Pfizer's Torcetrapib Cholesterol Drug May Face Delays

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Pfizer Inc.'s potential blockbuster drug torcetrapib may be delayed until 2011, clouding plans to replace top-selling cholesterol medicine Lipitor when its patent expires.

Officials at New York-based Pfizer, the world's largest drugmaker, said last week that U.S. regulators may want long- term studies showing the drug when combined with Lipitor prolongs lives and prevents disease before approving it. Analysts lowered their profit estimates after the comments on torcetrapib, which is designed to boost levels of so-called good cholesterol that removes plaque from arteries.

The U.S. Food and Drug Administration may not finish until late 2008 its evaluation of imaging studies showing whether the drug shrinks fatty substances that clog arteries and trigger heart attacks, John LaMattina, president of global research and development at Pfizer, said in a conference call. Analysts say the review may run a year later than expected and the drug, which some projected to generate $1.6 billion in sales by 2009, may be delayed by one to three years as a result.

For Pfizer, it all comes down to replacing Lipitor," said Michael Krensavage, an analyst at Raymond James in New York, in a telephone interview yesterday. "Pfizer is counting on this compound to do that."

Torcetrapib boosts blood levels of HDL, or good cholesterol, that removes fatty plaque from the arteries by 50 percent. Sales of the drug may peak at $15 billion and help offset revenue Pfizer will lose after 2010 when Lipitor's patent expires, according to analysts estimates.

Shares

Pfizer shares fell 5 cents, or less than 1 percent, to $27.21 at 9:31 a.m. in New York Stock Exchange composite trading. The stock price had fallen 3 percent as of yesterday since Pfizer discussed its outlook for the drug on Oct. 19, when the company reported third-quarter earnings that beat analysts' estimates.

The FDA told Pfizer it wants studies showing whether the drug reduces the risk of heart attack or stroke, LaMattina said in a call with analysts Oct. 19. Doctors who consult for Pfizer had said the FDA might approve the drug based just on imaging studies showing that the treatment shrinks artery blockages. Imaging studies will be finished sooner than trials that show whether the drug prevents heart attacks.

Not a Guarantee

"The FDA has been clear that approval on imaging alone is not a guarantee and in fact it is pretty iffy," LaMattina said in the conference call. "So a lot depends on what the imaging looks like and the nature of the effects. We are doing a major biological experiment here."

In March Pfizer said it may get approval as soon as 2008 based on the imaging studies if the data is very convincing and Pfizer said last week that is still a possibility.

Lipitor accounted for about 25 percent of Pfizer's $51 billion in revenue last year. Pfizer wants to win FDA approval of torcetrapib before generic rivals to Lipitor are sold to prevent any loss of revenue, analysts said.

Pfizer plans to sell torcetrapib in combination with Lipitor, which lowers LDL, or bad cholesterol, as a two-pronged effort to prevent heart attacks and strokes.

"Pfizer is clearly being more conservative on its torcetrapib outlook," said Mario Corso, an analyst with Summer Street Research Partners in Boston, in a note to clients Friday. "A delay until 2010-plus brings Lipitor generics into view."

Increasing Risk

Roopesh Patel, an analyst at UBS Securities LLC in New York, downgraded his rating on Pfizer stock yesterday to "neutral" from "buy," in part because of an increasing risk that torcetrapib may not become available until 2011. Raymond James's Krensavage reduced his rating to "market perform" from "strong buy," last week after Pfizer discussed its timeline for torcetrapib.

Taking a more cautious approach may be a smart strategy for Pfizer if it improves the drug's chances of getting approved, said Trevor Polischuk, an analyst at New York-based Orbimed Advisors LLC, which manages $6 billion, including Pfizer shares.

"This product for Pfizer is critical, and I think getting the drug to market is more important than how fast it gets to market," said Polischuk, in a telephone interview Oct. 24.

Pfizer may lose as much as $25 billion in revenue by 2011, when patents expire on six top-selling drugs, analysts said.

"Pfizer's pipeline is barren beyond the torcetrapib opportunity, especially given the relative level of investment," Barbara Ryan, a Deutsche Bank analyst in Greenwich, Connecticut, wrote in a note Oct. 18 to clients.

Imaging Studies

The first look at imaging studies that will show if the drug reverses plaque-build up, and perhaps prevents heart problems, will be presented at the American College of Cardiology meeting in March.

The drug's effect on patient health "will be an important determinant of the ability of the agency to approve based on the imaging studies," Steven Nissen, the lead researcher of one set of studies and the chairman of cardiology at the Cleveland Clinic, in a telephone interview yesterday.

Pfizer will submit its application to the FDA in late 2007 and it could take more than a year for the agency to make a decision on the approval, LaMattina said. If the FDA needs additional data, it may take until late 2009 before those studies are completed, pushing back approval until 2010 or 2011, said UBS's Patel in a note to clients yesterday.

Sales of torcetrapib are not included in Pfizer's projections for revenue growth in 2009, vice chairman David Shedlarz said last week. Andrew McCormick a company spokesman said Pfizer's comments on torcetrapib last week didn't represent a change in company expectations.

New Management

The statements on torcetrapib marked the first time the company's new management has addressed the outlook for the drug. In July, Jeffrey Kindler replaced former Chief Executive Officer Hank McKinnell, who was removed by the board more than a year earlier than planned.

Kindler restructured the top management team, appointing a group of seven executives who report directly to him. The timeline for torcetrapib may be a result of those changes and a more conservative outlook, analysts said.

"I think expectation are getting recalibrated by new management," said Jon Fisher, a fund manager with Fifth Third Asset Management, who doesn't manage shares of Pfizer. "This is reality and this is something Hank and his team wouldn't allow themselves to admit to, because that isn't the Pfizer way."

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