Trial and Errors: Pfizer's Drug Failures Are the Result of Bad Management, Not Clinical Misfortune

The FDA's decision to nix Pfizer (PFE)'s development of a new osteoarthritis drug, tanezumab, reveals some serious errors of judgment among management. Especially when you couple it with the company's confession that it will not proceed with a study of the antipsychotic Geodon in children in part because it cannot meet an FDA deadline.*

On tanezumab: It is not Pfizer's fault that the drug actually made patients' arthritis worse, causing an unacceptable increase in joint replacments. Sometimes you study a drug and it turns out not to work. That's the way it is in the drug business (they call it "trial and error" for a reason).

But it is Pfizer's fault for studying tanezumab in the first place. Tanezumab is an injection drug, which would have gone into a crowded market of painkillers -- most of which are cheap and can be taken as pills. It could only have been preferred by patients for whom nothing else works (at that point you're often looking at joint replacement anyway). So while the drug was interesting -- it was a biotech product that inhibited nerve growth factor -- the market opportunity was probably tiny. Why was Pfizer wasting resources on such a marginal revenue driver? That's a strategic decision, not a clinical one, and Pfizer seems to have gotten it wrong going in.

Tanezumab came from Pfizer's 2006 acquisition of Rinat Biosciences. That deal was primarily about Rinat's Alzheimer's drug. Then came the Wyeth deal in which Pfizer gained Wyeth's rights to Elan (ELN)'s bapineuzumab, another Alzheimer's candidate whose promise far eclipses Rinat's. So almost all of the "several hundred million dollars" that Pfizer paid for Rinat has turned out to be a waste. Again, that's about management strategy, not clinical results.

There's also the question of the timeline. Pfizer was touting tanezumab as "well-tolerated" as recently as June 18. Mark Brown, head of the drug's arthritis clinical development program, told Reuters:

We believe this drug will ultimately prove itself to be superior to existing therapies for osteoarthritis.

The FDA does not move quickly. Yet somehow, between June 18 and June 23, the FDA discovered that the drug makes the condition worse, not better. Two of those days were the weekend. Hmm.

On Geodon: Has any aspect of Pfizer's management of this drug been competent? The company was sued by Blue Cross Blue Shield earlier this month, for allegedly giving kickbacks to doctors to use the drug for unapproved, "off-label" purposes. Blue Cross wants the money it paid for the prescriptions back.

The suit recounts Geodon's sorry history: The FDA initially rejected the drug in 1998. When it was later approved in 2000, the FDA ordered its name changed from "Zeldox" to Geodon because the moniker Pfizer had picked was too similar to "Zyvox," an antibiotic. Pfizer used a bunch of dodgy scientists to prepare the application for the drug, two of whom ended up in prison and a third was sanctioned for research misconduct. When the drug was on the market, the company paid $4,000 a day for one doctor to fly around in his private helicopter allegedly promoting the drug for off-label uses.

And although the company says its pediatric Geodon application is delayed for deadline reasons, and that the FDA did not actually request the trial that was cancelled, it comes after the FDA cited Pfizer in April for giving overdoses of the drug to children. Hmm, again.

The whole thing creates the impression that there's a lack of adult supervision in certain parts of the company. These aren't bad clinical results, they're bad management decisions. As analyst Tim Anderson of Bernstein Research wrote in a note to investors:

What this does, however, is cast a pall over PFE's broader R&D abilities as the company has been highlighting tanezumab as one of its promising late-stage products worthy of phase 3 development. On the back of failed Dimebon (another drug for Alzheimer's disease), the timing of this setback is not ideal, and it works against the "pipeline optionality" that is often part of investors' BUY thesis.

*Correction: Originally, this item incorrectly said that Pfizer was unable to meet an FDA deadline that would have allowed Pfizer to market Geodon for children. In fact, Pfizer is still pursuing a children's indication for the drug. Pfizer cancelled the trial for a number of reasons, one of which was that the data from it would only have arrived after the FDA's deadline for submitting information for the indication had passed, a spokesperson said. Here's the company's official explanation:

Pfizer continues to pursue a pediatric bipolar indication for Geodon and is committed to working with the FDA to address the questions raised in the Complete Response Letter. While Pfizer had taken preparatory steps to potentially conduct Study A1281196, it was never started and no patients were enrolled. After careful consideration, the Company decided not to proceed with the study. Being able to meet regulatory timelines for data readouts and study completion were the main factors driving Pfizer's decision not to move forward with the clinical trial. It is important to note that no additional studies were mandated in the FDA's Complete Response Letter.

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