Updated from 12:37 p.m. EDT

Pfizer ( PFE) saw more than $14 billion lopped off its market cap Thursday after the drugmaker offered disheartening full-year earnings guidance and withdrew its estimates for the next two years.

By late afternoon, the stock was down $1.92, or 8%, to $22.05 in heavy trading, having fallen as low as $21.90. More than 95 million shares had been traded, easily surpassing the average daily volume of 24 million shares for a full session.

Pfizer said it now expects full-year earnings, excluding one-time items, to be in a range of $1.92 to $1.94 a share, down from its previous prediction of $1.98. Analysts polled by Thomson First Call also had been expecting $1.98 for the year.

Shareholder sentiment soured further when the company said it was evaluating its financial prospects for 2006 and 2007 "in light of current and anticipated business conditions and are withdrawing our prior guidance for those years at this time." New guidance will be issued early next year.

In July, Pfizer predicted double-digit earnings per share growth in 2006 and an even greater improvement in 2007.

Tempering Revenue

Pfizer also reported that third-quarter earnings fell sharply from a year ago, weighed down by merger charges. Backing those out, the drug company's earnings topped estimates, but the shares slid on particularly bad fourth-quarter guidance.

The company earned $1.59 billion, or 22 cents a share, in the quarter, compared with $3.34 billion, or 44 cents a share, a year ago. The latest quarter included a charge of $1.96 billion related to merger accounting plus a hodgepodge of other items related to writedowns and restructuring.

Adjusted for everything, Pfizer earned 51 cents a share in the quarter, down 7% from the comparable year-ago number but still 3 cents ahead of the Thomson First Call consensus. Revenue fell 5% from a year ago to $12.19 billion, slightly below the $12.52 billion consensus.

"Revenues in the third quarter of 2005 reflected lower prescription growth and increased competition in key therapeutic markets in the U.S., such as the lipid-lowering market, where the rate of growth in the third quarter declined significantly versus the first half of the year; and the erectile-dysfunction market, which has been in decline compared to 2004," Pfizer said. "The effects of these considerations are expected to temper fourth-quarter revenues as well."

Pfizer doesn't know if the lower prescription growth is a temporary or chronic condition, said Hank McKinnell, chairman and chief executive, in a meeting with analysts after the earnings report. He said Pfizer will need several more months of data to better evaluate the trends.

"Our belief is that we will see a recovery" in the fourth quarter, said McKinnell, adding that "I share your disappointment" at the decline in third-quarter revenue. McKinnell said Pfizer had endured the "greatest magnitude" of patent expirations in the shortest time in the history of the drug industry.

Pfizer will continue to be affected by patent expirations on major drugs into 2007, even if Lipitor survives a U.S. patent challenge. McKinnell reaffirmed his belief that a U.S. court would repel a challenge by India's Ranbaxy Laboratories. A federal judge's decision could come later this year or early next year. McKinnell said Pfizer won't settle the case to make Ranbaxy go away.

Thursday's financial announcement didn't prompt any immediate ratings changes on Wall Street, but it certainly provoked a lot of discussion.

The third quarter was fair, but "the rest is a mess," says Tim Anderson of Prudential Equity Group in a brief research note to clients. He's neutral on Pfizer. His firm doesn't have an investment banking relationship with Pfizer, but his report says Anderson, a member of his research team or a member of his household owns the company's shares.

The news didn't bother Michael Krensavage of Raymond James, who told clients that he was keeping a strong buy rating. Even though third-quarter revenue fell by 5%, that was a smaller decline than Krensavage had predicted.

And while Pfizer's third-quarter profit was 51 cents, excluding items, that was 4 cents better than Krensavage had forecast. He doesn't own shares, but his firm says it expects to receive or intends to seek investment-banking compensation from companies mentioned in its research reports.

Meanwhile, James Kelly of Goldman Sachs says his estimates are under review. His research note says he still has an outperform rating on Pfizer. He doesn't own shares, and his firm has had an investment banking relationship with the company.

The Cholesterol Connection

Part of the problem is Lipitor, the anti-cholesterol drug whose U.S. revenue rose just 1% in the quarter due to "an unexpectedly rapid slowdown in the U.S. lipid-lowering market as a whole and marginal Lipitor prescription share erosion during the quarter of one percentage point," the company said.

The company said the rate of growth in new prescriptions in the overall lipid-reducing market was 8% in the third quarter, down from 17% in the first half of the year. Pfizer said its drug still commands 40% of all lipid-lowering prescriptions, well above any competitor.

"We believe that Lipitor is poised for further growth fueled by newly emergent outcomes data, which once again confirm Lipitor's outstanding ability to reduce morbidity associated with cardiovascular disease," Pfizer said. "We believe that these new data will support renewed growth for Lipitor. These data will also be prominently featured in upcoming physician and consumer branded and unbranded promotion beginning this quarter."

Lipitor's foreign-market sales came to the rescue, adding 14% for the quarter. Worldwide Lipitor sales rose 6% to $2.9 billion.

Pfizer continued to feel the impact of last year's safety controversy involving COX-2 arthritis drugs, which include the company's Celebrex and Bextra. Celebrex remains on the market, but Bextra's sales were suspended in April after the Food and Drug Administration said its risks outweighed its benefits.

Pfizer disputes the FDA's assessment, and it's trying to convince the agency that the drug can return to the market. Celebrex sales fell 44% to $446 million with the decline fairly evenly spread among U.S. and foreign markets.

As for other big-name drugs, the blood pressure drug Norvasc produced a 9% sales gain to $1.13 billion, the antidepressant Zoloft added only 1% to $807 million, and sales of the antibiotic Zithromax rose 19% to $402 million.

Sales of the impotence drug Viagra skidded 4% worldwide to $386 million, with U.S. sales losing 7% and foreign sales gaining 14%.

Generic competition took a toll on the epilepsy drug Neurontin, whose sales declined 80% to $155 million, and the antifungal Diflucan, whose sales sank 52% to $103 million.

In other matters, Pfizer removed some of the mystery involving dalbavancin, an experimental injectable antibiotic that was obtained when the company acquired Vicuron Pharmaceuticals.

The FDA was supposed to have ruled on the product Sept. 21, but neither Pfizer nor the agency said anything. Analysts speculated that Pfizer received conditional approval. On Thursday, Pfizer confirmed the conditional clearance, saying that "we anticipate a rapid and successful resolution of outstanding issues" that will allow final approval in the coming months.

McKinnell added that "all options are open" regarding the repatriation of earnings from foreign subsidiaries thanks to a one-time tax holiday law signed by President Bush last year. Pfizer has repatriated $36.9 billion at a sharply reduced tax rate. McKinnell said some of the money has been applied to paying down debt, but he said he wasn't interested in using the money for a big acquisition.