July 18 (Bloomberg) -- Pfizer Inc., the world's largest drugmaker, said second-quarter earnings fell 48 percent as competition reduced revenue from the top-selling cholesterol pill Lipitor. The company's shares declined the most since December.

Net income fell to $1.27 billion, or 18 cents a share, the New York-based company said today in a statement. Excluding $1.1 billion in restructuring and acquisition costs, profit missed the average analyst's estimate by 8 cents. Lipitor sales plunged 13 percent, as cheaper generic copies of Merck & Co.'s Zocor gained.

Total sales fell 5.6 percent to $11.1 billion, missing the average analyst estimate of $11.5 billion. Chief Executive Officer Jeffrey Kindler has cut jobs and closed factories in his first year at the helm to offset revenue declines from the loss of patent protection on some of Pfizer's biggest products.

``Let me be direct: it was a tough quarter,'' Kindler said in a conference call to investors today. ``The statin market has proved to be even more intensely competitive than we believed it would be.''

The quarter included payments to Bristol-Myers Squibb Co., also based in New York, for the two companies' partnership on an experimental drug.

Pfizer shares declined 83 cents, or 3.2 percent, to $25.13 at 4 p.m. in New York Stock Exchange composite trading. The stock has gained 11 percent in the past 12 months, lagging behind a 19 percent gain in the 14-member Standard & Poor's 500 Pharmaceutical Index.

`Can't Get Bigger'

``Pfizer is like a wrestler,'' said Les Funtleyder, an analyst with Miller Tabak & Co. in New York, in a telephone interview today. ``After so many steroids, you can't get any bigger.''

Pfizer's previous biggest share decline was an 11 percent drop on Dec. 4 that wiped out $21 billion of market value. That sell-off was triggered the company dropped research on torcetrapib, the drug intended to replace Lipitor, the world's biggest-selling medicine, because deaths among patients taking it in a trial were 60 percent higher than in a group that didn't get the product.

The torcetrapib failure, after $1 billion in development spending, left Pfizer without a new drug just as generic Zocor copies, available since last June, began to take sales from Lipitor. At the same time, newer drugs, including Merck and Schering-Plough Corp.'s Vytorin and Zetia, gained popularity.

Lipitor Sales, Prescriptions

Sales of Lipitor fell to $2.7 billion. A 25 percent drop in the U.S. more than offset a 5 percent sales gain abroad. Kindler cited changes in wholesaler inventories that bolstered Lipitor in the first quarter and reduced them in the second.

``Lipitor is eroding faster than Pfizer thought it would to generic Zocor,'' Funtleyder said. ``As goes Lipitor, so goes the sales.''

The number of Lipitor prescriptions fell, and Pfizer had to offer more rebates to wholesalers and to companies that manage drug benefits, he said.

``Kindler has to explain Lipitor better and make people comfortable that it is a one-time event,'' said Eric Boyce, a fund manager at Hester Capital Management in Austin, Texas, which has $1.5 billion, including Pfizer shares, under management. ``This isn't catastrophic, but people want to know if this is habit-forming.''

Projected Decline

Pfizer projected a decline of as much as 5 percent in Lipitor revenue this year from last. The company said it will promote added uses and bolster its marketing campaign, which includes television ads featuring the heart doctor Robert Jarvik, for whom the first permanent totally artificial heart was named.

Lipitor accounted for $12.9 billion in sales last year, more than twice as much as the second-ranked drug, GlaxoSmithKline Plc's asthma treatment, sold as Seretide and Advair.

``There is nothing in Pfizer's pipeline, or any pipeline in the industry, that can replace Lipitor,'' said analyst Barbara Ryan of Deutsche Bank Securities Inc. in Greenwich, Connecticut, in a phone interview last week.

Pfizer is looking into ways to combine Lipitor with other forms of cholesterol-lowering drugs to extend sales after the patent expires in 2010, the company said in a conference call to investors. Pfizer's vice president of research, John LaMattina, declined to specify what combinations the company is considering.

Merck successfully tried a similar strategy when its patent was expiring on Zocor by developing Vytorin, a combination of Zocor and Schering-Plough Corp.'s cholesterol drug Zetia. Many Zocor users switched to Vytorin, which had $624 million in sales in the first quarter.

Research Costs

Research and development costs rose 20 percent, largely for collaboration with Bristol-Myers to develop the blood thinner apixaban.

The revenue decline also reflected reduced demand for the blood-pressure drug Norvasc and the antidepressant Zoloft, both of which lost patent protection and faced cheaper, generic rivals.

Second-quarter net income last year was $2.42 billion, or 33 cents a share. Pfizer said profit in the most-recent period, excluding certain costs, was 42 cents, missing the average 50-cent estimate in a Bloomberg survey of 16 analysts.

Pfizer repeated its forecast that 2007 profit, excluding discontinued operations and costs including expenses related to acquisitions, will rise to $2.08 to $2.15 a share, in line with the average estimate of $2.15 in a Bloomberg survey of 21 analysts. Revenue this year will drop to $47 billion to $48 billion, from $48.4 billion, the company said.

Celebrex

The painkiller Celebrex generated sales of $478 million this quarter, an increase of 1 percent. Pfizer resumed television advertising of Celebrex in April for the first time since Merck withdrew the similar drug Vioxx in 2004 after a company study linked it to elevated risks of heart attacks and strokes. Pfizer didn't pull Celebrex from the market, saying its benefits outweighed risks that could be addressed with warnings.

Lyrica, the first drug developed by Pfizer to reach $1 billion in annual sales since the impotence pill Viagra in 1998, generated $405 million in the second quarter, up 49 percent from a year earlier. Lyrica, introduced in 2004, won expanded marketing approval for fibromyalgia from U.S. regulators in June.

To contact the reporter on this story: Elizabeth Lopatto in New York at elopatto@bloomberg.net; Shannon Pettypiece in New York at spettypiece@bloomberg.net.

Last Updated: July 18, 2007 16:15 EDT