Tuesday, December 05, 2006

Drug through the mill

It wasn't a particularly good day at the office for Pfizer.

Pfizer takes its medicine after cholesterol disaster
By Stephen Foley in New York

On Thursday, it was "The Most Important New Development in Years". Two days later, it was history.

Investors had been just starting to get their tongues around the name of Pfizer's promising new heart disease medicine, Torcetrapib, which formed the centrepiece of the drug maker's presentations at a research and development conference at its giant lab complex in Connecticut last week.

Pfizer grew to become the biggest pharmaceuticals company in the world on the back of its blockbuster cholesterol medicine Lipitor, the first to lower LDL, so-called "bad cholesterol", whose build-up increases the risk of heart disease. Torcetrapib was to be its next trick, a drug designed to raise HDL, "good cholesterol", which improves people's cardiovascular health.

But data that was revealed to Pfizer on Saturday morning, by the independent monitors keeping an eye on the trial, changed everything. Far from reducing patients' risk of heart problems, the drug appeared to be causing more of them to die of heart attacks and other complications of high blood pressure. The monitors told Pfizer to halt the trial.

Researcher Charged With Conflict

In a rare federal prosecution, a leading government Alzheimer's researcher was charged Monday with a criminal conflict of interest for performing lucrative private drug company work that overlapped his official duties.

Prosecutors alleged Dr. Trey Sunderland of the National Institutes of Health received $285,000 in improper consulting fees and travel expenses from Pfizer (nyse: PFE ), Inc., for work on early indicators of Alzheimer's at the same time he also oversaw similar NIH business with the drugmaker.

The private consulting "directly related" to his government job, and Sunderland failed to obtain the proper approvals from his supervisors or disclose the work to NIH, according to papers filed in U.S. District Court in Baltimore.

The felony charge carries a maximum sentence of one year in prison and a $100,000 fine. Prosecutors filed the charge as a criminal information, instead of indictment, signaling the possibility of a plea deal.

NIH had identified at least 44 government researchers who improperly made money moonlighting for biotechnology and drug companies. Most were given written or verbal reprimands or were permitted to retire.

But Sunderland drew the attention of federal prosecutors and the ire of Congress when House investigators revealed his private financial deal and the fact that he transferred hundreds of tubes of valuable NIH tissue samples to Pfizer around the time of his consulting work.

Sunderland, 55, who heads a geriatric psychiatry branch at NIH's National Institute of Mental Health in Bethesda, Md., is to appear Friday for arraignment.

Ned Feder, a former NIH scientist now with the non-profit watchdog group Project on Government Oversight, said "in this and similar cases NIH authorities have made it habit of covering up or minimizing wrongdoing. They are still hiding the details of other scientists' conflicts of interest over the past 10 years."

Experts said the last prosecution involving a similar conflict by a senior government scientist was that of cancer researcher Prem Sarin. He was removed from NIH in 1991 in a probe involving his relationships and payments from a private company for research on an AIDS drug.

Pfizer's new drug woes
The life of a multinational drug company can't be an easy one. On the one hand, you have to put up with a constant stream of criticism from those who say your prices are way too high, and on the other you suffer the risk of having a high-profile new drug fail in testing, with deleterious effects to the share price and future revenue stream.

Just such a thing has happened to Pfizer, currently the world's number one pharmaceutical company. Home to such blockbuster drugs as Viagra, Lipitor, and Celebrex, Pfizer were feeling bullish about the prospects of their new cardiovascular drug, torcetrapib. As regular readers will know, cardiovascular disease (CVD) is the leading killer of both men and women in the developed world, and rising swiftly through the ranks everywhere else, too. CVD involves the build-up of lipids in the artery walls, which leads to an infiltration of inflammatory cells that attempt to clean up the deposits, followed by the formation of lesions, or plaques. These can grow to completely block the artery, or even rupture, resulting in strokes, heart attacks and other things you'd rather not have to experience.

Pfizer already has a foot in the statin market with Lipitor, the number one seller. Their new drug, torcetrapib, is designed to increase HDL levels by inhibiting an enzyme called cholesterol-ester transport protein CETP. CETP transforms HDL into smaller particles, many of which end up as LDL. Therefore, blocking CETP ought to raise HDL levels and, in combination with a statin, should in theory prove a good therapy for CVD.

Unfortunately for Pfizer and their shareholders, the Phase III trial currently underway to do just that has revealed an increase in mortality rates compared to Lipitor alone. The study involved 7500 patients on Lipitor, compared to 7500 on Lipitor in combination with torcetrapib. 82 deaths were recorded in the combination group compared to 51 in the control group, and as a result Pfizer have stopped all clinical trials involving torcetrapib, as well as halting all development on the drug.

This is a pretty big setback for Pfizer, and one that leaves the company's pipeline looking pretty bare.

Maven: Pfizer's Painful Spin
By Marek Fuchs

[L]et's look at what has happened to Pfizer over the past week and why it shows both how you should avoid the stock until further notice (issues of trust and competence -- see: the lack thereof -- abound) and, more importantly, how you cannot make any investment decision without a firm understanding of what the business media are thinking, doing, writing and saying about your company -- and why.

It is an ancient foundation of Business Press Maven thought and has never been made clearer in such short order: If there is a spread between the published perceptions of the business media and reality, reality will always win out. Though admittedly, not always as quickly as it did in the case of Pfizer.

The Pfizer train wreck left the station on Tuesday, when the company announced that it was laying off 2,000 salespeople, about 20% of its once-vaunted force. Though the kind hearts on Wall Street usually cheer layoffs for the cost savings involved, there was a sense here, well deserved, that a change in era was being signaled. Pfizer, like many of the drug companies, had always ridden its sales force to reliable success.

Could there have been an upside besides cost cuts going on with the employment cuts? Sure. Or maybe. But Pfizer had some 'splainin to do.

Instead of 'splainin, Pfizer started spinning. In fact, it took spin to the level of performance art on Thursday, just two days after the announcement of layoffs, when company management spoke with surefootedness to assembled analysts, reporters and investors at a research facility, touting the greatness of its drug pipeline, using language that would appear comical only two days later.

But the real fools, as I pointed out, were the business media. They essentially wrote about Thursday's meeting with washrags over their eyes, not pressing -- or, in most cases, even touching -- the point that if things were so good on Thursday, why the desperate move on Tuesday? If all these drugs are really coming down the pipeline, uh, won't you need people to sell them?

Forbes swallowed Pfizer's claims hook, like and sinker. It published articles titled "Six Pfizer Drugs to Watch" and "Pfizer Fights Back."

The real answer, of course, came Saturday when Pfizer announced that it was forced to stop development of torcetrapib, its showcase, big-ticket good-cholesterol drug, because it was killing people.

Though I cannot imagine how Pfizer officials did not know by Thursday that torcetrapib was at least causing enough higher blood pressure to temper their excited talk, I'll leave it to others to figure out what they knew and when they knew it.

The larger point is that when there is a spread between the business media's perception of events and reality, it means that there is a clear and present danger for investors.

And investors are the ones left holding the bag. The business media fatheads just ride the other side of the story. What, you ask, is Forbes writing today?:

"Behind Pfizer's Failure."

S&P shifts outlook for Pfizer
Standard & Poor's reaffirmed its 'AAA' ratings for drug developer Pfizer Inc. Monday, but shifted to a "negative" outlook from "stable" in the wake of its cholesterol drug-candidate failure.

"The ratings on Pfizer still reflect the company's excellent position in the worldwide pharmaceutical market, highlighted by its diverse drug portfolio and huge R&D program," said S&P credit analyst Arthur Wong. "We also look at the company's very conservative financial policies and superior financial profile."

Pfizer AAA Debt Rating May Be Cut, Moody's, S&P Say (Update3)
By Caroline Salas

Its $5.6 billion of long-term debt is under review for a possible downgrade because New York-based Pfizer's credit profile may no longer deserve its rating without the prospect of marketing torcetrapib, Moody's said today in a statement. S&P today revised Pfizer's outlook to "negative" from "stable."

"This major pipeline setback also increases Moody's concerns that Pfizer may pursue larger acquisitions involving incremental debt, or more aggressive shareholder policies," Michael Levesque, analyst at Moody's in New York, said in the statement.

Pfizer, which has had Aaa ratings from Moody's since 1994, is one of only nine U.S. companies to have the top ranking, according to data compiled by Bloomberg. Standard & Poor's has rated Pfizer's debt AAA since 1986.

There were 11 AAA U.S. borrowers as recently as 2004, when Whitehouse Station, New Jersey-based Merck & Co. was downgraded three levels to AA- after its Vioxx painkiller was linked to heart attacks. A year later, New York-based insurer American International Group Inc. was cut to AA+ during a regulatory probe into potential earnings manipulation.

The extra yield, or spread, investors demand to own Pfizer's $199 million of 5.875 percent notes due in 2008 instead of similar-maturity Treasuries widened by 11 basis points to 45 basis points, according to Trace, the bond-price reporting system of the NASD. The price held at about 102 cents on the dollar. A basis point is 0.01 percentage point.

Pfizer Chief Executive Officer Jeffrey Kindler plans to speed the search for acquisitions in biotechnology, vaccines and oncology, he said today in an interview on CNBC.


Anonymous DanielHaszard said...

Eli Lilly zyprexa cost me $250.00 a month supply and has up to ten times the risk of causing diabetes and severe weight gain.

Nervous investors watch Eli Lilly shares drop $2.80 post election.

My issue is Zyprexa which is only FDA approved for schizophrenia (.5-1% of pop) and some bipolar (2% pop) and then an even smaller percentage of theses two groups.

So how does Zyprexa get to be the 7th largest drug sale in the world?
Eli Lilly is in deep trouble for using their drug reps to 'encourage' doctors to write zyprexa for non-FDA approved 'off label' uses.

The drug causes increased diabetes risk,and medicare picks up all the expensive fallout.There are now 7 states (and counting) going after Lilly for fraud and restitution.


Daniel Haszard

6 December 2006 at 5:46:00 am GMT+10  

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