Pfizer Shares Sink as It Halts Plans for Cholesterol Drug

NEW YORK, Dec. 4 -- Shares of Pfizer, the world's largest drug maker, sank Monday 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 $2.96, or 11 percent, to $24.90 on the New York Stock Exchange.

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

The news was devastating to Pfizer, which has had numerous patents on key products expire. It spent about $800 million to develop torcetrapib, which was supposed to fill the void when its best-selling drug, Lipitor, a cholesterol treatment, 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 possible downgrade because of the announcement. Meanwhile, Lehman Brothers 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 is likely to slash the size of its 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 Pfizer $14 billion annually between 2005 and 2007.

In the statement Pfizer issued Saturday, chief executive Jeffrey B. Kindler said the company's pace of transformation will be quickened because of the loss of torcetrapib, although he didn't give specifics. Last week, Pfizer announced it was cutting 20 percent, or 2,200 jobs, of its U.S. sales force.

Deutsche Bank analyst Barbara Ryan said Pfizer may lay off as many as 10,000 in the near future. Pfizer employs about 100,000.

"Losing asenapine was a hole in the boat. Now they have hit an iceberg," said Jason Napodano, a biotechnology analyst with Zacks International Research.

Pfizer reiterated that it hopes to introduce six new products to the market by 2010, but Napodano said its pipeline just doesn't have another drug that offers the sales potential of torcetrapib.