Still, the company just beat Wall Street's profit expectations and raised its 2012 profit forecast, so its shares only fell slightly.
Sales of Lipitor, which has lost patent protection in all major countries, dropped 87 per cent in the U.S. and 71 per cent worldwide, to a $749 million total.
Altogether, sales for more than two-thirds of Pfizer's medicines declined, most by 10 per cent or more. That was mainly due to generic competition, which cut prescription drug sales by about $2.5 billion.
However, Pfizer remains the world's biggest drugmaker by revenue —because its rivals also are being hammered by generic competition, the weak global economy and price cuts by government health programs, particularly in Europe.
The New York-based company said net income was $3.21 billion, or 43 cents per share, down from $3.74 billion, or 48 cents per share, a year earlier.
Adjusted earnings hit 53 cents per share, a penny more than expected. That excludes a $1.1 billion gain from a tax settlement, a $491 million charge to settle a Justice Department probe over past improper marketing of immunosuppressant drug Rapamune and other one-time items.
Revenue fell 16 per cent to $13.98 billion, well below expectations for $14.66 billion. Unfavourable exchange rates cut worldwide revenue by 4 per cent, or 2 cents per share.
"Sales were weaker than expected across ... the company's pharmaceutical, animal health and consumer segments," Edward Jones analyst Linda Bannister noted, but taxes and expenses also came in lower than expected.
Chief Financial Officer Frank D'Amelio said Pfizer is working to offset sales losses to generics "with expense discipline" and share repurchases. The company cut spending on production, sales, administration and research to $8.2 billion, down $1.3 billion from a year ago.
Revenue from prescription drugs dropped 18 per cent, to $12.12 billion, as sales fell sharply for primary care and specialty care medicines and dipped by a per cent or two for cancer drugs and drugs sold in emerging markets such as China and India. The established products business, which sells popular off-patent medicines, saw sales rise 7 per cent to $2.4 billion — because Lipitor sales in the U.S. and Japan were shifted to that category from primary care sales.
Lipitor, which once brought in as much as $13 billion a year, got generic competition on Nov. 30, 2011. Pfizer slowed defections while it had limited, slightly cheaper generic competition through May, with big rebates to insurers and $4 copayment offers for most patients staying on Lipitor. But prices plunged when multiple generics hit the market at the end of May. Pfizer then ended the insurer rebates and most patients switched to generics.
Prevnar 13, a shot against ear infections and meningitis that's the top-selling vaccine ever, saw sales fall 12 per cent to $868 million. Still patent protected, it's lost some steam with the end of older children getting "catch up" doses because it protects against more disease strains than the original Prevnar shot they got earlier. Few adults have been getting it because it's only recommended in the U.S. for those with weak immune systems. CEO Ian Read said an 80,000-patient study under way could lead to a recommendation that all adults get it.
The bright spots were increases of 14 per cent to $1.04 billion for what's now Pfizer's top seller, Lyrica for fibromyalgia and other pain; 5 per cent for painkiller Celebrex, to $676 million, and 5 per cent for erectile dysfunction drug Viagra, to $517 million.
Sales of consumer health products such as pain relievers Advil and Anbesol increased 2 per cent to $780 million, helped by two small acquisitions. Veterinary medicine sales, including the Convenia antibiotic for dogs and cats, fell by 2 per cent to $1.02 billion.
Pfizer raised its 2012 profit forecast, to $1.30 to $1.38 per share, from $1.21 to $1.36, but reduced the top end of its revenue forecast by $1 billion. It now expects $58 billion to $59 billion.
Read noted three new drugs have recently been approved in the U.S. or Europe, and two others that could be big sellers — tofacitinib for rheumatoid arthritis and Eliquis for preventing blood clots — could get approved by March.
"In '13, '14 and '15, we're expecting (patent expirations) to continue on a pace of about $3.5 billion to $4 billion a year," Read said in an interview. "We will grow again and we will become a reasonable-growth company, but it's over a long period of time."
Pfizer's board of directors authorized a new $10 billion share repurchase program. It's to start when Pfizer completes the pending sale of its nutrition business for $11.85 billion to Nestle SA, likely in the next few months.
Pfizer has bought back about 302 million shares in the past 12 months and has $4.1 billion remaining under its current buyback program.
Pfizer's stock fell 42 cents, or 1.7 per cent, at $24.45 in afternoon trading.
Linda A. Johnson can be followed at http://twitter.com/LindaJ_onPharma