By Rachel Barron

Pfizer shares plunged almost 12 percent Monday after the world’s largest drug maker pulled the plug on what it hoped would be a potential blockbuster cholesterol medication.

The company decided Saturday to stop the development of torceptrapib, a drug designed to raise HDL cholesterol, or "good" cholesterol, as well as end a late-stage trial on the drug that involved 15,000 patients.

Pfizer made the decision shortly after receiving a phone call from an independent safety monitoring board that found those taking torceptrapib, in combination with the company’s bankrolling cholesterol drug Lipitor, experienced higher rates of death when compared to those who took Lipitor alone. Eighty-two patients taking the cholesterol combo died, compared to 51 who were only taking Lipitor.

Lipitor works by lowering LDL cholesterol, or “bad” cholesterol. Pfizer was testing the hypothesis that simultaneously raising HDL cholesterol and lowering LDL cholesterol could further reduce the risk of cardiovascular disease than taking Lipitor solo.

According to the American Heart Association, heart disease is the No. 1 killer of both men and women in the United States. Although having high cholesterol levels doesn’t necessarily cause heart disease, high levels of LDL-cholesterol are viewed as a risk factor for the disease.

The phone call left the company in shock. “We believed that the study was coming along as expected,” said Dr. Philip Barter, chairman of the committee overseeing the study, in a statement. “This new information was totally unexpected and disappointing,” he said.

Investors also played out their dismay sending Pfizer’ stock down $3.29 to $24.57.

Big hopes were riding on Pfizer’s ability to make good with torceptrapib. The company had agreed to spend $800 million on its clinical development. As well, Investors were eying it as a future blockbuster for the company. Investors were especially hoping it could help make up expected sales loss when Lipitor, which pulls in about a whopping $13 billion annually, goes generic around 2010. Lipitor also accounts for about 28 percent of Pfizer’s drug sales.

Pfizer’s Fallout

Pfizer’s fallout is no doubt going to be painful.

Bluntly put, “this is a major blow to (Pfizer’s) research strategy,” said Leerink Swan & Company analyst Seamus Fernandez in a research note.

For many analysts torceptrapib was to be a linchpin in Pfizer’s ability to deliver organic growth. Investment research firm UBS had the drug adding as much as $6 billion in revenues for the company by 2012.

The bad news has created a huge looming question, “What now?” Stunned but never quiet, Wall Street is already speculating on an answer. Perhaps the company will go out on an acquisition spree to bulk up its pipeline?

Obviously still reeling from the blow, Pfizer is in its early phase of damage control. For now the company is reiterating that revenues will remain unchanged for 2006, and revenue growth is expected in 2009. As well, the company said it will “enhance” total returns to shareholders through dividends and share purchases.