Pfizer’s Silver Lining
11 Dec 06
“This will be one of the most important compounds of our generation. We
think we’ll have a strong case for approval.”
Pfizer CEO Jeffrey B. Kindler, in The New York Times, 1 Dec 06
Pfizer CEO Jeff Kindler
Mr. Kindler was
talking about Pfizer’s new cholesterol medication torcetrapib, which the
company has been working on since 1998. He made these comments at a
Pfizer-hosted investors’ conference on Thursday, 30 November.
Expectations were high for the drug, the first of a number of new
compounds which are designed to increase the amount of “good”
cholesterol in the bloodstream. Investment analysts expected torcetrapib
to generate annual sales of several billion dollars.
The
investors’ conference appeared to be a success as well. Pfizer stock
rallied more than 2 percent on Thursday, as Pfizer’s senior executives
talked about their intention to introduce four new medicines a year by
2011.
Two
days later, on Saturday morning, Dr. John L. LaMattina, Pfizer’s chief
scientist, received the first definitive results from its large-scale
clinical trials of torcetrapib. These results indicated conclusively
that the drug was dangerous.
The problem with
torcetrapib is that it increases blood pressure even as it raises levels
of so-called “good” cholesterol. Results from the clinical trials
demonstrated that the negative effects of higher blood pressure
outweighed the benefits of increased “good” cholesterol.
Torcetrapib
actually caused an increase in deaths and heart problems. Eighty-two
people who were taking the drug have died so far in the clinical trial,
compared with only fifty one people in the control group. Based on
these findings, an independent board monitoring the study recommended
that the drug’s development be discontinued.
After a Saturday
morning conference call between the company’s senior executives, Pfizer
announced that it was ending clinical trials of torcetrapib and writing
off an investment of almost $1 billion that the company had made over
the last 8 years.
Investors’ reaction was swift – on Monday, 4 December, Pfizer stock
dropped about 10 percent. Moody’s bond rating service announced that it
was considering a downgrade of the company’s bonds, which are currently
rated AAA. S&P changed the outlook for Pfizer from stable to negative.
Pfizer Stock Price, Dec 1st – Dec 5th, 2006
The failure of
torcetrapib comes at a very difficult time for Pfizer, which is
struggling to find replacements for such blockbuster drugs as Lipitor.
Still, the
company is fortunate that it was forced to cancel the drug before
selling it. Patients taking the drug in clinical trials must sign
waivers that acknowledge the unknown risks of the compound, so Pfizer’s
legal liability is currently quite limited. If the problems with the
drug had emerged once it was in the market, Pfizer’s legal problems
would have been catastrophic.
Companies are
extremely reluctant to cancel their own late-stage projects, and the
drug approval process is structured to address this built-in conflict of
interest. The torcetrapib clinical trial, called Illuminate, was
administered independently of Pfizer. In fact, Pfizer researchers were
not even allowed to see the data until the independent panel overseeing
the trials were sure that the results were definitive.
Once the panel
was sure of the results, Pfizer executives really had no choice but to
cancel the project. According to reporting in The New York Times,
they were able to make this decision in a two hour conference call
on Saturday morning. Within hours, Pfizer had told more than 100 trial
investigators to stop giving patients the drug.
In other
industries, of course, there’s much less independent oversight in the
development of new products and services. In fact, most companies would
justifiably object to having outsiders control the fate of their new
product development projects.
But the conflict
of interest still remains – companies are extremely reluctant to cancel
their own late-stage projects, even if it’s the best course of action.
In research they’ve done regarding “speaking up” at work, Harvard
professor Amy Edmondson and her co-author Jim Detert of Penn State
provide an indication of just how much employees do not want to discuss
their concerns about new product development projects.
In one part of
the Edmondson/Detert study, managers were forced to make a choice
between speaking up around two very unattractive options -- raising
concerns about a project or about their boss’ unpleasant personal
habits. Most of the managers faced with this choice would prefer to
speak up about their boss’ personal habits rather than about the
project!
Last week
brought undeniably bad news for Pfizer, but there is a silver lining.
Thanks to a stringent regulatory process, Pfizer was forced to cancel a
project that was never going to be successful. Other companies don’t
have these kinds of mechanisms in place and too often persevere,
spending time and money on efforts that eventually fail with their
customers.
More Information:
-
The New York
Times
reported on
Pfizer’s decision to cancel drug development on 4 December 06.
Here’s a
link.
-
Here’s a
recent
interview about “speaking up” at
work with Professor Amy Edmondson.
-
I wrote an
update several years ago on why bad projects are so hard to kill.
That’s available
here (on an older version of my site).
-
Isabelle
Royer, at Université Paris-Dauphine, has done a number of case-based
studies on the issue of why bad projects are so hard to kill. She
wrote an article for Harvard Business Review in 2003 that’s
discussed
here.
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