What went wrong at Pfizer?
Pfizer announced a few days ago that they pulled the plug on torcetrapib, because the drug had sharply increased the death rate in a 15,000 patient trial. This was the drug that was going to save Pfizer when Lipitor, Pfizer’s $14 billion blockbuster anti-cholesterol medicine, goes off patent in 2010. To make matters worse, two days before canceling all further development, Pfizer’s CEO Jeff Kindler stated at a large meeting with 250 analysts that torcetrapib was “one of the most important developments in our generation.”
During the past week newspapers and analysts and scientists have had one question on their mind: How could something like that happen to the preeminent drug company in the world? How could the CEO of this powerful drug company be caught hyping a drug that was withdrawn only days later?
As a former Vice President of Pfizer, and based on my many years working in the drug industry, I may have some clues to what really happened.
First, let’s face it. A drug company such as Pfizer does not spend $800 million on clinical trials for a new drug without very good preliminary data that indicate that this drug has the potential to save a great number of lives. But you never really know what will happen until you start large scale phase III clinical trials. Pfizer did just that, and enrolled 15,000 patients.
Then the trouble began. First they discovered that while torcetrapib appeared to increase “good cholesterol” by about 60%, which is a good thing, it also increased blood pressure, which is a bad thing.
Pfizer’s research chief, Dr. John LaMattina, was according to the New York Times, “the company’s chief booster for torcetrapib” and he clearly staked his career and scientific reputation on this new drug, in spite of the bad news.
But, according to Forbes, “some researchers had always doubted torcetrapib, some savagely. Even doctors who tested the drug said it was a big gamble. Years before Pfizer's drug went into large-scale trials, some research suggested that drugs like it might actually do more harm than good. In particular, at least three published studies of people with gene mutations that the drug mimicked found unexpectedly higher rates of heart disease.”
John LaMattina, however, determined that it was in his and Pfizer’s best interest to contradict the critics and claim that torcetrapib was “the most important new development in cardiovascular medicine in years,” two days before the torcetrapib drug trial was abruptly halted.
And normally a research chief has an experienced CEO, who may not have the same personal investment in any particular drug, who can independently ask the tough questions.
Only this time Dr. LaMattina didn’t have such a boss.
Dr. LaMattina reports to Jeffrey Kindler, and Mr. Kindler has only four months experience as a drug company CEO and only five years of experience in the drug industry. And in those five years, Mr. Kindler never managed the business. He was in charge of the law department. In fact, Mr. Kindler has less experience in the drug industry than many of his product managers and sales representatives. And of course, that makes it hard to ask the tough questions.
What made matters even worse was that Jeff Kindler wanted to change how Pfizer was run. His predecessor, Dr. Hank McKinnell, had been forced out amid turmoil surrounding his compensation package and poor stock performance. Dr. McKinnell had also made himself impopular on the Street, and minimized his contacts with analysts. Mr. Kindler was going to change all that, create a new openness, and instead ended up embarrassed.
Of course, I do believe that Mr. Kindler is doing the right thing, when it comes to openness, but such openness has to be combined with actual know-how. So when market guru Jim Cramer after this debacle wrote, “Maybe they really are a bunch of jokers at Pfizer,” that certainly doesn’t bode well for this large corporation. And when Mr. Cramer piled it on the following day, saying that “there are three things Pfizer is good at” and then listed those things as, “issuing press releases, screaming at the media” and “blaming the system,” then, any investor would start getting seriously concerned. It probably doesn’t help that Mr. Cramer also billed Pfizer a “$25 bond with no upside.”
This development is more than a big set-back for Pfizer. It provides an unusual glimpse into a corporation caught with its pants down and its hubris exposed for the entire world to see. After all, there were plenty of warning signs, ignored by Pfizer’s present management. And there is perhaps only one person smiling right now. And that is Pfizer’s vice chairman, Karen Katen, forced out after her succession battle with Jeff Kindler. She had thirty years of experience in the drug industry.