Pfizer's Cox-2 Pain Lingers

Following a rough 2005, Celebrex is making a bid to rebound.
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After a brutal 2005 in which its sales were cut by nearly half,

Pfizer's

(PFE) - Get Report

arthritis drug Celebrex is trying to make a comeback.

Quarter-to-quarter sales figures are starting to creep higher. Pfizer recently launched a new direct-to-consumer advertising campaign, and the company forecast more than $2 billion in worldwide Celebrex sales this year -- an aggressive target considering the drug's revenue sank to $1.73 billion last year from $3.3 billion in 2004.

Pfizer's future success with the drug will depend on several factors, namely how many new patients take it, how insurers pay for it and how many people file lawsuits alleging Celebrex caused some kind of injury.

Last year, Celebrex was caught up in the concerns about the cardiovascular risks posed by the class of drugs known as Cox-2 inhibitors, the group that includes

Merck's

(MRK) - Get Report

Vioxx. Merck pulled its drug in September 2004 when clinical trials showed

a heightened chance of heart problems among people who took Vioxx for more than 18 months.

Celebrex is the only Cox-2 drug available in the U.S.

Pfizer withdrew Bextra, another Cox-2, from the market in April 2005 after the

Food and Drug Administration

said its risks, particularly a rare dangerous skin disorder, outweighed its benefits.

Last September,

the FDA rejected Pfizer's application for Dynastat, a cousin of Bextra. Dynastat is available in some foreign markets, and Pfizer is talking to U.S. regulators about options for both drugs.

Celebrex has been approved by the FDA for six purposes, including osteoarthritis and rheumatoid arthritis. Pfizer is pushing to expand its sales, and a new marketing campaign features print ads in magazines such as

Time

and

Newsweek

. Pfizer

had suspended direct-to-consumer advertising for Celebrex in November 2004.

This time, Pfizer's marketing takes into account

a tougher safety warning. Celebrex has a black-box warning on its label, the toughest alarm from the FDA, about its possible cardiovascular risks. The warning also says Celebrex can bring "an increased risk" of serious gastrointestinal problems, like bleeding and ulceration, especially among the elderly.

Celebrex isn't alone, however. All older prescription pain relievers carry the same warnings for potential cardiovascular and gastrointestinal damage.

Insurance Impact

Celebrex's comeback will depend heavily on how insurers view it and other Cox-2 inhibitors. "If managed-care organizations decide to significantly change reimbursement patterns for these drugs and Celebrex, that may also be material to the company," says Robert Hazlett, an analyst with SunTrust Robinson Humphrey,

The pharmacy-benefit management company

Express Scripts

(ESRX)

encourages patients and doctors to choose generics first, including when it comes to pain relievers, says Dr. Ed Weisbart, the company's chief medical officer.

Express Scripts has been promoting such behavior for Cox-2 drugs for several years, saying that Cox-2 drugs

have been overprescribed and that their pain relief power isn't any better than generic drugs.

"There are clinical reasons for a small subset of patients" to try Cox-2 drugs, Weisbart says. "There's a handful of cases where it might make sense."

Celebrex won't have much support from the Kaiser Permanente health care system in California either. "It's no safer, no better and it's 10 to 20 times more expensive" than generic prescription pain relievers, says Dr. David Campen, medical director of pharmacy operations, for Kaiser's California operations.

Campen estimates that Celebrex accounts for less than 1% of the prescriptions written by Kaiser's physicians. "Our rheumatologists say

Celebrex's role is quite limited," he says. Kaiser will reimburse patients whose doctors recommend it.

Kaiser has paid close attention to the FDA's review of Celebrex and the agency's decision that the drug isn't easier on the stomach than other pain relievers. If the FDA eventually agrees that Celebrex provides a gastrointestinal benefit, Pfizer will place this distinction on its label and be able to include the findings in its advertising.

Dr. Gail Cawkwell, Pfizer's senior medical director in charge of Celebrex, says her company is trying to convince the FDA to change the label based on "definitive data." Pfizer has started one clinical trial seeking to demonstrate its gastrointestinal benefits, and it will start two others later this year. Results from the first trial should be available in 2008, she says.

The Unknown

As for the litigation Pfizer is facing, the first Celebrex trial had been scheduled for next month in Alabama, but it's been postponed. Rosie Ware, 54, says she suffered a stroke in February 2005 after taking Celebrex. She claims Pfizer failed to warn consumers, doctors and others about its potential risks and side effects.

Pfizer hasn't provided any details on how many Cox-2 lawsuits it might have to defend. At any rate, the number is certainly dwarfed by the 11,500 personal injury lawsuits known to have been filed in the U.S. against Merck over Vioxx.

Unlike Merck, Pfizer hasn't set aside any reserves for defending its Cox-2 drugs.

At the moment, the Pfizer litigation doesn't rate as a big risk factor on Wall Street, although some analysts include it in a general compilation of concerns. For now, they're more worried about how well Pfizer's new drugs will do, whether experimental drugs will clear regulatory hurdles and if Lipitor can keep growing.

"There has been considerable discussion about the cardiovascular safety profile of Cox-2 inhibitors in the medical community," says SunTrust's Hazlett in a research report last month. The removal of Vioxx and Bextra "creates additional potential risks to Pfizer and Celebrex" because they're all in the same drug class, he says.

Bextra's suspension could produce legal expenses and liabilities that might weaken Pfizer's stock price, says Hazlett, who maintains a buy rating on Pfizer. He doesn't own shares, but his firm has had a recent noninvestment banking relationship.

Reversing the Decline

Celebrex sales briefly benefiting from Vioxx's removal. For the fourth quarter of 2004, Celebrex sales climbed to $1.01 billion from $810 million for the same period the previous year. That changed amid the

scrutiny of all Cox-2 drugs. By the second quarter of 2005, sales had dropped to $401 million from $728 million the prior year.

Since last year's second quarter, however, quarterly sales have been growing gradually. For the three months ended March 31, sales rose 19% year-over-year to $491 million.

Pfizer recently noted that new U.S. prescriptions in the first quarter were up 23% from last year even though the overall arthritis market experienced a 2% drop in new prescriptions.

The gain indicates "there is still a substantial base of patients who prefer Cox-2

drugs and have likely explored and exhausted other options," says Barbara Ryan of Deutsche Bank Securities. Ryan has a buy rating on Pfizer. She doesn't own shares, and her firm has had a banking relationship with the company.

Still, Albert Rauch of A.G. Edwards says Celebrex "is a far cry from being a growth driver for Pfizer." Rauch, who has a hold rating, doesn't own shares. His firm has had a noninvestment banking relationship.