U.S. pharmaceutical companies are expected to turn in a decidedly mixed second-quarter earnings performance this week, continuing a sectorwide malaise that has led to mediocre stock performance.

Pfizer ( PFE), Merck ( MRK), Schering-Plough ( SGP) and Wyeth ( WYE) kick off Big Pharma's earnings season on Wednesday. Only No. 1 drug giant Pfizer is expected to grow quarterly earnings year over year among that group, although Eli Lilly ( LLY) is also expected to pull the trick when it reports on Thursday.

The problems faced by drugmakers are well known by now, namely a dearth of new blockbuster drugs to replace sales lost to a strong uptick in generic competition. In addition, there's an increasingly hostile political environment that more and more supports the importation of cheaper prescription drugs from outside the U.S.

The Amex Pharmaceutical Index is down 3% in the past 12 months, lagging far behind the S&P 500's 11% gain.

Pfizer is expected to report a 55% rise in second-quarter earnings to 47 cents per share, on a 23% jump in revenue to $12.31 billion, according to Thomson First Call. Pfizer has been the only drugmaker to turn in consistent earnings growth, but much of that growth has come from cost-cutting and efficiencies stemming from its merger with Pharmacia -- not from stellar top-line sales growth from its core drug franchises.

Last Thursday, Pfizer reduced its 2004 revenue outlook to a range of $52.5 billion to $53 billion from a previous forecast of about $54 billion, citing "revisions for a number of products as well as the effect of foreign exchange fluctuations."

At the same time, the drugmaker reiterated its 2004 EPS forecast of $2.13, a 22% increase over the prior year. Whether Pfizer can maintain double-digit EPS growth into 2005 and 2006 is an open question.

Pfizer's anticholesterol drug Lipitor, the drug giant's top product, is expected to rack up approximately 16% sales growth to $2.3 billion during the quarter. Looking ahead, the outlook for Lipitor sales growth is murky. New, more aggressive government guidelines advocating lower cholesterol levels could be a boon for Lipitor sales. But at the same time, a new cholesterol drug from Schering-Plough and Merck, known as Vytorin, should be approved later this month and become a strong Lipitor competitor.

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