Oct. 20 (Bloomberg) -- Pfizer Inc., the world's largest drugmaker, said third-quarter earnings jumped 49 percent after merger expenses fell and sales of the cholesterol treatment Lipitor and the painkiller Celebrex rose.

Net income climbed to $3.34 billion, or 44 cents a share, from $2.24 billion, or 29 cents, a year earlier. Sales rose 4 percent to $12.8 billion from $12.3 billion, the New York-based company said in a statement.

Pfizer's revenue increase was the smallest in more than two years as Chief Executive Officer Hank McKinnell relied on demand for medicines including Lipitor, rather than acquisitions such as last year's Pharmacia Corp. purchase, to spur growth. Pressure to lower prices, patent expirations and competition to some of Pfizer's most profitable products will ``temper revenue and income growth in 2005,'' McKinnell said in the statement.

``They've worked off the benefits of most of the acquisitions that they have done,'' said Jon Fisher, who helps manage about $30 billion at Fifth Third Asset Management in Cincinnati, including Pfizer shares. ``They're coming into the beginning of a big patent expiration period.''

The patent on Lipitor, the world's best-selling medicine expires in 2010. Pfizer also is bracing for patent expirations for the antibiotic Zithromax in 2005, the antidepressant Zoloft in 2006 and the blood-pressure treatment Norvasc in 2007.

Shares Decline

Excluding costs, such as $229 million to resolve claims against a subsidiary that sold products with asbestos in the 1970s, Pfizer said it earned 55 cents a share in the third quarter. The average estimate of 25 analysts surveyed by Thomson Financial was for profit of 54 cents.

Pfizer shares fell 50 cents, or 1.7 percent, to $28.50 at 12:14 p.m. in New York Stock Exchange composite trading. They had declined 18 percent this year, compared with a 14 percent drop in the Standard and Poor's 500 Pharmaceuticals Index.

U.S. and European drug stocks, including Pfizer as the largest, have been battered by safety concerns and pressure for lower prices. Investors are also concerned about a lack of new products as drugs accounting for a total of $82 billion in sales face patent expiration between 2002 and 2007, according to London consultant Datamonitor Plc.

``There's blood on the streets when it comes to being a drug investor these days,'' said Bridget Collins, who helps manage about $4 billion at Victory Capital Management in New York, including Pfizer shares.

Acquisition Expenses

At the same time, 25 analysts out of the 33 who follow Pfizer rate the company a ``buy,'' the eight others have a ``hold'' rating on the stock, based on Bloomberg data.

Pfizer's acquisition-related expenses fell to $633 million from $1.44 billion a year earlier. Pfizer's sales gains over the past eight quarters, which ranged from 10 percent to 56 percent, had been fueled by the $58 billion purchase of Pharmacia and the $120 billion purchase of Warner-Lambert in 2000.

``Now that we've annualized all of the Pharmacia merger we should expect the growth to be much more moderate,'' said Steve Lampe, who helps manage about $8 billion in assets at Delaware Investments in Philadelphia, including Pfizer shares.

Wyeth reported third-quarter net income today of $1.42 billion, or $1.06 a share. That compared with a net loss of $426.4 million, or 32 cents, a year earlier, when the Madison, New Jersey-based company set aside $2 billion to help pay for lawsuits over diet drugs.

Lipitor

Pfizer said sales of Lipitor rose 11 percent to $2.74 billion in the recent quarter, while sales of Norvasc, its second- largest product, declined 6 percent to $1.03 billion.

Merck & Co. and Schering-Plough Corp. introduced a competitor to Lipitor during the quarter called Vytorin, the first of a new group of drugs that limits cholesterol absorption from food and also slows the liver's production of the fatty material.

Worldwide sales of Vytorin, which reached the market in August, are expected to be $70 million in the quarter, according to Prudential Equities Group analyst Tim Anderson, who rates Pfizer ``neutral weight.''

Celebrex

Sales of Celebrex and Bextra, another treatment for arthritis pain, surged in the quarter, with Celebrex rising 14 percent to $797 million and Bextra climbing 37 percent to $324 million.

The drugs are in the same class as Merck's Vioxx, which the Whitehouse Station, New Jersey-based company pulled from the market on Sept. 30 because of a link to heart attacks and strokes. All three drugs were designed to suppress the Cox-2 enzyme that plays a role in pain and swelling.

Pfizer has defended Celebrex against suggestions its medication may cause similar heart risks, saying it has a different chemical structure than that of Vioxx. Three studies sponsored by the U.S. government and Pfizer found no link between Celebrex and heart disease, Pfizer said Oct. 1.

Small studies have also suggested that Celebrex's anti- inflammatory effects may improve the functioning of blood vessels in patients with heart disease, Pfizer said earlier this week. A growing number of studies have linked inflammation to an increased risk of future heart problems.

Pfizer early next year plans to study the heart benefits of Celebrex in more than 4,000 arthritis patients who recently had a heart attack.

Viagra, Zoloft

Sales of Viagra, the world's best-selling male-impotence treatment, declined 15 percent to $403 million. Pfizer is fighting to maintain Viagra's share of the erectile-dysfunction market against Cialis, sold by Eli Lilly & Co. and Icos Corp., and Levitra, sold by GlaxoSmithKline Plc and Bayer AG. Sales of Viagra in the U.S. fell 23 percent to $217 million.

Pfizer said Viagra has 70 percent of the worldwide erectile dysfunction market, while Cialis has about 19 percent and Levitra has about 10 percent.

Sales of Zoloft slipped 3 percent to $802 million, while Effexor, a rival antidepressant made by Wyeth, rose 38 percent to $893 million.

Antidepressant makers have been pressured to disclose the results of all clinical studies and provide warnings about the potential for an increase in suicidal behavior in children taking the drugs. U.S. regulators on Oct. 15 ordered the manufacturers to place cautions on the medicines' labels in a black box, the strictest warning level.

Sales of Pfizer's newer drugs, such as Caduet, a heart-drug combination of Lipitor and Norvasc, have been ``disappointing,'' Victory Capital's Collins said. Caduet revenue was $5 million in the quarter after reaching the U.S. market in May.

``The last several product launches have been more modest than had been expected for sure,'' she said. ``Pfizer has a really interesting pipeline looking at the period of '06 and '07. Those drugs are a while off. We're going to have to wait and cross our fingers and hope everything works out. For now, we're in a bit of a lull.''

Patent Challenge

Sales of Pfizer's epilepsy medicine Neurontin rose 10 percent to $764 million. A judge on Oct. 13 refused to grant Pfizer a court order blocking Alpharma Inc. from selling a generic version of the drug, which generated $2.7 billion in sales for Pfizer last year.

Neurontin is Pfizer's fourth-biggest drug, with most of the sales coming from so-called off-label uses for bipolar disorder, migraines and other uses that haven't been approved by the U.S. Food and Drug Administration.

Pfizer reiterated that it expects 2004 profit, excluding certain costs, to rise to $2.12 to $2.14 a share. Net income will increase to $1.58 to $1.60 a share from 54 cents in 2003, Pfizer said. Profit next year will rise to $2.36 a share, according to the average estimate of 28 analysts surveyed by Thomson.

Pfizer plans to spend about $7.5 billion on research and development this year, down from a July estimate of $7.6 billion.

(Pfizer officials will hold a conference call at 2:30 p.m. New York time. To listen, go to http://www.pfizer.com.)

To contact the reporter on this story: Nicole Ostrow in New York at nostrow@bloomberg.net.

Last Updated: October 20, 2004 12:16 EDT