Pfizer Inc.’s (PFE) Sutent faced yet another development setback when the company announced that the candidate failed to achieve its primary endpoint in a late-stage study (SUN 1087) that was being conducted in patients suffering from non small-cell lung cancer (NSCLC).

Results showed that Sutent, when used in combination with Roche’s (RHHBY) Tarceva (erlotinib), failed to demonstrate a statistically significant improvement in overall survival compared to Tarceva alone. However, Sutent showed a statistically significant improvement in progression-free survival, the secondary endpoint of the study.

Pfizer reported that no new or unforeseen adverse events occurred in the study. The company intends to further analyze the results which will be presented at the European Society for Medical Oncology (ESMO) Congress in October 2010. Based on a detailed analysis, Pfizer could opt to study Sutent in a sub-group of NSCLC cancer patients.

Not the First Setback for Sutent

The disappointing study results are the latest setback faced by Sutent this year. Earlier in April 2010, Pfizer had announced the discontinuation of a phase III liver cancer study.

Pfizer halted the trial based on a review conducted by an independent Data Monitoring Committee (DMC). The DMC said that a higher number of serious adverse events were observed in the Sutent arm compared to Onyx (ONXX)/Bayer’s (BAYRY) Nexavar (sorafenib). Moreover, Sutent failed to demonstrate superiority or non-inferiority to Nexavar.

In March 2010, Pfizer had reported disappointing results from two phase III studies of Sutent in advanced breast cancer. The company was evaluating Sutent in combination with docetaxel as a first-line treatment of patients with advanced HER-2 negative breast cancer. However, the study failed to show any improvement in progression-free survival compared with docetaxel alone.

In the second study, Sutent was evaluated with capecitabine in previously treated advanced breast cancer patients. This study also failed to show any significant improvement in progression-free survival compared with capecitabine alone.

Label Expansion would Boost Sales

Despite the disappointing top-line results from the NSCLC study, Pfizer said that it is continuing to study Sutent for the treatment of other types of cancer. The product is currently in phase III studies for advanced castration-resistant prostate cancer and for renal cell carcinoma (as adjuvant therapy).

Sutent is currently approved for the treatment of gastrointestinal stromal tumors (GIST) and metastatic renal cell carcinoma (RCC). The drug has experienced very strong uptake, ending 2009 with revenues up 14% at $964 million. Approval for additional indications would help boost Sutent revenues significantly.

Neutral on Pfizer

We currently have a Neutral recommendation on Pfizer, which is supported by a Zacks #3 Rank (short-term Hold rating). We expect near-term earnings growth at Pfizer will come in the form of cost-cutting and share repurchases.

While the merger with Wyeth provides Pfizer with an attractive biologics platform and some complementary products and businesses, we do not believe they are enough to sustain long-term top-line growth. Longer term growth will be dependent on the success of drug development. The Lipitor patent expiration in 2011 remains a big concern.

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