Pfizer shares plunge after cholesterol drug fails
NEW YORK/LONDON, Dec 5 (Reuters) Shares of Pfizer Inc. fell almost 11 percent on Monday, wiping out .3 billion of market value, after the world's biggest drug maker unexpectedly halted development of its most important experimental medicine.
Pfizer stopped work on torcetrapib, designed to raise levels of ''good'' HDL cholesterol, because of increased deaths and heart problems among patients given the product in a late-stage trial.
Torcetrapib had been expected to fill a gap left when Pfizer's patent on Lipitor, the world's biggest-selling drug with annual sales of about billion, expires in 2010 or 2011.
Drugs like Lipitor, which lower ''bad'' LDL cholesterol, cut the risk of heart attack by about 30 percent. Experts hope drugs that raise HDL -- which removes excess LDL from the bloodstream -- could greatly reduce risks of heart attack.
Pfizer shares fell as low as .52 but closed at .90 on the New York Stock Exchange. The 12-month low is .27.
Shares of rivals in the cholesterol market, including Schering-Plough Corp. , Abbott Laboratories Inc. and AstraZeneca Plc , rose on the news that a formidable competitor had been eliminated.
Analysts expect Pfizer to move to shore up investor confidence by raising its dividend and accelerating cost-cutting. New Chief Executive Jeffrey Kindler has already said he will announce long-term strategic plans in January.
Pfizer is also expected to fill a multibillion-dollar hole by buying other companies or rights to drugs.
''These guys were already on the acquisition trail for new products and new technologies, but the scale of what they would consider might now change,'' said Mike Ward, an analyst with Nomura Code Securities in London.
''Rather than the -billion-to--billion range of acquisitions, which has been fairly consistent Pfizer policy for a while, there will now be speculation that it could be almost anything.'' While it was unclear which companies Pfizer might target, the biotech sector enjoyed a modest rally, with the American Stock Exchange Biotech index <.BTK> rising 1.35 percent.
Ward said Pfizer might consider buying companies such as Wyeth or Amgen Inc. , which offer assets in vaccines and antibodies.
Deutsche Bank, Lehman Brothers, Morgan Stanley, Merrill Lynch and JP Morgan all cut recommendations on Pfizer shares.
Moody's Investors Service placed Pfizer's Aaa long-term debt rating under review for a possible downgrade.
''SHOCKING REVELATION'' Saturday's decision to scrap torcetrapib took investors by surprise, although there had been concern that the drug caused higher blood pressure, itself a major risk of heart disease.
Just last week, at a meeting with industry analysts and money managers, Pfizer executives hailed the drug as potentially one of the most important medicines in a generation and said they hoped to seek U.S. approval for it next year.
But in the 15,000-patient clinical trial, 82 patients taking the combination of torcetrapib and Lipitor died, compared to 51 taking Lipitor alone.
Pfizer said it stopped the trial only because of the torcetrapib results and that the data had no impact on the safety or efficacy of Lipitor, which has been on the market since 1997 and widely studied.
Although this is its biggest setback, Pfizer has seen other promising experimental drugs disappear from its pipeline in recent months.
Product disappointments have led Pfizer to end a joint development program with Akzo Nobel for the schizophrenia drug asenapine and drop out of a deal to develop a sleep drug with Neurocrine Biosciences Inc. .
RIVALS GAIN For some rivals, the problems facing Pfizer are good news.
Analysts at Morgan Stanley said the failure of torcetrapib was an ''important positive'' for AstraZeneca since the product had been the biggest potential competitor to AstraZeneca's cholesterol drug Crestor.
AstraZeneca shares, which have been punished recently following setbacks for its own drugs in development, rose 0.5 percent in London and 1.1 percent in New York.
Another potential winner from Pfizer's woes is expected to be Abbott Laboratories, which is acquiring Kos Pharmaceuticals Inc. . Kos markets Niaspan, part of an older class of niacin drugs that raise HDL. Abbott shares rose 3.3 percent.
Shares of Schering-Plough, which sells cholesterol fighters Zetia and Vytorin with Merck&Co. , rose 3.7 percent.
Switzerland's Roche Holding AG might also benefit among European pharmaceutical companies, since it is developing a rival to torcetrapib licensed from Japan Tobacco Inc.
<2914.T>. But some investors are wary that the problems with torcetrapib could turn out to be a class effect. Roche stock rose 0.8 percent.
(=.7507 Euro) REUTERS CS DS1157