PFE Pfizer Dumps Torcetrapib Drug

The pressure on Pfizer to improve its financial performance intensified after the announcement that the company has ended development of a key drug Torcetrapib. Now Pfizer, the world’s largest drug maker, is likely to slash staff and accelerate merger and licensing deals. Pfizer took the decision after an advice from independent board monitoring a study for cholesterol treatment Torcetrapib that work be ended because of unexpected number of deaths.

Analyst differed on how much Pfizer stock would fall. According to Barbara Ryan, an analyst at Deutche Bank, the dividend yield of around 4% would keep shares from a free fall. However, some analyst estimated the stock could plunge to $20 a share.

Pfizer had been counting on the drug to revitalize stagnant sales that have been hurt by a number of patent expirations on key products. Pfizer was spending around $800 million to develop Torcetrapib, which was supposed to fill the void when its best-selling drug, Lipitor, is going to lose patent protection in either 2010 or 2011. “This is obviously unfortunate because this was the biggest opportunity in their pipeline,” said Barbara Ryan.

Two months ago, Pfizer announced it would detail plans in January to change the company into a more nimble organization and would go beyond the program announced in 2005 to cut $3 billion in expenses by 2008. Patent expirations are expected to cost the company $14 billion annually between 2005 and 2007.

Pfizer CEO Jeff Kindler said the company’s speed of transformation would accelerate because of the loss of Torcetrapib although he didn’t give any details. Last week, Pfizer announced to cut 2200 jobs of US sales force. Pfizer employs roughly 1,00,000 people.
According to Ryan, Pfizer may lay off as many as 10,000 people in near future. She expects Pfizer to increase its annual dividend from 96 cents to $1.10 per share in the next few weeks in the hopes of putting a floor on the stock.