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Warner-Lambert stock slips
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March 22, 2000: 11:59 a.m. ET
But removal of diabetes drug not expected to have big impact on pharmaceutical firm
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NEW YORK (CNNfn) - Shares of drug maker Warner-Lambert Co. sustained a modest sell-off Wednesday after the company announced it would withdraw its diabetes treatment Rezulin from the U.S. market under pressure from federal regulators.
Warner-Lambert (WLA: Research, Estimates) stock slipped 3-1/8, or about 3 percent, to 91-7/8 in late morning trading. Shares of Pfizer Inc. (PFE: Research, Estimates), which is acquiring Warner-Lambert, lost 1-13/16 to 34-7/8, a drop of 5 percent. Based on Tuesday's closing stock prices, Pfizer's estimated $85 billion buyout of its smaller rival values Warner shares at about $100.89 apiece.
The Food and Drug Administration asked Morris Plains, N.J.-based Warner-Lambert late Tuesday to pull Rezulin, a treatment for Type II, or adult onset, diabetes, from the market after the drug was linked to fatal liver failure in some patients. Consumer advocates had pressed the FDA to remove the drug.
Pharmaceutical industry analysts view the withdrawal of Rezulin as a short-term setback for the company, saying most observers already had expected the drug would be pulled from the market. Sales of Rezulin, which was introduced in 1997, totaled about $750 million in 1998, and then fell to $625 million last year after reports surfaced about fatal side effects associated with the drug.
"Rezulin had already had its difficulties. Most people had already written it off," said Corey Davis, a research analyst at Chase H&Q, which rates both stocks as a "neutral."
In a research report, Merrill Lynch analyst Steve Tighe said the news should have "minimal impact" on Warner-Lambert's earnings and should remove some uncertainty from the stock. It should have no effect on the Pfizer-Warner deal, the report said.
The deal, which would create the world's second largest pharmaceutical company after the proposed combination of Britain's Glaxo Wellcome Plc (GLX: Research, Estimates) and SmithKline Beecham Plc (SBH: Research, Estimates), is expected to close this summer, pending regulatory and shareholder approval.
Warner-Lambert's best-selling drug is Lipitor, a blockbuster cholesterol lowering treatment co-marketed with Pfizer. The drug had about $3.7 billion in sales last year.
Two potential beneficiaries of Rezulin's removal are SmithKline, maker of the rival diabetes treatment Avandia, and Eli Lilly and Co. (LLY: Research, Estimates), which markets the drug Actos in conjunction with Takeda Pharmaceuticals of Japan.
SmithKline shares rose 9/16 to 67-9/16 in late morning trading; Lilly added 3/4 to 62-7/16. 
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