With

Merck

(MRK) - Get Report

and

Schering-Plough's

(SGP)

next-generation cholesterol treatment, Vytorin, hitting the market, Friedman Billings Ramsey has soured on

Pfizer

(PFE) - Get Report

, downgrading the drugmaker's shares, citing increased competition.

Shares of Pfizer fell 88 cents, or 2.7%, to $31.42 Friday after Friedman Billings Ramsey analyst David Moskowitz downgraded the company to market perform from outperform, telling investors that Pfizer's blockbuster cholesterol reducer, Lipitor, is in some trouble. (FBR does and seeks to do business with the companies covered in its research reports.)

In his view, because Vytorin is the only drug to stop the production of cholesterol in the liver as well as absorption by the intestine, it will become the preferred cholesterol treatment. And with Merck and Schering-Plough announcing plans to begin selling it to wholesalers for $2.34 a pill, it will be cheaper as well. (For more on Vytorin's approval Friday, please read

Schering-Plough, Merck Gain on Drug OK.)

"Vytorin will be cheaper than all doses of Lipitor except the 10 milligram dose," said Moskowitz, in his downgrade. "Given that Vytorin's label will indicate that it was superior

in lipid-lowering than Lipitor, we believe that the new product could pressure Pfizer's $10 billion flagship franchise."

In addition to dropping his rating, the analyst also cut his price target to $34 and cut his 2005 earnings estimate to $2.31 a share, below the current Wall Street consensus of $2.37 a share. Between 2003 and 2007, instead of growth in the high-double digits, Moskowitz said he expects Pfizer's growth to come in around 12%.

At a time when Lipitor faces increased pressure, Moskowitz noted that Pfizer's much-heralded pipeline is not producing the kinds of blockbusters that can offset an expected drop in sales. In 2004, Pfizer has launched three drugs -- Inspira, Caduet and Spiriva -- and in the analyst's view, the only real success has been Spiriva, whose sales must be split with Boehringer, its partner on the drug.

When Pfizer released second-quarter results last week, the drugmaker cautioned that 2004 sales would come in lower than previously expected, citing a "more-challenging business environment, marked by new competition."

With a number of its drugs, including Lipitor, facing challenges from generic drugmakers in the coming years, Pfizer has vowed to put its pipeline to work, rolling out 20 new drug applications through the end of 2006, with treatments for everything from arthritis to Parkinson's disease. But with just seven new drug applications through mid-2004, the company's plans aren't necessarily living up to Wall Street's lofty expectations, according to Moskowitz.

"Although Pfizer has one of the strongest pipelines in the business, several development-stage products have been delayed or discontinued," he said. "Meanwhile, other filings have been delayed, or at least have fallen behind market expectations."