July 21 (Bloomberg) -- Pfizer Inc. had a $2.86 billion second-quarter profit on surging sales of its Lipitor cholesterol medicine. Demand for similar drugs helped Schering-Plough Corp. post its smallest loss in a year and Merck & Co. report its biggest sales gain in five quarters.

Pfizer Chief Executive Hank McKinnell is seeking to defend Lipitor, the world's best-selling medicine, against challenges from AstraZeneca Plc's Crestor and a new combination drug from Merck and Schering-Plough called Vytorin. That medicine may win U.S. approval as early as Friday.

The U.S. government last week lowered its estimate of the acceptable cholesterol level for patients at high risk of heart disease, suggesting demand for the so-called ``statin'' drugs will rise. The U.S. market for cholesterol-lowering drugs is expected to grow as much as 20 percent over the next three years to more than $18 billion, Medco Health Solutions Inc. estimates.

``Doctors love prescribing these things and the qualifications to use these drugs continues to widen every year,'' said Jon Fisher, who helps oversee about $30 billion in assets at Fifth Third Asset Management in Cincinnati. ``Everything points to continued strong growth for this category.''

Vytorin, which Merck and Schering-Plough will sell through a joint venture, has already been cleared for sale in Mexico and Germany. The companies are now awaiting approval from the U.S. Food and Drug Administration. Vytorin is a pill combining Merck's Zocor with a newer drug Zetia, which Merck sells with Schering- Plough.

Shares of New York-based Pfizer, the world's largest drugmaker, rose 43 cents to $32.76 at 10:21 a.m. in New York Stock Exchange composite trading. Merck, which ranks No. 2, climbed 95 cents, or 2 percent, to $45.78, while Schering Plough, based in Kenilworth, New Jersey, increased 37 cents, or 2 percent, to $19.16.

Pfizer

Pfizer's net income of 38 cents a share compared with a net loss of $3.59 billion, or 48 cents, a year earlier when costs from the purchase of Pharmacia Corp. hurt results. Sales rose 24 percent to $12.3 billion, Pfizer said in a statement.

Lipitor sales jumped 17 percent to $2.36 billion and accounted for 19 percent of total revenue.

Excluding expenses related to the Pharmacia purchase and certain other costs, Pfizer earned 47 cents, matching the average estimate of analysts surveyed by Thomson Financial.

U.S. sales of Pfizer's Viagra impotence treatment fell 12 percent to $201 million. Viagra is losing market share to Eli Lilly & Co. and Icos Corp.'s Cialis and GlaxoSmithKline Plc and Bayer AG's Levitra.

Merck

Merck's second-quarter net income fell less than 1 percent to $1.77 billion from profit from continuing operations of $1.78 billion, or 79 cents, a year earlier. Sales rose 9 percent to $6.02 billion. Merck spun of Medco Health Solutions Inc. in August.

Sales of the cholesterol treatment Zocor, Merck's top- selling drug, rose 12 percent to $1.37 billion. The company will lose exclusive marketing rights to the medicine in 2006.

Revenue from Zetia, introduced in November 2002, almost doubled from the first quarter to $242 million from $123 million.

Sales of Merck's Vioxx painkiller dropped 18 percent to $653 million, largely because drug wholesalers had stocked up on the product in the second quarter of 2003 before an anticipated price increase, company spokesman Tony Plohoros said.

In the year-earlier second quarter, income from discontinued operations of $82.5 million, or 4 cents a share, made net income $1.87 billion, or 83 cents.

Schering-Plough

Schering-Plough, the maker of Claritin allergy pills, reported a second-quarter net loss of $65 million, or 4 cents, compared with net income of $182 million, or 12 cents, a year earlier. Sales fell 7 percent to $2.15 billion.

The quarter included expenses of $42 million, or 2 cents a share, for job cuts and costs of $80 million, or 4 cents, for a licensing agreement with Tokyo-based Toyama Chemical Co. for an experimental antibiotic.

Spokesman Steve Galpin declined to elaborate on job cuts during the quarter. Schering-Plough offered early retirement to about 900 employees last year and froze salaries this year to meet Hassan's goal of reducing payroll expenses 10 percent.

Sales of Claritin tumbled 8.9 percent to $82 million while sales of the Intron hepatitis products declined 42 percent to $144 because of competition from Roche Holding AG.

Schering-Plough's sales have been declining since Claritin, once the world's No. 1 allergy medicine, lost patent protection in 2002.

Chief Executive Officer Fred Hassan, on the job for 15 months, has said Vytorin will restore Schering-Plough to profitability next year. The company's losses peaked at $265 million in last year's third quarter.

Wyeth

Wyeth, the maker of Advil pain pills, said second-quarter profit fell 4.3 percent because of lower income from asset sales. Demand for medicines such as Effexor for depression boosted sales 13 percent.

Net income fell to $827.3 million, or 62 cents a share, from $864.4 million, or 65 cents, a year earlier, when a gain from asset sales lifted profit, the Madison, New Jersey-based company said in a statement. Wyeth was expected to earn 59 cents, the average estimate of 21 analysts surveyed by Thomson Financial. Revenue rose to $4.22 billion.

Revenue from Effexor, the company's largest product, gave Wyeth a boost as Chief Executive Robert Essner faces declining demand for the Premarin hormone treatment and manages lawsuits over Wyeth's fen-phen diet drug.

``It was a strong quarter for them,'' said Fifth Third's Fisher. ``They are very effectively competing on price.''

Wyeth shares rose $1.07, or 3 percent, to $35.33.

To contact the reporters on this story: Juliann Walsh in Princeton at at jwalsh10@bloomberg.net. Nicole Ostrow in New York at nostrow@bloomberg.net.

Last Updated: July 21, 2004 10:50 EDT