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re: this may turn the dow negative Pfizer shares could dive after drug failure
Analysts say shares could fall from 5 to 25 percent after safety concerns bring trials of heralded cholesterol drug to an abrupt end.
December 3 2006: 5:44 PM EST

NEW YORK (Reuters) -- With the sudden failure of torcetrapib, Pfizer Inc.'s most important experimental product, financial analysts predict shares of the world's largest drugmaker could fall from 5 to 25 percent on Monday and that Pfizer will need to buy other products to fill the void.

On Saturday Pfizer (Charts) halted development of torcetrapib, which was designed to raise levels of "good" HDL cholesterol, after an independent safety monitoring board cited increased deaths and heart problems among patients given the product in a late-stage trial.
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Pfizer CEO Jeffrey Kindler had raised the company's earnings guidance a few days before the announcement.

While some rival companies could benefit from the news, including Abbott Laboratories Inc. (Charts), experts warned that shares of other drugmakers could be hurt as the setback underscores the risk of drug development and dangers of relying too heavily on potential blockbuster products.
The big threat to Big Pharma

"When you live by the blockbuster, you can be badly hurt when the blockbuster fails to materialize," said Steve Brozak, an analyst with WBB Securities, who predicted Pfizer shares would tumble 15 percent on Monday.

Pfizer on Saturday said it would accelerate plans to improve operations and cut costs in view of the torcetrapib setback and reaffirmed plans to introduce about six products a year, starting in 2010.

Investors were counting on torcetrapib to be approved before the patent expires by 2010 or 2011 on Lipitor, Pfizer's $13 billion-a-year pill that cuts levels of "bad" LDL cholesterol, and make up for most of Lipitor's lost sales.

Torcetrapib in earlier clinical trials had boosted HDL cholesterol by 60 percent, raising hopes that it could greatly reduce the risk of heart attacks and strokes. But it caused slight elevations in blood pressure, itself a major risk of heart disease.

Pfizer shares fell to about $20 a year ago when Indian drugmaker Ranbaxy Laboratories Inc. threatened to launch a generic form of Lipitor. But the threat evaporated last December when a federal judge upheld the validity of Lipitor's patents, and Pfizer's shares have since rebounded, closing on Friday at $27.86.

Two other analysts, who asked to remain anonymous, predicted Pfizer shares could now fall back to the low-20s because the company had hitched so much of its financial future to torcetrapib, and no other experimental Pfizer drug comes close to its sales potential.

"I assume the stock will go down by 20 to 25 percent, but no farther because at that point enough investors will remain attracted by the company's dividend," one of the analysts said.

Just two days earlier, new Pfizer Chief Executive Jeffrey Kindler told hundreds of analysts at a research meeting that the drugmaker could seek approval for the medicine as early as next year if clinical data supported it.

"Short of Lipitor losing patent protection, the failure of torcetrapib is the biggest possible setback for Pfizer that could have happened," said Heather Brilliant, an analyst for Morningstar Inc.

But Brilliant said she does not expect shares to fall more than 5 percent because Pfizer has the cash flow to buy other new drugs before Lipitor's patent lapses.

"If shares fall 25 percent, I think that will be the biggest buying opportunity since Vioxx was withdrawn because Pfizer has a lot of good things going for it," Brilliant said, including strong cash flow from its array of other medicines.

Brilliant was referring to the 27 percent decline in shares of Merck & Co. (Charts) on September 30, 2004, when it withdrew its arthritis drug, Vioxx, on safety concerns. Shares of Merck have since fully recovered, helped by launches of new medicines.

Switzerland's Roche Holding AG could benefit from torcetrapib's demise because it is developing a rival medicine, licensed from Japan Tobacco Inc. in 2004, that works by the same mechanism.
Big pharma CEOs: The winners and losers

So far, Roche has not seen similar safety issues as those experienced by Pfizer, although some investors may be nervous that the problems with torcetrapib could turn out to be common to the entire class of experimental medicines known as CETP inhibitors.

An older class of niacin medicines also raise HDL, but only by about 15 to 25 percent. The leading brand is Niaspan, sold by Kos Pharmaceuticals Inc., a U.S. biotechnology company being acquired by Abbott Laboratories.

Merck is conducting trials of its own long-acting form of niacin, as well as of a separate drug that would be combined with it to prevent facial flushing -- a side effect of niacin.