Pfizer look set to break off its deal with Celltech to develop a new rheumatoid arthritis and Crohn disease treatment following renewed problems for the drug.

Shares in the UK leading biotech company fell nearly 20% on the news that Pfizer wanted to renegotiate the terms of the agreement, indicating diminished faith in the drug's commercial potential.

Pfizer says it now wants to wait for the final results from two phase II trials of the drug, CDP 870, in rheumatoid arthritis before giving the green light for phase III trials.

The US giant's move will delay the research programme, and Celltech have now said initial discussions to renegotiate the financial terms could result in the rights being restored to it.

The deal struck between Celltech and Pharmacia in 2001 for the marketing rights in return for payments of up to £165 million and a 40% share of profits was one of the most generous agreements ever for a biotech company. But Pfizer, who acquired Pharmacia earlier this year, are keen to renegotiate the deal in their favour or walk away from the drug.

In rheumatoid arthritis, there are now three drugs which share CDP 870 anti-TNF technology already on the market, and Pfizer will be looking for signs of unique qualities in the clinical data that will differentiate it from existing treatments.

The product is not expected to hit the market until 2007, by which time competitors Amgen and Wyeth's co-marketed Enbrel, Schering-Plough's Remicade and Abbott's Humira will have a considerable head start.

"We will work rapidly to conclude our ongoing discussions with Pfizer, whilst moving ahead aggressively with our development in Crohn disease, where we believe CDP 870 will be the second biological to reach the market," said Dr Goran Ando, chief executive of Celltech.

"When combined with the recent substantial growth in this market, we believe CDP 870 has considerable potential with Pfizer or through alternative partnering arrangements."

Dr Ando added that the drug, in common with other anti-TNF treatments, could treat other diseases such as psoriasis. Analysts believe the class could be worth $6 to 7 billion by 2008.

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