In the world of clinical testing, it was an epic event — and the consequences are still being felt throughout the industry.

On Dec. 2, 2006, New York-based Pfizer Inc. — the world’s largest pharmaceutical firm, by market value at the time — announced that clinical trials of its star drug candidate, Torcetrapib, had failed. Pfizer had spent almost US$1 billion bringing its new cholesterol medicine to late-stage trials, but a high number of patients who participated in the trial died. The firm is potentially facing a huge drop in revenue.

Sales of Torcetrapib were to have taken up the slack created by the removal in June 2011 of Pfizer’s patents for Lipitor — its US$13 billion-a-year drug for fighting artery-clogging LDL cholesterol. When generic drugmakers win the right to do their own formulations, Lipitor revenue will drop swiftly.

In fact, sales of Lipitor are already slowing, thanks to industry competitors that have developed different versions of LDL-lowering medicine. Which is another reason Pfizer was so disappointed with the clinical trial’s results; Torcetrapib had represented a fresh, potentially more effective, way of treating cardiovascular disease through raising HDL cholesterol, also known as “good” cholesterol because it carries excess cholesterol to the liver for excretion.

Pfizer’s scientists had hoped to use HDL-raising drugs in combination with Lipitor, which in theory would mean big improvements in cholesterol health. At the moment, research and development at Pfizer and elsewhere is on single-therapy approaches. And, despite Torcetrapib’s failure, there is still agreement that HDL-raising medicines may be the most valuable.

There are several reasons for this. First, the techniques for reducing LDL cholesterol are considered less difficult than for raising HDL— one of the reasons why there is already a lot of competition among LDL drugmakers. Second, medicine that raises HDL could be two or three times more effective in reducing cardiovascular disease than lowering the bad LDL cholesterol, according to Dr. Mark Knapp, a research analyst with Toronto-based Clarus Securities Inc.

The firm that may now be closest to coming up with a new drug that raises HDL is Switzerland-based Roche Holding AG, which is rated a “buy” by 60% of the analysts that cover it. Roche is expected to decide later this year whether to begin Phase III clinical trials for a substance dubbed JTT-705.

Unlike the case with Pfizer’s Torcetrapib, the Roche formulation has not raised blood pressure in clinical trials to date. However, the primary mechanism in developing both Torcetrapib and JTT-705 is the same — inhibiting a protein known as CETP. Roche’s scientists will try to determine whether Pfizer’s trouble with Torcetrapib had to do with the protein or whether another factor was involved.

Meanwhile, the race is on at a handful of other, much smaller firms to develop cholesterol-management drugs using different approaches. For example, Alnylam Pharmaceuticals Inc. of Cambridge, Mass., is using gene therapy to reduce LDL levels. It’s rated a “buy” by Mark Monane, an analyst with Needham & Co. LLC in New York, who has given the firm a target price of US$26 a share compared with the US$21.50 at which it was trading on Feb. 7, the date of his report.

According to a recent survey by Heartwire magazine, many researchers think there’s still plenty of promise in the quest to raise HDL — and that the best of way of doing it is to induce the production of more apoA-1, the substance that makes up 70% of the HDL protein.

Two contenders in this burgeoning field are Canadian start-ups — Calgary-based Resverlogix Corp. and Ottawa-based Liponex Inc. — each with wildly different valuations. Although neither firm has generated revenue to date, Resverlogix, which began trading on the Toronto Stock Exchange in 2003, has a market cap of slightly less than $400 million compared with just $9.3 million for Liponex, which has been trading on the same exchange since Aug. 15, 2005.

The disparity seems odd, considering Liponex’s HDL-raising drug development is more advanced than the one Resverlogix’s R&D group is pursuing. But the big difference between the two start-ups’ valuations has to do with one of Resverlogix’s secondary products.

That firm signed a licensing deal last July with Minneapolis-based Medtronic Inc., a maker of medical devices. The firms agreed to co-develop cardiovascular medicine through specially designed medical devices. Under the terms of the deal, Medtronic will pay up to $340 million if a commercially successful product emerges.

@page_break@Resverlogix’s attempts to develop its lead HDL-raising drug — known as RVX-208 — are in the preclinical stage, although the firm announced in March it is laying the ground for Phase I clinical trials. The timing of the latter will be disclosed in the third quarter. Preclinical studies published last September suggested RVX-208 could raise apoA-1 levels by up to 180% over concentrations in control animals.

Resverlogix also announced in Jan-uary it had retained UBS Securities Canada Inc. of Toronto to evaluate “a strategic agreement regarding the Resverlogix technologies.” This probably means the firm is hunting for a partner with substantial cash — capable of seizing the HDL market opportunity in the wake of Pfizer’s Torcetrapib failure. Resverlogix said in mid-March it was “hopeful a transaction will be concluded in 2007.”

Liponex had figured it was on a fast track as well. Within two weeks of Pfizer’s dramatic announcement, Liponex’s share price had jumped 47% to $1.40, setting the stage for another sharp rise to $3.10 earlier this year. Then, on March 7, Liponex revealed Phase I/II trial results that suggested its HDL-raising compound — CRD5 — was ineffective. The mean average increase in HDL levels was less than 5% and responses were all over the map. Some patients displayed a decline in HDL measurements, while others showed significant rises.

Those results contrasted sharply with positive news from previous trials and preclinical data. Liponex management has suggested the problem may lie with the formulation of CRD5 and that tweaking will do the trick.

But analysts weren’t impressed. Shameze Rampertab, an analyst with Jennings Capital Inc. in Calgary, changed his recommendation from “speculative buy” to “sell” with a 12-month target price of 50¢ a share. Clarus’s Knapp takes a longer view, saying in his March 8 research note that Liponex still has enough cash for another clinical trial without raising money. He rates Liponex as “accumulate” and has a 12-month target price of $1.50 a share, compared with the company’s March 16 closing price of 43¢ a share.

Ironically, Pfizer is a firm with lots of apoA-1 technology under its hood. It paid US$1.3 billion in December 2003 to acquire Esperion Therapeutics Inc., which specialized in HDL-raising technology. One of four drug candidates is in Phase II trials, suggesting Pfizer is still some years away from qualifying a drug for market. And it may be another five years of clinical trials before the firm — or any other HDL specialist — wins regulatory approval. But every successful R&D milestone translates into significant share price gains.

Meanwhile, Pfizer is winning plaudits from analysts for its cost-cutting efforts triggered by the anticipated reduction in Lipitor sales. Pfizer’s earnings are expected to jump 8.2% to US$2.24 a share in 2007, compared with US$2.07 a share in 2006, according to Barbara Ryan, a research analyst with Deutsche Bank Securities Inc. IE