- The Washington Times - Monday, December 4, 2006

NEW YORK (AP) — Pfizer Inc.’s decision to scrap development of a crucial medicine sent its shares plummeting yesterday as analysts fretted about its future and speculated about which companies it might purchase to shore up its pipeline.

Shares of Pfizer fell $2.96, or 10.6 percent, to close at $24.90 on the New York Stock Exchange.

Pfizer said Saturday it had halted development of cholesterol treatment torcetrapib because of an unexpected number of deaths and other complications in the trial.

Torcetrapib was supposed to fill the void when Pfizer’s best-selling drug, cholesterol treatment Lipitor, loses patent protection as early as 2010. Other patent expirations will cost Pfizer $14 billion in annual sales between 2005 and 2007.

Now the revenue gap is looming larger than ever. Analysts said Pfizer has some interesting products in its pipeline, but none that comes close to torcetrapib’s promise, intensifying the pressure to find new medicines.

One avenue is for Pfizer to buy smaller drug companies to gain the drugs they are developing. Pfizer can fund a substantial shopping spree: It has roughly $13 billion in cash and short-term assets, and will reap $13.5 billion from the sale of its consumer products division to Johnson & Johnson, expected to close by year’s end.

As much as analysts think Pfizer will act swiftly to bring new products into the fold, they caution it is no panacea. This year, Pfizer canceled at least two drug development deals. Last month, it pulled out of its deal with drug maker Organon to develop schizophrenia treatment asenapine and over the summer returned its development and marketing rights on sleeping pill Indiplon to Neurocrine Biosciences Inc.

Pfizer is in a tough spot because it wants to show investors it is taking actions to improve its fortunes, but purchasing another company or licensing products also is risky, said Jason Napodano, an analyst at Zacks Independent Research who downgraded Pfizer stock to “sell” from “hold” yesterday.

Mr. Napodano acknowledged that Pfizer pays an attractive dividend and has a stock buyback program that bolsters its share price. Still, he said, “Those aren’t long-term strategies.”

Most analysts don’t think Pfizer will acquire a major drug maker because it would be expensive and difficult to integrate. Plus, with $51.3 billion in annual revenues, Pfizer already needs numerous blockbusters to fuel sales growth, a challenge that would be compounded by purchasing another drug maker.

“Pfizer is already too big,” Mr. Napodano said.

Some analysts speculated that Isis Pharmaceuticals Inc. would be a strategic fit for Pfizer because it has a cholesterol-lowering agent in development that works differently from Lipitor. Its shares rose 93 cents, or 8.9 percent, to $11.34 on the Nasdaq Stock Market.

Sepracor Inc. stock jumped $2.52, or nearly 5 percent, to $57.82 on the Nasdaq. The company reported good results for a study of sleeping pill Lunesta yesterday, but analysts also speculated it might be a target for Pfizer because it gave up on its own product, Indiplon, for the lucrative and growing market for sleep aids.

Last week, Pfizer showcased its pipeline at a meeting where it told analysts it would introduce six drugs per year beginning in 2011. But analysts noted that drug development is fraught with problems as highlighted by torcetrapib’s failure. At that meeting, for example, Pfizer executives heralded torcetrapib’s future, only to have it collapse two days later.

The void left by torcetrapib won’t be easy to fill, and some investment houses — including Morgan Stanley, Merrill Lynch and Lehman Brothers — downgraded Pfizer stock. Moody’s Investors Service placed Pfizer’s long-term debt rating under review for downgrade because of the announcement, while Standard & Poor’s Ratings Services said it affirmed its AAA ratings on Pfizer Inc. but revised the outlook to negative from stable.

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