Pfizer faces leaner times after trials on a drug for heart disease were halted, writes Denis Staunton.

Pfizer's decision last weekend to halt development on a promising new treatment for heart disease shocked Wall Street, wiping 11 per cent off the company's value on Monday and raising questions about the long-term prospects of the world's biggest pharmaceutical firm.

Pfizer pulled the plug on torcetrapib, a drug that promotes the creation of "good" cholesterol, or HDL, after late stage trials showed that patients taking the drug were dying more often than those who did not take it.

Torcetrapib is not the first blockbuster drug to self-destruct at a late stage of development, but its failure highlights problems at Pfizer that are shared throughout the industry.

With net profits in excess of $8 billion last year, about $20 billion in cash and little debt, Pfizer ought to be better placed than most companies to weather misfortune. The problem is that about half of Pfizer's annual revenue comes from a single heart disease drug, Lipitor - which earns more than $12 billion a year, but loses patent protection in 2010.

Pfizer had hoped to retain its market share by combining Lipitor, which lowers bad cholesterol with torcetrapib, which increases good cholesterol and launching the new product as early as 2008.

As late as last week, Pfizer was describing the compound as "the most important development in cardiovascular medicine in years". But on Saturday morning, Pfizer chief executive Jeffrey Kindler received news that, in a trial involving 15,000 people, 82 patients taking Lipitor and torcetrapib had died, compared with 51 taking Lipitor alone.

Patients taking torcetrapib also showed an increase in angina and congestive heart failure.

"There wasn't much of a discussion. It was clear we had to stop the trial," Mr Kindler said.

The failure of torcetrapib, and Lipitor's impending loss of patent protection, leaves Pfizer facing the future after 2010 with a weak pipeline of drugs in development. Even if the company's best prospects, which include an innovative HIV treatment and an obesity drug that limits appetite, succeed, none have the commercial potential of a drug for heart disease, which is America's biggest killer. Pfizer is now likely to accelerate cost cuts that last week saw the loss of 2,000 jobs as the company slashed a fifth of its US sales force. With its own product pipeline depleted, the company must look to acquisitions of biotech companies and licensing agreements for other companies' drugs. Although Lipitor was the product of an inspired licensing agreement in 1996, Pfizer has had an otherwise poor history of deal-making, spending $60 billion to acquire Pharmacia in 2002, only to see the smaller firm's most promising drug become embroiled in safety questions.

Earlier this year, Pfizer announced an overhaul of its approach to licensing and co-developing products invented by other drug companies, moving beyond mergers and licensing to include co-promotion deals, equity investments, and other options.

Promising drugs will not come cheap however, and this has already been a record year for acquisitions of biotech companies in the US, with 13 major deals worth almost $20 billion.

Torcetrapib's failure highlights the perils of focusing on areas such as heart disease, which promise enormous profits but also require huge investment in large-scale trials. Because most of those who use cholesterol drugs are essentially healthy, the Food and Drug Administration is especially alert to the long-term risks of any new treatments.

Some pharmaceutical companies have shifted their focus towards niche drugs and areas such as cancer treatment, where regulatory authorities take a more liberal approach, on the basis that patients who turn to new treatments often have few other options.

Pfizer's troubles come at an anxious time for America's pharmaceutical industry as Democrats prepare to take control of Congress with a commitment to reduce the cost of healthcare and to make medical treatment available to more Americans.

The party is committed to allowing the government to negotiate directly with pharmaceutical manufacturers to ensure lower prescription drug prices for senior citizens. The ban on state and federal authorities negotiating prices with drug companies means that American patients pay much more for medicine than their counterparts in Europe, where state health authorities effectively cap prices by negotiating with pharmaceutical companies.

Democrats are also considering moves that would encourage doctors to provide cheaper, generic forms of most drugs and the Food and Drug Administration has already become more friendly to generic drug manufacturers and more strict with drug companies that try to extend patent protection by making slight changes to existing products.

Pfizer's vast cash reserves and the company's sheer size and global reach should ensure that it survives the loss of its latest blockbuster drug, even if profits shrink after 2010.

Wise investments and a run of luck in R&D may not be enough, however, to protect the company from a new political mood in the US that will mean leaner times ahead for an industry that has had its own way in Washington for many years.