NEW YORK (Dow Jones)--Shares of Warner-Lambert Co. (WLA) fell nearly 5%
Tuesday after Salomon Smith Barney downgraded the stock to outperform from buy
on concerns about the diabetes drug Rezulin.
But several others on Wall Street, including SG Cowen & Co. and PaineWebber
Inc., said they are maintaining their buy ratings on the Morris Plains, N.J.,
pharmaceutical company.
Warner-Lambert recently traded at 66 9/16, down 3 1/4, or 4.7%, on volume of
4.7 million shares, compared with a daily average of 2.9 million.
The company announced last week that the Food and Drug Administration's
Endocrinologic & Metabolic Drugs Advisory Committee will review Rezulin's
post-marketing safety and efficacy data on March 26 along with a supplemental
new drug application for combination therapy.
The safety review follows increasing concern about the drug's potential to
cause deadly liver damage. Since the March 1997 launch, 32 deaths have been
linked to liver damage in patients taking the drug. Rezulin's patient
population totals about 1.4 million, according To Salomon.
After adverse events, the drug's label was downgraded to include "a gauntlet"
of 11 liver function tests during the first year of therapy to identify
patients at risk, Salomon analyst Christina Heuer wrote in a research note
issued Tuesday morning.
Her concerns stem from questions about whether the FDA will add more liver
tests to Rezulin's label or will relegate the drug to a last-resort therapy for
diabetes.
Concerns about potential competitors to Rezulin were also cited. In late
November, Smithkline Beecham PLC (SBH) filed a New Drug Application with the
FDA for the drug Avandia. And on Monday, the U.S. unit of Takeda Chemical
Industries filed to market Actos, a drug that will be promoted in the U.S. with
Eli Lilly & Co. (LLY). Both companies requested six-month expedited reviews.
If the potential competitors receive safety labels superior to Rezulin's,
that could pose a serious threat to Warner-Lambert, said Hambrecht & Quist Inc.
analyst Alex Zisson, who estimates 1998 U.S. sales of the drug at about $750
million.
But he noted that "by far, Lipitor is still the most important profit
contributor" to the company. Zisson, who is maintaining his neutral rating on
the company, estimates 1998 sales of the blockbuster cholesterol drug at about
$2.1 billion worldwide.
(MORE) DOW JONES NEWS 01-19-99
11:40 AM
SG Cowen analyst Jonathan Moran said that despite the FDA's review of
Rezulin, his company is maintaining its strong buy rating on Warner-Lambert.
"I think that we view this as a neutral to slight positive for Warner," he
said, adding that the FDA review will provide an open and objective scientific
forum for discussion about the drug.
PaineWebber analyst Jeffrey Chaffkin, who said his company is also
maintaining its buy rating on Warner-Lambert, said the stock price already
reflects investors' Rezulin concerns and added that benefits of the drug
outweigh its risks. The shares, he said, will be "pretty volatile" between now
and the March meeting.
Even Salomon noted the upside potential at Warner-Lambert in its research
note and said an expected strong fourth-quarter earnings report next week could
"enhance" the stock price. The absence of an expedited review for Avandia and
Actos could also benefit the stock. And Warner-Lambert could stand to gain if
Rezulin escapes new restrictions on its use and is recommended for new
indications for combination therapy, Salomon's note said.
But for now, Rezulin is "mired in controversy" amid upcoming patent
expirations on other key drugs at Warner-Lambert, and Salomon cut its 1999
earnings estimate to $1.90 a share from $1.95. Analysts surveyed by First Call
see 1998 earnings at $1.48, up from $1.04, adjusted for a stock split, for
1997.
Until the FDA meeting, Salomon wrote, the stock "could continue to trade
within a narrow range."
- Melanie Trottman; 201-938-5287
(END) DOW JONES NEWS 01-19-99
12:31 PM |
