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Maraviroc Holds Promise for Pfizer
  Pfizer stock sinks after promising drug yanked, analysts predict an acquisition binge
"Pfizer is slated to introduce three new drugs next year, but only one of them, an AIDS compound, is believed to hold blockbuster potential"

By Associated Press
Tuesday, December 5, 2006 - Updated: 06:31 AM EST
NEW YORK - Pfizer Inc.'s decision to scrap development of a crucial medicine sent its shares plummeting 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 Monday at $24.90 on the New York Stock Exchange.
On Saturday, Pfizer said 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, possibly as early as 2010. Other patent expirations will rob Pfizer of $14 billion in revenues annually 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 come 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 believe 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 drugmaker 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 want to show investors it is taking actions to improve its fortunes, but purchasing another company or licensing products is also very risky, said Jason Napodano, an analyst at Zacks Independent Research, who downgraded Pfizer stock to "sell" from "hold" on Monday.
Napodano acknowledges that Pfizer pays an attractive dividend and has a stock buyback program that bolsters shares. Still he said, "Those aren't long-term strategies."
Most analysts do not believe Pfizer will acquire a major drugmaker because it would be expensive and difficult to integrate. Plus, with $51.3 billion (?38.55 billion) in annual revenues Pfizer already needs numerous blockbusters to fuel sales growth, a challenge that would only be compounded by purchasing another drugmaker.
"Pfizer is already too big," said Napodano.
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 than 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 on Monday, but analysts also speculated it might be a target for Pfizer since its gave up on its own product for the lucrative and growing market for sleep aids, Indiplon.
Shares of Medarex Inc., a biotech company, rose 70 cents, or 5.2 percent, to $14.27 on the Nasdaq. Montgomery & Co. analyst Shiv Kapoor speculated shares increased because investors thought Pfizer might be interested in its technology. Also higher were shares of Nektar Therapeutics, which added 82 cents, or 5.1 percent, to $17 on the Nasdaq. Pfizer already has a partnership with Nektar for Exubera, which is inhaled insulin.
Last week, Pfizer showcased its pipeline at a meeting where it told analysts it would introduce six new 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 blow up two days later.
Additionally, Pfizer is not known for its research and development prowess. All companies have products fail, but Pfizer has not introduced a blockbuster drug (one with more than $1 billion, or ?750 million) in annual sales) that it discovered since impotency tablet Viagra in 1998.
"They've lost more credibility in the research and development area," said Les Funtleyder, an analyst at Miller Tabak & Co. "Research is the question that continues to dog Pfizer."
Pfizer is slated to introduce three new drugs next year, but only one of them, an AIDS compound, is believed to hold blockbuster potential. Recently, it has introduced Exubera and Chantix, a smoking cessation drug, which is off to a promising start. Sutent, a cancer treatment, is also selling well.
But the void left by torcetrapib won't be easy to fill and some investment houses downgraded the stock, including Morgan Stanley, Merrill Lynch and Lehman Brothers. Moody's Investors Service placed Pfizer's long-term Aaa debt rating under review for possible 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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