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Pfizer's Disappointing Prognosis

Pfizer (PFE) investors were disappointed by the company's lackluster earnings outlook on Feb. 10. The stock fell more than 2%, to $25.65, as the company said earnings per share in 2006, excluding the costs associated with its ongoing restructuring program, would be about flat with 2005 at $2. That was slightly below what Wall Street had been expecting (see BW Online, 2/8/06, "Pfizer Feels Investors' Pain").

That still might be a tough goal to hit. Pfizer executives told analysts at the New York City meeting that it expects some of its biggest-selling drugs to post healthy gains in 2006. But that is far from assured.

FIGHTING GENERICS. The cholesterol-lowering drug Lipitor is Pfizer's biggest money machine, bringing in more than $12 billion in sales in 2005. Pfizer management told the analysts that they expected Lipitor sales to climb past $13 billion in 2006. But the entire cholesterol-lowering market will be under pressure later this year when the U.S. patent expires on Zocor, Merck's (MRK) $4.4 billion-a-year cholesterol drug.

Managed-care companies and insurers are ready to pounce on that opportunity. They will be looking to shift more patients to a cheap, generic version of Zocor in a bid to control their mounting drug bills (see BW Online, 2/8/06, "Generics Make a Name For Themselves"). So expanding Lipitor's market share this year will be an uphill battle.

Then there is Celebrex. Karen Katen, president of Pfizer Human Health, said the company expected sales of the painkiller would grow to more than $2 billion this year. Celebrex is one of the so-called Cox-2 inhibitors, the class of drugs that took a major hit in 2004 when Merck withdrew Vioxx after it was linked to cardiovascular problems. The concern that those problems extend to all Cox-2 drugs led to a collapse of Celebrex sales -- to $1.7 billion in 2005, almost half of what it sold the previous year.

Pfizer is throwing major resources behind an effort to resuscitate Celebrex. It recently announced it would fund a clinical trial aimed at finally answering the questions surrounding the drug's safety (see BW Online, 12/13/05, "Pfizer's Search for an Answer on Celebrex"). Still, results from that trial are unlikely to come for a couple years.

HOPE FOR A CURE? So the Cox-2 class will remain under a cloud in the near term, and igniting strong growth for Celebrex will be a tall order. After all, despite Pfizer's renewed sales push in the fourth quarter, sales of the drug in that period climbed to just $472 million from $446 million in the third quarter.

Regardless of the earnings performance Pfizer turns in for 2006, investors will be focused on an as-yet-unlaunched product. Later this year, the company is expected to release data on a new drug for raising HDL, the so-called "good cholesterol." The company is hoping that data will show that the drug causes a reduction in the artery-clogging plaque found in coronary arteries. If that is the case, Pfizer could have a blockbuster on its hands.

But the drug, torcetrapib, has also been associated with small increases in blood pressure. The company's chief scientist John LaMattina said the company hadn't yet figured out why that is occurring. But if that side effect looks to be a big problem, the Food & Drug Administration may ask Pfizer for more data before approving it. That kind of delay would be a major disappointment for Pfizer. Yet another reason 2006 will be a critical year for the world's largest drugmaker.

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