Tue, Dec 05, 2006 page11

• Pfizer could slash as many as 10,000 jobs

  NO MIRACLE DRUG Analysts predicted falling stock and the company announced it would slash staff after it said that it was abandoning production of a once promising new drug

  • AP AND BLOOMBERG
  • • 
    • 
    • 

  Pfizer Inc will likely slash staff and accelerate merger and licensing deals as the pressure on it to improve its financial performance intensified after the weekend's announcement that the company ended development of a key drug, analysts said.

  Analysts differed on how much they believed Pfizer stock would fall when it opened yesterday. Barbara Ryan, an analyst at Deutsche Bank, said she believed the dividend yield of roughly 4 percent would keep shares from a free fall, but another analyst estimated the stock could plunge to US$20 a share.

  Shares of the New York-based company declined by US$4.13 to US$23.73 in early trading yesterday on the New York Stock Exchange.

  Pfizer, the world's biggest drugmaker, ended development of its most important new drug, a cholesterol medicine designed to replace Lipitor when its patent expires.

  Pfizer ended clinical studies of the cholesterol pill torcetrapib on Dec. 2 because fatalities among patients taking it were 60 percent higher than in the group who didn't get the drug.

  "This is obviously unfortunate because this was the biggest opportunity in their pipeline," Ryan said. "Clearly there is more pressure on them to do cost cutting."

  Ryan said Pfizer, which employs roughly 100,000 people, may lay off as many 10,000 people in the near future. Ryan added that she expects Pfizer to hike its annual dividend from US$0.96 to US$1.10 per share in the next few weeks in the hope of putting a floor on the stock.

  But Jason Napodano, an analyst at Zacks Independent Research, doesn't think the yield will be enough to prop up the shares. He points out that at the end of last month, Pfizer pulled out of its deal with drugmaker Organon to develop schizophrenia treatment asenapine.

  Napodano said he expected the drug to add US$500 million in sales by 2010 while by that time torcetrapib's sales would total US$3 billion.

  "Losing asenapine was a hole in the boat. Now they have hit an iceberg," Napodano said.

  Ryan and Napodano both expect Pfizer to act swiftly to bring new products into the fold, either through acquisition or licensing. But Napodano said that until investors see what those products are, he sees little reason to buy the stock. He said he intends to review his "hold" rating on the stock.

  The loss of torcetrapib thrust chief executive officer Jeffrey Kindler, a former McDonald's Corp executive who took the Pfizer helm in July, into one of the biggest financial crises in the company's 157-year history. Pfizer invested US$1 billion in developing the medicine and needed it to replace cholesterol drug Lipitor, the source of a quarter of its US$51 billion in annual revenue and almost half of net income, when the patent expires in four years.

  "The new CEO basically will have to buy his way out of trouble," Navid Malik, an analyst with Collins Stewart Holdings Plc, said in a telephone interview from London on Sunday.

  "When you get to 2010 and 2011, you are facing a cliff where Pfizer sales are going to drop quite dramatically," Malik said.
• Most Popular

  • 1

    Taiwan to produce more than 1,200 new missiles

  • 2

    Taiwan in tsunami threat zone after major earthquake in Philippines

  • 3

    HSBC doubles down on Taiwan

  • 4

    Taiwan firms eye Philippines amid shift to non-China supply chains: CIER

  • 5

    Taiwan wants bilingual, AI-ready graduates — but tests for yesteryear