Pfizer

(PFE) - Get Report

suffered another setback in its drug development pipeline Tuesday night, and this blowup will likely cause collateral damage.

The New York City-based pharmaceutical giant halted a phase III study of a melanoma drug after an interim review concluded that the drug would not prolong survival any more than currently prescribed chemotherapy, the company announced Tuesday night.

The latest disappointment from Pfizer's drug lab raises even more doubts about the viability of a similar melanoma drug being developed by

Medarex

(MEDX)

and

Bristol-Myers Squibb

(BMY) - Get Report

.

The Medarex-Bristol Myers drug

failed

a phase III study last December although the two companies say they will still file the drug for approval with U.S. regulators before the middle of the year.

Both the Pfizer and Medarex-Bristol Myers drugs are designed to work in almost identical ways by blocking a cell receptor called CTLA-4 that, in turn, activates the body's immune system to seek out and destroy cancer cells.

But Tuesday's failure of the Pfizer drug adds further evidence to suggest that so-called CTLA-4 inhibitor drugs may not be potent enough to work against melanoma. And this will only add to investor worries that have weighed on Medarex shares since last year.

Pfizer closed Tuesday up 2% to $21.38 ahead of its announcement, which caused the stock to fall 1% to $21.15 in the after-hours trading session.

Medarex was up 5% Tuesday but gave back 10% to $8.40 in the after-hours session Tuesday.

The Pfizer drug, known as tremelimumab, was being studied in a phase III trial of patients with advanced melanoma who had not yet begun being treated with any chemotherapy. The study pitted tremelimumab against one of two standard chemotherapy drugs used to treat skin cancer, with overall survival as the primary endpoint.

Pfizer halted the study after an interim review concluded that patients given tremelimumab would not live longer than patients given either of the two chemo drugs, temozolomide or dacarbazine. Data from this study will be presented in June at the annual meeting of the American Society of Clinical Oncology.

Pfizer continues to study tremelimumab in other types of cancer.

Last summer, Pfizer stopped prematurely a phase III trial of a lung cancer drug after a similar interim review found the drug to be ineffective. The most damaging blow to Pfizer's pipeline came in 2006 when the company was forced to cancel a program to develop a new cholesterol drug.

The Medarex-Bristol Myers drug is known as ipilimumab. Last December's failed phase III trial involved so-called "second line" melanoma patients, which means patients had been treated previously with chemotherapy.

The two companies are currently running another phase III melanoma trial, this one also in previously untreated patients. The design of the trial differs a bit from the Pfizer study in that patients are being treated with either ipilimumab plus dacarbazine or with dacarbazine by itself.

Results from this study aren't expected until 2009.

Adam Feuerstein writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback;

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