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Pfizer Fails... Again


Two of its trial drugs take a hit, and competitors are ready to pounce.

Thursday night brought another black mark for Pfizer (PFE), or rather two black marks.

The New York-based pharma giant announced that two late-stage breast cancer trials of its drug Sutent didn't meet the primary endpoints. On top of the Sutent flop, the company also announced that it's discontinuing a phase 3 study of its non-small cell lung cancer drug figitumumab because an outside safety committee said it was unlikely to have any effect in patients.

"We view these announcements as disappointing but not surprising given the events that occurred last year surrounding these cancer compounds," wrote Leerink Swann analyst Seamus Fernandez in a note to investors. "However, we acknowledge that these R&D failures continue to drive negative investor sentiment even though they do not affect our revenue forecasts."

This isn't the first time Sutent has failed to perform. The drug, while currently approved for the treatment of advanced kidney cancer and gastrointestinal stromal tumor, failed to outperform standard chemotherapy in a late-stage last year for colon cancer.

Last year, the Big Pharma stopped the phase 3 development of axitinib for the treatment of pancreatic cancer when the drug showed no improvement in patients compared to chemotherapy alone. In 2008, the company halted late-stage studies of tremelimumab for melanoma, sending shares of Medarex, Pfizer's partner, crashing. Outside cancer, Pfizer has had other disappointments; it recently announced that its drug with Medivation (MDVN), Dimebon, was not effective in the treatment of Alzheimer's.

(See Pfizer Dealt an Alzheimer's Blow)

This string of failures serves as a reminder to Pfizer investors that the acquisition of Wyeth has been a $68 billion bandage for the company's lack of R&D and dwindling pipeline. The company has been trying desperately to fill the hole that will inevitably appear in its top-line when cholesterol-lowering drug Lipitor and Alzheimer's treatment Aricept go off patent later this year, when its erectile dysfunction drug Viagra loses protection from generic competition in 2012, when its arthritis treatment Celebrex loses its patents in 2014, and drugs like Prempro, Lyrica, and Chantix follow shortly after.

While this dark cloud doesn't have any silver lining for Pfizer, other companies may benefit from the Big Pharma's failures. Onyx Pharmaceuticals (ONXX) develops a breast cancer drug called Nexavar. The drug has had problems with skin toxicity in drug trials and isn't as far along in development as Sutent, but now could have a better shot at capturing some of the market.

"There is overlapping toxicity of hand-foot skin reaction for Nexavar and Xeloda, and how problematic this will be for Nexavar depends on the alternatives. Therefore, we view a negative Sutent trial to be a positive for Nexavar," wrote Leerink Swann analyst Howard Liang. He believes that Sutent's failure could enable Nexavar to have an improved competitive landscape. He raised his price target on the company to $35 from $32. He also raised his estimates for sales of Nexavar in breast cancer, expecting the drug to reach sales of $350 million by 2015, compared to a prior estimate of $210 million.

Nexavar is currently on the market for the treatment of liver cancer and advanced kidney cancer.
No positions in stocks mentioned.

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