Pressures on Pfizer multiply as it ends development of key drug
Saturday, December 2nd 2006, 9:04 pm
By: News On 6
NEW YORK (AP) Pfizer Inc. will likely slash staff and accelerate merger and licensing deals as the pressure on it to improve its financial performance intensified after the weekend's announcement that the company ended development of a key drug.
Analysts differed on how much they believed Pfizer stock would fall when it opened on Monday. Barbara Ryan, an analyst at Deutsche Bank, said she believed the dividend yield of roughly 4 percent would keep shares from a free fall, but another analyst estimated the stock could plunge to $20 a share. Pfizer shares closed Friday at $27.86 on the New York Stock Exchange.
The world's largest drugmaker 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.
The news is devastating to Pfizer, which had been counting on the drug to revitalize stagnant sales that have been hurt by numerous 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 either 2010 or 2011.
``This is obviously unfortunate because this was the biggest opportunity in their pipeline,'' said Ryan. ``Clearly there is more pressure on them to do cost cutting.''
Ryan said Pfizer may lay off as many 10,000 people in near future. Pfizer employs roughly 100,000 people. Last week it announced it was cutting 2,200 people from its U.S. sales force by the end of the year as part of efforts to streamline the company.
Last year, Pfizer announced a program to slash $4 billion in expenses by 2008. But two months ago, Pfizer said it would cut even more costs and promised details in January. Patent expirations will cost the company $14 billion annually between 2005 and 2007.
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 the hopes of putting a floor on the stock.
Beyond that, Ryan expects Pfizer to act swiftly to bring new products into the fold, either through acquisition or licensing. The company has several new products in development, including cancer and obesity treatments, but they are still years away from the market.
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 where they will be affected by compound's demise because it still 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 is dangerous or if there was something specific to torcetrapib that caused the deaths. He said that Roche Holding AG is developing drugs of the same type, and there's speculation that Merck & Co. is too. Merck declined to say if it had such a drug in its pipeline.
Nissen was conducing a trial for Pfizer which was going to use images of patients' arteries to see if torcetrapib helped reduce plaque, the fatty deposits that can build up and reduce blood flow. Just three days ago, Pfizer said it was hoping to use the results of that trial to seek approval for torcetrapib in the second half of next year.
Nissen said he will still examine the results of the study, and that if the trial showed that the drug actually increased 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 about the problem. The results were unexpected because the review board examined the trial data in October and didn't see an increase risk of death, Pfizer said.
Analysts said that patients sign waivers, acknowledging that they are willingly participating in an experiment, which indemnify company from most lawsuits.
``I have to give Pfizer credit. They did everything the right way,'' Nissen said.
According to Pfizer spokesman Paul Fitzhenry, 82 patients taking the combination of torcetrapib died, compared to 51 deaths in the arm of the study where patients were taking Lipitor alone. Each arm of the study had 7,500 patients. Pfizer said that the study didn't raise any questions about Lipitor's safety.
New York-based Pfizer had expected to sell torcetrapib in combination with Lipitor, which lowers bad cholesterol. Lipitor sales totaled $12.2 billion last year.