Trouble Ahead for Pfizer Stock (NYSE: PFE) as Lipitor Claims Inevitably Amass

Updated August 14, 2014: Pfizer stock (NYSE: PFE) will soon feel the pressure from the wave of lawsuits being filed claiming that Pfizer's blockbuster drug Lipitor – the world's best-selling drug of all time – causes type-2 diabetes in women.

"This will be a huge overhang on Pfizer stock," Money Morning Capital Wave Strategist Shah Gilani said. "Investors have to watch developments closely."

With a market cap of more than $180 billion, the world's largest pharmaceutical firm's pockets run deep. Lipitor alone brought in global sales of more than $125 billion for Pfizer over the 14-and-a-half years since its 1996 market debut (Pfizer's patent on Lipitor expired on November 30, 2011). More than 29 million patients took the drug just in the United States.

A recent Reuters review of federal court filings discovered that Lipitor claims have shot up from 56 to nearly 1,000 in the past five months.

That's because of a Feb. 18 decision by the U.S. Judicial Panel on Multidistrict Litigation.

The Panel determined that the number of Lipitor diabetes lawsuit filings had gotten large enough to warrant their consolidation in a single, federal court proceeding. While Pfizer argued against a consolidation, stating that doing so would prompt copycat filings, the Panel ruled that merging the cases would prove beneficial for both plaintiffs and Pfizer.

"I believe the suits will mushroom and lawyers will seek class-action status. The fallout, being global, will impact the stock for a long time to come," Gilani said. "As far as lawsuits and potential huge settlements over a single drug, there's no end in sight."

A U.S. District Court located in Charleston, South Carolina, will handle the consolidated proceedings and U.S. District Judge Richard M. Gergel will preside. The first case is scheduled to be tried in July 2015.

It will serve as one of several "bellwether" cases to gauge the strength of other cases in the pool of claims.

Pfizer issued a statement denying any liability and stated its intention to fight the lawsuits. The company has argued that women taking Lipitor to control cholesterol may share other risk factors that make them vulnerable to diabetes, such as high blood pressure or obesity. It also stated that there is an "overwhelming consensus" in the medical community about the benefits of statins, including Lipitor.

A twist to this story – and a further blow to PFE stock – is that the U.S. Food and Drug Administration warned Pfizer in 2012 that Lipitor and other statin-type cholesterol-reducing drugs were linked to incidents of memory loss and a "small increased risk" of diabetes.

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