- The Washington Times - Monday, December 4, 2006

1:06 p.m.

NEW YORK (AP) — Shares of Pfizer Inc., the world’s largest drug maker, sank today on news that the company had halted development of a key new cholesterol treatment that was heralded as the engine to reignite the company’s stagnant sales.

The stock plunged $3.63, or 13 percent, to $24.23 in morning trading on the New York Stock Exchange.

Pfizer said Saturday that an independent board monitoring a study for cholesterol treatment torcetrapib had recommended that the work end because of an unexpected number of deaths and other complications.

The news is devastating to Pfizer, which has been hurt by numerous patent expirations on key products. It spent about $800 million to develop torcetrapib, which was supposed to fill the void when its best-selling drug, the cholesterol treatment Lipitor, loses patent protection in 2010 or 2011. Lipitor sales totaled $12.2 billion last year.

Moody’s Investors Service placed Pfizer’s long-term Aaa debt rating under review for potential downgrade because of the announcement. Meanwhile, Merrill Lynch downgraded the stock to “neutral” from “buy”; Morgan Stanley dropped it to “equal weight” from “overweight,” and its Lehman Bros.’ ranking fell to “underweight” from “overweight.” Lehman Bros. analyst Tony Butler wrote in a report that Pfizer may not return to revenue growth for the next seven years, with the exception of 2009.

Pfizer likely will slash staff and accelerate merger and licensing deals as the pressure to improve its financial performance intensifies, analysts said. The good news for Pfizer is that it has solid cash flow and a management team that understands its challenges and seems motivated to address them, analysts said.

Two months ago, Pfizer said it would detail plans in January to turn the company into a more nimble organization — plans that would go beyond the program announced last year to cut $4 billion in expenses by 2008. Patent expirations will cost the company $14 billion annually between 2005 and 2007.

Last week, Pfizer announced it was cutting 20 percent, or 2,200 jobs, of its U.S. sales force.

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