said ICOS will get $75 million up front and payments based on the progress of 1C351. Eli Lilly will keep cash running into the joint venture for three years.

Eli Lilly said these two costs will mean a one-time after-tax charge of about 7 cents a share. Separately, Eli Lilly said its 1998 tax rate was reduced to 23 percent from 25 percent due to lower taxes outside of the United States and will benefit the third quarter.

The consensus estimate is for the drug giant to profit 49 cents a share during the quarter.

The companies will market the drug together in North America and Europe. Outside of those regions, Eli Lilly will have exclusive rights but will pay undisclosed royalties to the joint venture.

ICOS will contribute the intellectual property and research of 1C351, the companies said.

Written By Tiare Rath