No Long-Term Ills Expected for Drug’s Maker

The sudden withdrawal of Warner-Lambert’s billion-dollar diabetes drug, for all its surprise, should have little long-term effect on the company or its pending merger with pharmaceutical giant Pfizer Inc., analysts predicted Wednesday.

Indeed, the episode, while embodying the anxieties of corporate managers in an age of activist shareholders and sharp media scrutiny, could prove fleeting, at least in the view of financial experts.

The Rezulin furor had become an increasing embarrassment to Warner-Lambert Co. and the pill’s withdrawal had only a modest effect on its stock price, which ended the day at 93 5/8, down 1 3/8.

Some analysts said that the demise of Rezulin was anticlimactic. Declining sales of the controversial diabetes pill, evident for the last year, indicated that its heyday was already over.

“You could see that the past was the future as far as this product was concerned,” said Neil Sweig, an analyst with Ryan, Beck/Southeast Research.

The New Jersey drug firm yanked Rezulin off the market Tuesday night, after almost two years of negative publicity and tightening restrictions from the Food and Drug Administration. The drug has been linked to 63 voluntarily reported deaths.

Now, as Warner-Lambert hopes the Rezulin controversy will begin to fade, its prospects rest on another drug, the cholesterol fighter Lipitor, which is expected to become the top-selling drug in the world, with annual revenue exceeding $5 billion.

Rezulin has registered sales exceeding $1.8 billion since it was introduced in March 1997. In financial statements over the last several years, executives touted Rezulin to Wall Street as one of the company’s two profit engines of the future.

Experts said Wednesday that the furor over Rezulin played little role in Pfizer’s hostile $90-billion takeover of Warner-Lambert. Rather, it was the sales potential of the other drug, Lipitor, that fueled the merger effort, which may be completed this summer.

“The merger will still go on. The vote will still be aye,” said David Saks, portfolio manager for the Gruntal MedScience Fund. “The crown jewel, of course, is Lipitor.”

Pfizer spokesman Andy McCormick issued a statement Wednesday dismissing any significant impact from the loss of Rezulin, which was expected to bring in $400 million in sales this year, down from $773 million in 1999.

“The cessation of Rezulin sales by Warner-Lambert is not material to either the closing of the Pfizer-Warner-Lambert merger or the anticipated ongoing operations of the combined companies,” he said.

Combined, Warner-Lambert and Pfizer will sell products ranging from Trident to Listerine, from Visine to Viagra. The company will have the largest research staff in the world.

Still, the FDA’s decision to pull Rezulin from the market was a blow to Warner-Lambert, which had fought hard to keep it. Even in announcing its withdrawal, Warner-Lambert insisted that its benefits outweighed its risks and blamed “repeated media reports sensationalizing the risks” of Rezulin for forcing it off pharmacists’ shelves.

Some analysts said that, despite its sales, Rezulin was not a hugely profitable drug. Warner-Lambert licensed the drug from Sankyo Co., a Japanese firm.

Sankyo developed Rezulin and until Tuesday sold it in Japan under the name Noscal. After Warner-Lambert’s decision, Sankyo said it had halted Noscal sales in Japan and was recalling shipments already made.

“The margins were pretty low,” said analyst Sergio Traversa of Mehta Partners. He said that the negative publicity was also a “distraction” to the company. “You don’t like a product that is every day considered toxic and killing people.”

Gruntal’s Saks predicted the drug’s withdrawal would cost Warner-Lambert $200 million this year and perhaps $100 million in 2001. But the larger question, he said, could revolve around lawsuits stemming from deaths allegedly related to Rezulin. “It’s not just a loss of sales. Who knows whether there will be litigation issues?”

Other analysts said that risks are minimal. “Everything was laid out on the label of Rezulin,” Traversa said. “I can’t guarantee that nobody will sue, but probably the legal position of Warner-Lambert and Pfizer is pretty strong.”

But Houston attorney Zoe Littlepage, who filed a lawsuit against the company Wednesday on behalf of a nurse who died in 1998 after taking Rezulin, disagreed.

“I think their exposure in Rezulin is significant,” Littlepage said. “This drug went on the market without adequate warning, and it stayed on too long. They kept this on the market for profit.”

Independent analyst Hemant Shaw said that the Rezulin saga’s real effect on Warner-Lambert and the rest of the pharmaceutical industry may be through the FDA’s drug approval process. Rezulin was approved on a fast-track basis, which some critics have blamed for letting an unsafe drug onto the market.

“I think there is going to be more scrutiny than there has been in the past,” Shaw said.

Times staff writer Jonathan Peterson contributed to this story.