Meanwhile, the drugmaker also says it will finance a study to determine the potential heart risk of Celebrex and two generic pain pills.

01:00 AM EST on Wednesday, December 14, 2005

NEW YORK -- Drugmaker Pfizer's decision Monday to increase the drug company's quarterly cash dividend by 26 percent for the first quarter of next year has given a two-day boost to its stocks.

Shares gained 34 cents a share, or 1.7 percent, to close at $20.94 in New York Stock Exchange composite trading after Pfizer made the announcement during the trading day. The company's stock yesterday rose $1.37, or 6.5 percent, to close at $22.31.

Pfizer said its continued strong cash flow allowed it to pay a dividend of 24 cents, up from the current 19 cents, to be paid March 7 to shareholders of record, those who owned the company stock, as of Feb. 10.

"That is a pretty nice boost," said Jason Napodano, an analyst at Zack's investment research. "I guess they are trying to attract value investors."

Pfizer's yield next year will be around 4.5 percent if the company sustains the first-quarter dividend throughout the year, putting it on a par with those of Bristol-Myers Squibb Co. and Merck & Co., Napodano said. Some analysts have said Bristol-Myers' and Merck's yield are helping to prop up their stocks as both face difficult times.

Pfizer has also been struggling with numerous issues including patent losses, the withdrawal of its pain reliever Bextra, and staggering sales of its pain reliever Celebrex. Its stock, near the bottom of its 52-week range of $20.57 to $29.21, hasn't been this low since 1997.

The company said the dividend increase is part of a series of actions intended to enhance short- and long-term returns for shareholders, citing other initiatives announced earlier in the year, such as a planned cost savings of $4 billion by 2008 and buyback programs.

"This is the right thing to do for our shareholders," said David Shedlarz, a vice chairman of Pfizer, noting he didn't feel the need to match any other drug company's yield.

Shedlarz said Pfizer's strong cash position allows it to reward shareholders while still investing in research. This year, Pfizer will pay out $5.6 billion in dividends. That will increase to $7.2 billion if the first quarter dividend remains constant.

Pfizer also said yesterday that it will pay for a study of 20,000 patients to determine the potential heart risk of Celebrex, a similar drug to Merck & Co.'s Vioxx, which was withdrawn last year.

The study will also examine whether two generic pain drugs, naproxen and ibuprofen, raise the risk of heart attacks, strokes and deaths, the Cleveland Clinic said in a statement. The study begins next year. It will enroll people who take pain pills for arthritis and have heart disease or are at risk for it.

The research follows through on Pfizer's plan last year to study Celebrex in patients at high risk of cardiovascular disease. The study will be led by a Cleveland Clinic doctor who called for studies on the heart risks of Celebrex and Vioxx in a 2001 report. Sales of Celebrex, also known as celecoxib, fell 45 percent in the first nine months of this year from a year earlier as U.S. regulators issued public warnings.

"Since so many arthritis patients are at risk for heart disease, it is critically important to understand the cardiovascular safety of these drugs," said Cleveland Clinic heart doctor Steve Nissen, who will lead the study, in the statement. "Currently available information is insufficient to determine whether typical dosages of celecoxib and other popular pain relievers are linked to an increased risk of heart disease."

And on another front, former Pfizer vice president Peter Rost, who was fired after suing the drugmaker for promoting unauthorized uses for Genotropin, a growth hormone, sued the company yesterday, alleging wrongful termination.

Rost's action, filed in federal court in New York, alleges New York-based Pfizer violated New Jersey labor laws and the federal False Claims Act, which protects workers who make so-called whistleblower claims against their employers.

"Pfizer is trying to send a very strong message to the Pfizer employees that if you talk, you're getting kicked out," Rost, 46, said. "Normally most of these cases settle. I kind of doubt that this will."

Rost, who was a marketing executive for Genotropin, sued Pfizer in 2003 under the False Claims Act, alleging the company illegally promoted the product for so-called off-label uses. Pfizer made $50 million in 2002 from off-label sales, Rost said in his complaint.

Although the federal Food and Drug Administration approved Genotropin for a limited number of medical conditions, mainly growth deficiency in children and adults, Rost said Pfizer promoted it as an anti-aging treatment for adults and for short stature in children not caused by hormone deficiency.

On Dec. 1, the Justice Department decided it wouldn't join Rost's suit. He was fired the same day.