Submitted by admin on Tue, 2006-12-05 08:00. ::
Pfizer said Saturday that an independent board monitoring a study for cholesteroltreatment torcetrapib recommended that the work end because of an unexpected number ofdeaths and other complications.
The news is devastating to Pfizer, which had been hurt by numerous patent expirationson key products. It spent around $800 million to develop torcetrapib, which was supposedto fill the void when its best-selling drug, cholesterol treatment Lipitor, loses patentprotection in 2010 or 2011. Lipitor sales totaled $12.2 billion last year.
Pfizer likely will slash staff and accelerate merger and licensing deals as thepressure on it to improve its financial performance intensifies, analysts said. The goodnews for Pfizer is that it has solid cash flow and a management team that understands itschallenges and seems motivated to address them, analysts said.
Moody's Investors Service placed Pfizer's long-term Aaa debt rating underreview for possible downgrade because of the announcement. Meanwhile, Merrill Lynchdowngraded the stock to ‘‘neutral'' from‘‘buy''; Morgan Stanley dropped it to ‘‘equalweight'' from ‘‘overweight'' while LehmanBrothers' ranking fell to ‘‘underweight'' from‘‘overweight.'' Lehman Brothers analyst Tony Butler wrote in areport that Pfizer may not return to revenue growth for the next seven years, with theexception of 2009.
Two months ago, Pfizer said it would detail plans in January to turn the company intoa more nimble organization - plans that would go beyond the program announced last yearto cut $4 billion in expenses by 2008. Patent expirations will cost the company $14billion annually between 2005 and 2007.
In the statement Pfizer issued Saturday, CEO Jeff Kindler said the company'space of transformation will be quickened because of the loss of torcetrapib, although hedidn't give any specifics. Last week, Pfizer announced it was cutting 20 percent,or 2,200 jobs, of its U.S. sales force.
Deutsche Bank analyst Barbara Ryan said Pfizer may lay off as many 10,000 people inthe near future. Pfizer employs roughly 100,000 people. Ryan expects Pfizer to hike itsannual dividend from 96 cents to $1.10 per share in upcoming weeks in the hopes ofputting a floor on the stock.
But Jason Napodano, an analyst at Zacks Independent Research, doesn't think thedividend will be enough to prop up the shares. He points out that at the end of lastmonth, Pfizer pulled out of its deal with drugmaker Organon to develop schizophreniatreatment asenapine. Napodano said he expected that drug to add $500 million in sales by2010 while by that time torcetrapib's sales would total $3 billion.
Pfizer reiterated it hopes to introduce six new products to the market by 2010, butNapodano said its pipeline just doesn't have another drug which offers the salespotential of torcetrapib.
Ryan and Napodano both expect Pfizer to act swiftly to bring new products into thefold, either through acquisition or licensing. But Napodano said until investors see whatthose products are, he sees little reason to buy the stock and intends to review his‘‘hold'' rating on Pfizer.
Torcetrapib was designed to raise levels of HDL, or what's commonly known asgood cholesterol. Pfizer has two other products in early development to raise HDL, usingthe same method as torcetrapib. It is too soon to say whether they will be affected bythe compound's demise because it is still unclear what caused the patient deaths inthe trial.
Torcetrapib had been shown to raise blood pressure in some patients but the other twocompounds haven't displayed such a side effect, according to Pfizer.
Dr. Steven Nissen, chairman of cardiovascular medicine at the Cleveland Clinic, saidit is too soon to say whether the entire class of drugs known as CETP inhibitors isdangerous or if there was something specific to torcetrapib that caused the deaths. Hesaid that Roche Holding AG is developing drugs of the same type, and there'sspeculation that Merck & Co. is too. Merck declined to say if it had such a drug inits pipeline.
Roche spokesman Darien Wilson said its compound, slated for introduction in 2009, hasnot shown a risk of elevated blood pressure in clinical trials.
Nissen said he will examine the results of the study, and if the trial showed the drugactually increased plaque, it would indicate that there is something wrong with the waythe class of drugs works.
Nissen, an outspoken critic of the pharmaceutical industry, said he doesn'tbelieve Pfizer will face any liability issues over the trial because it acted swiftly totell the public and researchers about the problem. The results were unexpected becausethe review board examined the trial data in October and didn't see an increase riskof death, Pfizer said.
Analysts said that patients sign waivers, acknowledging that they are willinglyparticipating in an experiment, which protect companies from most lawsuits. However,Fordham University School of Law professor Benjamin Zipursky said warning patients ofrisks doesn't necessarily mean they can't sue later, especially ifinformation about the trial wasn't adequately detailed or the company downplayed orhid any potential negative data about the drug.
Pfizer was planning to sell torcetrapib in combination with Lipitor. According toPfizer spokesman Paul Fitzhenry, 82 patients taking the combination of torcetrapib died,compared with 51 deaths among patients taking Lipitor alone. Each arm of the study had7,500 patients. Pfizer said the study didn't raise any questions aboutLipitor's safety.
This is cache, read story here
