Pfizer's Failures and Fight for Lipitor

Investors seem to be shrugging off another setback for drug giant Pfizer. Late yesterday the company announced it's stopping a late-stage clinical trial for a skin cancer drug because it looks like it doesn't work better than chemo.

You can read more about melanoma at the American Society of Clinical Oncology's brand new and improved web site (it just launched Wednesday).

Pharma investors should know the risks of drug development. Most products that get tested don't ever make it to market. And as we've seen in oh-so-many instances in recent years, even when they do get approved there's no guarantee that the results that were seen in big clinical trials are going to hold up in the real world.

It's a risky business. But Pfizer (PFE) has had a run of bad luck, if you can call it that, lately. It started in late 2006 when its hoped-for successor to Lipitor failed. Then, late last year it paid billions of dollars to get out of the new, unsuccessful inhalable diabetic insulin business. Then, early this year safety issues cropped out for its new stop-smoking drug Chantix. And now this.

Miller-Tabak healthcare analyst Les Funtleyder wrote in a research note to clients Wednesday morning: "Unfortunately the bad news continues for PFE and we do not see many positive catalysts in the near-term given pipeline issues and political headwinds; valuation and dividend (about a 6 percent yield) do provide some support on the downside however."

Goldman Sachs pharma analyst James Kelly had forecast $300 million in sales for the skin cancer drug in 2012. That's not huge for a company the size of Pfizer. But, given the looming loss of the Lipitor patent and its relatively sparse drug development pipeline, the company needs every bit of new revenue it can generate.

So, Kelly is cutting his earnings estimate for 2012 by two cents. Goldman Sachs has done and wants to do more investment banking for PFE and it makes a market in the shares.

In the meantime, Pfizer is fighting for Lipitor. Take a look below at the new ad I mentioned in yesterday's post that the company has started running in the wake of the Vytorin/Zetia data that came out over the weekend. I don't recall ever seeing the image of a real heart--especially so prominently--in a drug ad like this one.

It's a stark contrast to Pfizer's recent Lipitor campaign with Dr. Robert Jarvik, the inventor of the artificial heart, that the company ended after the ads came under fire from several corners. So, perhaps PFE is going for a more science-driven, medical-driven look in the wake of that brouhaha.

The Pfizer news is also hurting shares of Medarex (MDEX) which would have received a royalty from PFE if the skin cancer drug worked. Pfizer says it is still testing it, though, on several other cancers.

Comments

[howard_roark]

It appears that most of the bad news about PFE is out and priced in to the stock. The recent bounce from $20 territory may indicate that the bottom is in, and there may be significant upside if PFE makes an acquisition to beef up the pipeline.

The dividend yield is certainly attractive at these levels and for the long term investor, upside share price is almost inevitable.

JMHO.