A Cholesterol Drug Clogs Pfizer's Production of A Promising Product
Monday, December 04, 2006SUSIE GHARIB: Stocks on Wall Street rallied today thanks to a flurry of merger deals and falling oil prices. The Dow jumped almost 90 points and would have been higher were it not for Pfizer. Shares of the drug giant tumbled 10 percent after it halted development of a promising new drug because of a larger than expected number of patients in a clinical trial died. The news came only days after Pfizer said it hoped to sell the drug next year. We have two reports tonight: the Wall Street reaction and from Washington, a look at drug development. We begin with Suzanne Pratt in New York.
SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: The world's largest drug maker dropped a bombshell on Wall Street, when it announced the failure of its experimental cholesterol drug, Torcetrapib. Medical and financial hopes were high for the drug, which produces so-called good cholesterol or HDL and helps fight heart disease. Analysts say the news is a huge blow for Pfizer as it copes with a number of patent expirations on key products. Torcetrapib was seen as the successor to Pfizer's blockbuster drug Lipitor, which generated more than $12 billion in revenue last year and loses patent protection in 2010. Analyst Albert Rauch of AG Edwards, which does business with Pfizer and holds a position in the stock, says the news raises big questions about the company's future.
ALBERT RAUCH, ANALYST, A.G. EDWARDS: The promise was with Torcetrapib, you could extend Lipitor from being a $12 billion product to being -- the drug combination, to being a $20 billion franchise.
PRATT: Pfizer stock fell sharply today after several Wall Street firms slashed their ratings on the shares. Pfizer closed just under 25, its lowest level since July of this year. Rauch has the company rated a "hold" and says there's little reason to buy the stock other than its dividend.
RAUCH: The dividend yield is what's going to support the stock's valuation probably for the rest of the decade.
PRATT: Other Wall Street analysts are more optimistic. They believe the company's pipeline and cost-cutting efforts have been under-appreciated by Wall Street. Analyst Kevin Scotcher of HSBC, which does investment banking and other business with Pfizer, today cut his target price to $30.50 a share but maintained his rating.
KEVIN SCOTCHER, PHARMACEUTICALS ANALYST, HSBC: I have an "over weight" on the stock and I reiterated that this morning, because I have a particularly positive view of the new drugs that Pfizer has launched. I think Lerica could be a $4 to $5 billion drug and I think that Chantiz could be a $2 billion drug.
PRATT: It's no secret that Pfizer has been looking to buy up new products and new technologies in recent months. Now that the hole in its pipeline is considerably larger, analysts say the scale of those acquisitions might grow. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: I'm Stephanie Dhue. The Food and Drug Administration says it supports Pfizer's decision to suspend the trial and will give increased scrutiny to drugs in this class. Pfizer's Torcetrapib was the first in a new series of compounds that showed promise in fighting heart disease by raising the level of good cholesterol or HDL. Analysts say the challenge now is for companies to prove these drugs are helping patients.
CHRIS JENNER, PORTFOLIO MANAGER, T. ROWE PRICE: So when the FDA says that they will give greater scrutiny to this entire class of drugs, what they're referring to is that they need to see outcomes data that shows that there is indeed clinical benefit as opposed to simply showing that there is plaque regression.
DHUE: Dr. Steven Nissen is leading a separate Torcetrapib study that could show if the problem is with the drug or the class of drugs.
DR. STEVEN NISSEN, CHAIRMAN, CARDIOVASCULAR MEDICINE, CLEVELAND CLINIC: The drug Torcetrapib was increasing plagues in the coronary. Then it's probably going to kill the entire class, but maybe it's just some bizarre unique toxicity of Torcetrabib and if that's the case, other drugs in the class might be able to go forward.
DHUE: Roche, Merck, AstraZeneca and Bayer are also developing similar medicines. Analysts say if there's a problem with the entire class, it shouldn't be a problem for the industry.
HEATHER BRILLIANT, EQUITY ANALYST, MORNINGSTAR: Because these drugs are still in development, we have not built in any tremendous amount of sales expectations for them into our models. So we wouldn't think it would impact those companies very greatly.
DHUE: Observers say the Pfizer news emphasizes the risks of drug development. What happened isn't uncommon. Studies show drugs in so- called phase three clinical trials have a 40 percent failure rate. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
