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Pfizer shares sink after patient deaths put an end to trials of
cholesterol drug
Updated 12/4/2006 9:51 AM ET
USA TOday
By Theresa Agovino, Associated Press


NEW YORK — Shares of Pfizer (PFE), the world's largest drugmaker,
sank Monday on news that the company had halted development of a key
cholesterol treatment.
The stock fell $4.06, or almost 15%, to $23.80 in pre-market trading.

The company said Saturday that an independent board monitoring a
study for cholesterol treatment torcetrapib recommended that the work
end because of an unexpected number of deaths.

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Pfizer was planning to sell torcetrapib in combination with its best-
selling cholesterol-lowering drug, Lipitor. According to Pfizer
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 had 7,500 patients. Pfizer said
the study didn't raise any questions about Lipitor's safety.

The news is devastating to Pfizer, which had been counting on the
drug to revitalize stagnant sales hurt by patent expirations on key
products. It has said it was spending around $800 million to develop
torcetrapib, which was supposed to fill the void when its best-
selling drug, cholesterol treatment Lipitor, loses patent protection
in 2010 or 2011. Lipitor sales totaled $12.2 billion last year.

"This is obviously unfortunate because this was the biggest
opportunity in their pipeline," said Barbara Ryan, an analyst at
Deutsche Bank. "Clearly there is more pressure on them to do cost
cutting."

Pfizer will likely slash staff and accelerate merger and licensing
deals as the pressure to improve its financial performance
intensifies.

Two months ago, Pfizer said it would detail plans in January to turn
the company into a more nimble organization that would go beyond the
program announced last year to cut $4 billion in expenses by 2008.
Patent expirations will cost the company $14 billion annually between
2005 and 2007.

In the statement Pfizer issued Saturday, CEO Jeff Kindler said the
company's pace of transformation will be expedited because of the
loss of torcetrapib, but he didn't give specifics. Last week, Pfizer
announced it was cutting 20%, or 2,200 jobs, from its U.S. sales
force.

Ryan said Pfizer may lay off as many 10,000 people in the near
future. Pfizer employs about 100,000 people. Ryan added that she
expects Pfizer to hike its annual dividend from 96 cents to $1.10 per
share in the next few weeks in hopes of putting a floor on the stock.

But Jason Napodano, an analyst at Zacks Independent Research, doesn't
think the dividend will be enough to prop up the shares. He points
out that at the end of last month, Pfizer pulled out of its deal with
drugmaker Organon to develop schizophrenia treatment asenapine.
Napodano said he expected that drug to add $500 million in sales by
2010 while, by that time, torcetrapib's sales would total $3 billion.

"Losing asenapine was a hole in the boat. Now they have hit an
iceberg," said Napodano.

Pfizer reiterated it hopes to introduce six products by 2010, but
Napodano said its pipeline just doesn't have another drug which
offers the sales potential of torcetrapib.

Ryan and Napodano both expect Pfizer to act swiftly to bring new
products into the fold, either through acquisition or licensing. But
Napodano said until investors see what those products are, he sees
little reason to buy the stock. He said he intends to review
his "hold" rating on the stock.

Torcetrapib was designed to raise levels of HDL, or what's commonly
known as good cholesterol. Pfizer has two other products in early
development to raise HDL, using the same method as torcetrapib. It is
too soon say whether they will be affected by the compound's demise
because it unclear what caused the patient deaths in the trial.

Torcetrapib had been shown to raise blood pressure in some patients
but the other two compounds haven't displayed such a side effect,
according to Pfizer.

Dr. Steven Nissen, chairman of cardiovascular medicine at the
Cleveland Clinic, said it is too soon to say whether the entire class
of drugs known as CETP inhibitors is dangerous or if there was
something specific to torcetrapib that caused the deaths. He said
Roche (RHHBY) is developing drugs of the same type, and there's
speculation that Merck (MRK) is too. Merck declined to say if it had
such a drug in its pipeline.

Roche spokesman Darien Wilson said in clinical trials its compound
has not shown a risk of elevated blood pressure and it is slated for
introduction in 2009.

Pfizer was hoping to seek approval for torcetrapib in the second half
of next year.

Nissen said he will examine the results of the study, and if the
trial showed that the drug actually increased artery-clogging plaque,
it would indicate that there is something wrong with the way the
class of drugs works.

Nissen, who has been an outspoken critic of the pharmaceutical
industry, said he doesn't believe Pfizer will face any liability
issues over the trial because it acted swiftly to tell the public and
researchers. The results were unexpected because the review board
examined the trial data in October and didn't see an increased risk
of death, Pfizer said.

"I have to give Pfizer credit. They did everything the right way,"
Nissen said.

Analysts said patients sign waivers, acknowledging that they are
willingly participating in an experiment, which protect companies
from most lawsuits. However, Fordham University School of Law
professor Benjamin Zipursky said warning patients of risks doesn't
necessarily mean they can't sue, especially if information about the
trial wasn't adequately detailed or the company downplayed or hid any
potential negative data.

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