Pfizer facing financial pressure after axed drug trial

Pfizer, the world’s largest pharmaceutical manufacturer, will be forced to shed staff and speed up merger and licensing deals, analysts say, after the company ended trials of a key cholesterol drug.

The analysts differed on how much they believed Pfizer stock would fall when it opened today.

Barbara Ryan of Deutsche Bank said she believed the dividend yield of roughly 4% would keep shares from a free fall, but another analyst estimated the stock could plunge to $20 a share. Pfizer shares closed on Friday at $28.90 on the New York Stock Exchange.

The drug giant said on Saturday that an independent board monitoring a study for cholesterol treatment Torcetrapib recommended that the work end because of an unexpected number of deaths.

According to Pfizer spokesman Paul Fitzhenry, 82 patients taking a combination of Torcetrapib died, compared with 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 did not raise any questions about Lipitor’s safety.

Torcetrapib was designed to raise levels of HDL, or “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 or not they will be affected by the 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 have not displayed such a side effect, according to Pfizer.

In a statement issued yesterday, the US Food and Drug Administration said it supported Pfizer’s decision to suspend the trial and said it would work with the company and other drugmakers developing similar products to ensure there were procedures in place to identify any safety problems quickly.

The drug-trial axe is devastating to Pfizer, which had been counting on Torcetrapib to revitalise stagnant sales hurt by numerous patent expirations on key products.

It has said it was spending around €625.5m 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. Lipitor sales totalled €9.5bn last year.

“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.”

Two months ago, Pfizer said it would reveal plans in January to turn the company into a more nimble organisation that would go beyond the programme announced last year to cut €3bn in expenses by 2008.

Patent expirations will cost the company €10.8bn annually between 2005 and 2007.

In the statement Pfizer issued on Saturday, chief executive Jeff Kindler said the company’s pace of transformation would be hastened because of the loss of Torcetrapib, although he did not give any specifics. Last week, Pfizer announced it was cutting 2,200 US sales-force jobs.

Ryan said Pfizer, which employs about 100,000 people, may shed as many 10,000 people in the near future. She said she expected Pfizer to increase its annual dividend from 96c to $1.10 per share in the next few weeks in the hope of putting a floor on the stock.

Jason Napodano, an analyst at Zacks Independent Research, did not think the yield would be enough to prop up the shares.

He said 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 €386.2m in sales by 2010, while by that time Torcetrapib’s sales would total €2.2bn.

“Losing Asenapine was a hole in the boat. Now they have hit an iceberg,” said Napodano.