"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.

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